Hyperliquid: A Guide to the Decentralized Perpetual Exchange

Hyperliquid is a decentralized perpetual exchange operating on its own high-performance layer-1 blockchain, HyperEVM. It specializes in perpetual futures trading

Hyperliquid is a decentralized perpetual exchange that operates on its own high-performance layer-1 blockchain, HyperEVM. It specializes in perpetual futures trading, allowing users to speculate on crypto prices without holding the underlying assets. The platform combines the benefits of both centralized and decentralized exchanges, offering a seamless, high-speed trading experience tailored for modern decentralized finance (DeFi) users.

Hyperliquid boasts a unique architecture that sets it apart from other DEXs. It boasts an onchain order book, which enables real-time, transparent trading with minimal latency. The exchange also supports a wide range of cryptocurrencies, including BTC, ETH, SOL, AVAX, BNB, MATIC, DOT, UNI, SUSHI, CRV, LDO, BAL, FTT, GMT, APE, QUICK, SAND, MANA, ENJ, GALA, IMX, X2Y2, LOOKS, CEEK, and HYPE.

A key feature of Hyperliquid is its community-driven approach. The platform has rejected venture capital funding, allocating 70% of its tokens to users and redistributing all revenue back to the community. As of Feb. 5, Hyperliquid has a market capitalization of approximately $8.92 billion.

How does Hyperliquid function?

Hyperliquid operates on a layer-1 blockchain that is explicitly designed for derivatives trading. For rapid transaction processing, Hyperliquid uses HyperBFT, a proprietary consensus algorithm. This system ensures that trades, orders and liquidations occur in real-time, with all transactions transparently recorded onchain.

Perpetual order book DEX

A fully onchain perpetual order book exchange is a core feature of the platform. Unlike decentralized exchanges (DEXs) that rely on automated market makers (AMMs), Hyperliquid adopts a traditional order book system. This approach allows traders to place bids and asks for various assets, resembling the experience of centralized exchanges (CEXs).

As of Feb. 5, Hyperliquid supports up to 100,000 orders per second. Orders are matched using a price-time priority mechanism, ensuring fair execution for all market participants.

Margining system

Hyperliquid has a decentralized clearinghouse that manages users’ margin balances and positions. The exchange supports both cross-margin and isolated-margin trading. Cross-margin allows traders to distribute collateral across multiple positions, while isolated-margin dedicates specific collateral to each trade, reducing liquidation risks for other holdings. This system enhances traders’ flexibility and risk management.

Pricing mechanism

To maintain accurate pricing, Hyperliquid uses a decentralized oracle system, with validators updating spot prices from major exchanges every three seconds, ensuring price integrity and reducing manipulation risks.

The system determines funding rates, margin calculations and liquidation processes using these price updates, ensuring price integrity and reducing manipulation risks.

Order types and options available on Hyperliquid

Hyperliquid L1 maintains an order book for each asset. The order book integrates with the clearinghouse, which handles all positions and margin checks.

These checks occur when a new order is placed and again for the resting side upon order matching. This process ensures a consistent margin system, even amid oracle price fluctuations.

Order types and options available on Hyperliquid include:

Order types

Order options

What are vaults in Hyperliquid?

Hyperliquid vaults provide a flexible way for users to participate in trading strategies while benefiting from the platform’s advanced features, such as liquidation management and high-speed market making.

Unlike traditional vaults that only rebalance between two assets, Hyperliquid vaults allow users — including decentralized autonomous organizations (DAOs), institutions and individuals — to deposit funds and share the profits. Vault owners receive 10% of total profits, except for protocol vaults, which operate without fees or profit sharing.

Hyperliquidity Provider (HLP)

HLP is a protocol vault that engages in market-making and liquidation processes, earning a portion of trading fees. It democratizes strategies usually reserved for institutional traders, allowing the community to contribute liquidity and share profit and loss (PNL).

HLP does not have additional profit-sharing for vault owners, as it is fully community-owned. The deposit lock-up period for HLP is four days.

Creating and managing vaults

Anyone can create a vault by choosing a name, writing a description, and depositing at least 100 USD Coin (USDC). Vault leaders must always maintain at least 5% ownership of their vault.

Depositors earn a share of vault profits, with proportional withdrawals ensuring liquidation prices remain stable. Users can browse and assess vaults via Hyperliquid’s platform to make informed investment decisions.

Deposits and withdrawals

Depositing into a vault is straightforward, with tracking on the “Portfolio” page. Withdrawals can be requested after the lock-up period, which is one day for user vaults and four days for HLP. If there are specific traders you admire or support, you can make deposits into their vault to get exposure to their trading strategies.