In May 2025, Hyperliquid's HIP-3 improvement proposal attracted widespread attention in the DeFi field, and the minimum viable version (MVP) has been launched on the test network. This is not only a simple protocol upgrade, but also a key step in Hyperliquid's development blueprint, which may have a far-reaching impact on the future of on-chain derivatives trading.

To truly understand the importance of HIP-3, we need to first understand Hyperliquid's overall design ideas, which starts with its three core proposals (HIPs).

📜 HYPERLIQUID Trilogy

Hyperliquid's development path is clear and coherent. Through three key improvement proposals, it has built a progressive and fully functional financial ecosystem.

HIP-1: Breaking the Barriers to Listing on CEX

Industry Pain Points: For a long time, new projects have faced a common problem: the process of listing on mainstream CEX is opaque, costly, and often accompanied by harsh terms. Project parties need to go through lengthy negotiations and may need to pay high fees or transfer a large number of tokens.

Solution: HIP-1 provides another option for crypto project teams. It allows anyone to create new tokens on Hyperliquid without permission, just like the ERC-20 standard. Project teams only need to pay a certain fee (paid in HYPE tokens) to create their own tokens and automatically open a spot order book market. This greatly reduces the threshold for assets to enter the open market and provides a more fair and transparent issuance platform for project parties.

HIP-2: Automated Market Making for Spot Markets

Industry Pain Points: Even if a new token is successfully launched, if no one is interested and there is a lack of buying and selling depth, then its value cannot be reflected. This is the so-called "liquidity cold start" problem.

Solution: HIP-2, also known as "Hyperliquidity", is the native automated liquidity strategy of the Hyperliquid protocol. When a new token is created through HIP-1, HIP-2 acts as a market-making robot, automatically placing buy and sell orders on the order book, and providing basic, tradable liquidity for this new market. It effectively solves the cold start problem of new assets in the early stage of listing.

HIP-3: Perpetual Market Creation without Permission

Industry Pain Points: Perpetual contracts are the most traded area in the crypto market, but before HIP-3, only the Hyperliquid core team had the right to decide which assets to list on the perpetual contracts, which limited the platform's development potential and asset diversity.

Solution: HIP-3, also known as "Builder-Deployed Perpetuals", completely opens up the creation of perpetual contract markets. Any "Builder" can deploy a custom perpetual contract on Hyperliquid by staking 1 million HYPE.

Builders have full control over the markets they deploy and can define key parameters on their own, including which assets to choose as collateral, which price oracle to use, and setting leverage limits and margin parameters. And the Builder enjoys 50% of the market transaction fees (the current figure, this share ratio may be adjusted after the official launch), which is a very generous return.

After these three steps are completed, Hyperliquid has leapt from a DEX that is purely for end users to a "financial infrastructure layer", far surpassing other DEX competitors in terms of narrative, and also derived a new business ecology and gameplay.

🎯 Impact 1: PMF fits the RWA craze

HIP-3 has a very high entry threshold: builders must pledge 1 million HYPE tokens as a security deposit. At the current unit price of HYPE of about $42, this pledge amount requires about $42 million. This design is actually a screening mechanism to ensure that only players with strong capital and seriousness are able to participate.

Institutional capital is of course considered a qualified player. These institutions will naturally not spend tens of millions of dollars to launch some small-cap Meme coins with rapidly declining trading volumes. They will target those markets in traditional finance with huge, stable trading volumes and deep value, and this is where RWA comes in. Major global stock indices (such as the S&P 500), commodities (such as gold), major foreign exchange currency pairs (such as the euro/dollar), etc. are all potential targets.

Take the world's most important S&P 500 index futures contract as an example. The daily trading volume of CME E-mini S&P 500 futures (code: ES) in 2025 is about 1.6 million contracts. The notional value of each contract is $50 multiplied by the index point of the day. The price of the E-mini S&P 500 futures in July 2025 is around $6,400/point, so the notional value of each contract is about $320,000 (6,400 × 50). Based on this calculation, the total notional amount of daily transactions of SP500 futures is approximately: 1,600,000 lots × $320,000/lot ≈ $512 billion.

If a perpetual contract of the SP 500 index is deployed on Hyperliquid, even if only 0.1% of the CME trading volume is obtained, and assuming a fee rate of 0.1%, the daily handling fee of this contract market will reach $512 billion × 0.1% × 0.1% = $512,000, and the Builder can share 50% of this handling fee, which means that the Builder's daily income is $256,000. It only takes about 164 days to recover its more than $42 million in pledge costs, and then it is pure income. This is undoubtedly very attractive to institutions pursuing stable returns.

In addition, before HIP-3, Hyperliquid, like many DeFi protocols, was tailored for Crypto Native assets, and its architecture and parameters may not be suitable for RWA assets. After the introduction of HIP-3, Hyperliquid's core engine provides unified trading and settlement capabilities, and each RWA market has risk parameters, pledged assets, and liquidation logic tailored for specific assets (such as US Treasuries and real estate). This modular design is necessary to safely and efficiently introduce RWAs with different attributes to the chain, and is "similar in nature" to Aave V4's Hub+Spoke architecture and Sky's Core+SubDAO architecture.

🌟 Impact 2: Creating a new token ecosystem

Although HIP-3 is good, there are still two problems that have not been solved:

1. After creating a perpetual contract market, you can enjoy a 50% commission share, which is a very attractive business. But the initial investment is huge, and the staking cost of 1 million HYPE excludes most retail investors. Do retail investors really have no way out?

2. HIP-3 is a bit similar to HIP-1, but it has decentralized the power to create a trading market, but where does the liquidity of this new market come from? HIP-2 solves the cold start liquidity problem of HIP-1, and who will provide the initial liquidity for HIP-3?

For the above two problems, although HIP-3 is still in the testnet stage, there may be better solutions in the future. The author believes that even if Hyperliquid does not provide an official solution after the official launch, the community can take advantage of the "composability" of the DeFi protocol and provide third-party solutions.

Suppose the community invents a new DeFi protocol, HLAggregator, to solve the staking problem of 1 million HYPE. HLAggregator allows retail investors to deposit their HYPE tokens into a public pool and collect 1 million HYPE through crowdfunding to qualify for the deployment of perpetual contracts. In return, users will receive a staking certificate representing their share (that is, LST), which entitles them to share the future fee income generated by the contract market. This allows ordinary users to participate in the benefits of HIP-3.

In addition to LST, HLAggregator will also issue its own governance tokens, such as HLA. When deciding which token perpetual contract market to establish with the crowdfunded HYPE, having more HLA means greater influence. To this end, project teams that want to create their own perpetual contract markets on Hyperliquid need to "bribe" HLA holders, such as airdropping HLA holders, thereby creating greater demand for HLA and raising the price of HLA.

In this way, the liquidity problem of the new contract market can also be solved. HLAggregator can distribute its own project token HLA, or cooperate with the project party that wants to launch a perpetual contract to distribute the token of that project, and use "token incentives" to incentivize users to provide initial liquidity for the new market.

With the success of HLAggregator, other teams followed up and developed other "liquidity aggregators", and a "Hyperliquid war" for users' HYPE deposits, project party cooperation, and real income distribution rights began. Readers familiar with the history of DeFi development will realize that this is a replica of the "Curve War" of the year.

In short, pledging 1 million HYPE to cause deflation is only the first step, and the second step is to create a new ecology and business model around HYPE. After two steps, the application scenarios and market demand of HYPE have been greatly expanded, thus establishing a solid support for the HYPE coin price.

📈 Impact three: meeting PRE-IPO transaction needs

Recently, retail investors have become more and more interested in private placement stocks (Pre-IPO) of unlisted companies. Star companies such as OpenAI and SpaceX have not yet gone public, but many people want to "get on board" in advance. Robinhood once issued a small amount of tokenized stocks of OpenAI and SpaceX. Although it caused great controversy, it also proved the market's strong investment demand for Pre-IPO stocks.

Hyperliquid has a natural advantage in meeting this market demand. First, Hyperliquid has a cool feature called Hyperps, which solves the problem of providing futures trading for assets that have not yet been officially launched or lack a reliable price source. Unlike traditional perpetual contracts that rely on external spot price oracles, Hyperps' funding rate is not calculated based on the deviation of the futures price from the spot price, but based on the difference between the current price of the futures and its own exponential moving average (EMA) over a period of time (e.g. 8 hours). When bullish sentiment is strong and the futures price in Hyperps is much higher than its own moving average, the funding rate will become extremely high, strongly incentivizing shorts to enter the market, and vice versa.

The combination of HIP-3 and Hyperps enables anyone (as long as they can afford the staking fee of 1 million HYPE) to "self-service" deploy perpetual contracts for popular private equity stocks such as OpenAI and SpaceX. HIP-3 solves the problem of "can or cannot", while Hyperps solves the problem of "no price anchor, violent fluctuations".

Although HIP-3+Hyperps launches futures contracts instead of real stocks, it is not suitable for value investors, but it does provide retail investors with an opportunity to gain benefits from the price fluctuations of these companies. More importantly, this mechanism provides a price discovery function. When these companies actually IPO, the market already has a reference price, and there will not be too outrageous pricing to harvest retail investors.

⚡ Impact 4: Respond to CEX competition with agility

Recently, compliant exchanges such as Coinbase and Kraken have also begun to provide futures trading services to US users. Their biggest advantage is compliance, which is very attractive to some institutional funds that have high requirements for security and compliance. The disadvantage is that traditional CEXs are cautious when launching products. For example, the contract products currently provided by Coinbase are limited to BTC and ETH, and the leverage limit is low (such as 10x). CEX needs to go through a complex approval process to launch new products, which may take several months, and it is impossible to respond quickly to the market's trading demand for new products.

CEX's disadvantage is exactly Hyperliquid's advantage. Before HIP-3, Hyperliquid was already very quick in responding to market demand. For example, when the NFT market was hot, Hyperliquid launched an NFT index contract, which allowed traders to directly go long or short the entire top NFT market; and when SocialFi was hot, Hyperliquid also launched the friend.tech social account index, which could directly go long or short the key price of the top users of the friend.tech ecosystem. Now HIP-3 will make the creation of contract markets "permissionless", and will take the speed of responding to market demand to a higher level. This agility is unmatched by CEX.

Therefore, Hyperliquid continues to innovate and launch new features such as HIP-3 and Hyperps, precisely to respond to the compliance advantages of CEX giants with its own agility and strengthen its differentiated characteristics in the fierce market competition.

🚀 Conclusion: A more open future of on-chain finance

In short, HIP-3 is an important leap in the development of Hyperliquid. It is not only a technical upgrade, but also a strategic choice, aiming to build itself into a core financial infrastructure that connects real-world assets, innovates around the HYPE ecosystem, and responds to market needs agilely, driving the deep integration of DeFi and TradFi.

Of course, the road ahead is also full of challenges. How to effectively guide the liquidity of new markets and how to deal with the complex global regulatory environment will be the key to determining its ultimate success or failure. But in any case, HIP-3 has already painted a more open, composable, and imaginative future for on-chain finance.

• This article is based on public information analysis and does not constitute investment advice. Cryptocurrency investment is risky, please make decisions carefully, DYOR.

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