Author: Nancy, PANews

The battle over Hyperliquid has spread to Wall Street, and the internal landscape of the ecosystem is also rapidly fragmenting.

Thanks to the permissionless market deployment capabilities brought by HIP-3 and the ever-expanding range of trading assets, Hyperliquid has rapidly expanded its reach this year, becoming a new battleground for "weekend warriors".

While the HIP-3 market is expanding rapidly, its ecosystem is undergoing a brutal reshuffle. Trade.XYZ, with its first-mover advantage, has almost monopolized the market, occupying over 90% of the market share; while the survival space of other ecosystem projects is being squeezed, with several projects, including Feilx and Ventures, announcing their closure one after another.

HIP-3 garnered over $300 billion in trading volume, with Trade.XYZ dominating 90% of the market.

The rise of HIP-3 has opened up a new growth curve for Hyperliquid.

According to data from the Hyperscreener dashboard, in the past 24 hours, the total trading volume of Perp on the Hyperliquid platform reached $8.77 billion, of which the HIP-3 market contributed approximately $3.5 billion, accounting for 39.9% of the total trading volume. In other words, for every $10 of perpetual contract trading volume generated on Hyperliquid, nearly $4 comes from HIP-3.

In fact, since its launch last October, HIP-3 has accumulated a trading volume of over $319.8 billion in just over six months, far exceeding market expectations. However, instead of a flourishing ecosystem, the expansion of trading volume has been accompanied by a more pronounced leading effect, with Trade.XYZ almost monopolizing the entire market's incremental growth.

Looking at open interest, Hyperscreener data shows that as of June 16, the total open interest in the HIP-3 market was approximately $29.4 billion, with Trade.XYZ alone contributing $28.7 billion, representing a market share of 97.6%. In contrast, other projects such as DreamCash, HyENA, Ventures, and Felix account for less than 1%, which is almost negligible.

Trading volume also confirms this trend. Looking at historical cumulative trading volume, Trade.XYZ consistently holds approximately 90% of the market share, DreamCash ranks second with about 6%, and the remaining projects compete for less than 5% of the market. In June alone, the dominance of the leading players intensified, with Trade.XYZ's market share climbing to 96.65%, while the remaining seven markets, including Felix Exchange, Ventures, and HyENA, combined accounted for only 3.35%, with some projects even holding less than 0.1%.

Looking further at the trading activity of assets, this gap becomes even more apparent. This month, the total trading volume of all assets on HIP-3 reached $11.21 billion, of which the core product XYZ100 (an index tracking the top 100 companies) on Trade.XYZ alone contributed $10.64 billion, with a single asset almost supporting the majority of the trading activity in the entire HIP-3 market.

The disparity in user activity is also quite pronounced. Data shows that Trade.XYZ attracted over 46,000 unique trading addresses this month, while other markets mostly had only a few hundred unique traders, some even fewer than a hundred. In terms of trading frequency, Trade.XYZ has accumulated over 22.03 million transactions this month, while most other markets only had tens of thousands to hundreds of thousands of transactions, a stark contrast to leading platforms.

To some extent, the current growth story of HIP-3 can almost be seen as the growth story of Trade.XYZ.

HIP-3 enters its elimination rounds, with ecosystem projects withdrawing one after another.

As Trade.XYZ continues to siphon market liquidity, HIP-3 is transforming from an open arena of innovation into a knockout tournament dominated by top players, making it increasingly difficult for newcomers to gain a share.

Recently, several HIP-3 projects have shut down. Last week, Charlie, co-founder of the Hyperliquid lending protocol Felix, announced that Felix's HIP-3 DEX and all spot markets would be shut down starting June 19th and completely delisted by June 20th. All traders were required to close their positions before then. This adjustment will not affect Felix's lending and spot stock businesses. The company will focus on its core products and, after finding new user growth paths, may return as a HIP-3 deployer.

In his post-mortem analysis, Charlie frankly admitted that although Felix had leveraged its first-mover advantage in markets such as crude oil, gold, and silver to generate approximately $3 billion in trading volume and substantial commission revenue, its market share was gradually surpassed after Trade.XYZ launched a similar market denominated in USDC.

In his view, Trade.XYZ's ability to quickly establish a competitive advantage stemmed from its choice of the more liquid USDC over USDH, its seizing of the HIP-3 launch window, its rapid expansion of market share, and the brand effect and liquidity flywheel generated by anticipated airdrops . As USDH gradually fades from the scene, continuing to deploy HIP-3 is no longer a viable competitive advantage, so the team decided to scale back related businesses.

Felix is ​​not an isolated case. Shortly after, Ventures, one of the largest participants in offering trading of private company stocks on Hyperliquid, also announced that it would gradually cease operations, and its team would join another development team within the Hyperliquid ecosystem. The platform will gradually shut down markets such as OpenAI, Anthropic, commodities, and indices. vHYPE holders can redeem HYPE at a 1:1 ratio and receive staking rewards. Ventures will also terminate its points and referral programs and confirm that it will not issue any tokens.

Ventuals disclosed that during the project's operation, it raised more than 500,000 HYPE tokens and had a trading volume of over $650 million, becoming one of the most representative innovative applications in the Hyperliquid HIP-3 ecosystem.

Although the team has not publicly explained the reasons for the closure, the market generally believes that Trade.XYZ's siphoning of liquidity from popular assets, as well as the liquidity and pricing problems faced by pre-IPO assets themselves, are the important reasons for the project's eventual exit .

Most deployers take four years to break even, increasing pressure on the HIP-3 ecosystem.

In addition to the competitive pressure brought by the head effect, HIP-3's own deployment mechanism is further squeezing the survival space of newcomers.

Under HIP-3 rules, any team wishing to create a DEX must first stake 500,000 HYPE tokens as a security deposit. At current prices, this amount to approximately $35.89 million, and the tokens will be locked for at least 183 days after deployment. Furthermore, each deployer's first three assets are exempt from auction; subsequent additions must be acquired through a Dutch auction with a minimum starting bid of 500 HYPE tokens (currently worth approximately $36,000, but significantly lower than the 1,750 HYPE tokens in January of this year). The HYPE paid in the auction will be directly destroyed by the protocol.

For new entrants, with liquidity highly concentrated among top players, the high upfront investment, continuously increasing expansion costs, and long payback periods are becoming an increasingly unbearable burden. It's worth noting that Hyperliquid announced in May that it would gradually lower the 500,000 HYPE staking threshold.

According to shaunda devens, an analyst at Blockworks Research, with the exception of Trade.XYZ, most HIP-3 deployers have annualized returns on their staked HYPE that are close to or even below 1%, with a median recovery period for market auction costs as long as 4 years. In contrast, Trade.XYZ is a significant exception, with an estimated yield on its staked HYPE as high as 74%, and a median recovery period for auction costs of only 5 months.

In other words, Trade.XYZ's success stems not only from the product itself, but also from a continuously reinforcing network effect. More users bring stronger liquidity, stronger liquidity attracts more assets to be listed, and more high-quality assets further solidify its market position. At the same time, edge deployers, due to low returns, not only lack the motivation to continue expanding, but also have reduced demand for new HYPE staking and their enthusiasm for participating in market auctions.

For Hyperliquid, this situation is not without its concerns.

Undeniably, Trade.XYZ has brought tremendous growth potential to Hyperliquid and has even become the most successful model case of HIP-3. However, if the listing rights and liquidity of the vast majority of popular assets are concentrated in the hands of a single deployer, then the competition in HIP-3 will remain a competition among the top players, making it difficult to evolve into an open and diverse ecosystem competition.

In the long run, this will not only squeeze the survival space for innovative projects, but may also trap Hyperliquid in the single narrative of perpetual contracts . Especially with the increasingly fierce competition in the Perp DEX sector, relying solely on perpetual contract trading will make it difficult to build a sufficiently rich on-chain application ecosystem and sustainable network effects. It is worth noting that Hyperliquid has already entered the currently popular prediction market through HIP-4, attempting to further enrich its business landscape .

In response to the current challenges, shaunda devens proposed two mechanism optimization suggestions to improve the sustainability of market creation and enhance HYPE's value capture capabilities.

First, a tiered exchange mechanism will be introduced. New deployers will be allowed to launch HIP-3 DEX with a threshold lower than the current 500,000 HYPE, but their permissions will be restricted accordingly, such as setting a lower limit on open contracts, a lower leverage ratio, and stricter risk control rules; as deployers increase the scale of HYPE staking, higher-level functions will be gradually unlocked.

Second, adjust the market auction economic model of HIP-3. Before the new market recovers the auction costs, allow deployers to receive up to 100% of the transaction fee revenue; or, before the total revenue of the entire DEX covers the auction costs, prioritize returning the fees to the deployers, and then restore the standard 50:50 revenue sharing mechanism between the protocol and the deployers after reaching the break-even point.

For Hyperliquid, HIP-3 has proven that decentralized marketplace creation is a viable path, and the success of Trade.XYZ has not only validated the product demand but has also become an important growth engine for Hyperliquid at this stage.

However, compared to relying on a super app to continuously siphon liquidity, a more resilient and healthier open ecosystem may be more necessary to allow innovators of different stages and types to find room to survive, and to allow new assets, new ways of playing and new business models to continue to emerge.