The launch of HYPE token on November 29, 2024 marked a pivotal moment for Hyperliquid, catalyzing the remarkable growth in both trading volumes and platform adoption since the start of 2024. As we analyze Hyperliquid's trajectory, it's becoming clear that merely viewing it as a decentralized exchange (DEX) for trading perpetual swaps is overly restrictive. Instead, Hyperliquid is emerging as something far more ambitious: a full-fledged Layer-1 blockchain with the potential to become the on-chain equivalent of Binance. The post-launch period has demonstrated remarkable resilience in Hyperliquid's core metrics. Daily trading volumes have consistently exceeded $4 billion, with the platform's spot market contributing an additional $250-500 million in daily volume. Perhaps most notably, Hyperliquid has maintained its dominant market position even after the conclusion of its points program, currently commanding 68% of all onchain perpetual trading volume. This sustained performance suggests strong product-market fit beyond mere incentive-driven activity.

Source: Defilama, Spartan Capital

When compared to centralized exchanges, Hyperliquid's growth trajectory is even more impressive. In December 2024, it represented 5-8% of Binance's daily derivatives volume. This rapid market penetration, achieved without the massive marketing budgets or established user bases of traditional exchanges, underscores the growing demand for transparent, onchain trading infrastructure.

At the heart of Hyperliquid's competitive advantage lies its purpose-built L1 designed specifically for high-performance trading. The decentralized trading landscape has evolved through various architectural approaches - from off-chain order books (Aevo), to AMM/pool models (GMX), to hybrid solutions (Drift, Vertex). Hyperliquid takes a distinct approach by implementing a fully on-chain central limit order book optimized for institutional-grade performance. The platform's performance stems from HyperBFT, a proprietary consensus mechanism that evolved from Tendermint's foundations. The May 2024 transition to HyperBFT delivered a 100x improvement in theoretical processing capacity, currently enabling 100k orders per second while achieving 0.2-second median latency (0.9s at 99th percentile). This performance approaches those of centralized exchange while maintaining on-chain verifiability.

The fully on-chain architecture provides key advantages over current alternatives in DeFi. AMM-based systems often suffer from toxic flow and stale pricing, while hybrid solutions introduce complexity and potential information asymmetries. Hyperliquid's design enables atomic execution of complex operations - from liquidations based on oracle feeds to hourly funding payments - with full transaction transparency. By maintaining the entire trading stack on-chain, from order matching to risk management, the platform provides verifiable execution while delivering institutional-grade performance. Hyperliquid’s robust trading volume currently ranks it as the 3rd largest high-performance L1 by fees, while still trading at a significant discount vs peers, despite continued industry-leading growth.

Source: Defilama, Artemis, Spartan Capital

The perp dex fee structure remains competitive with maker fees at 0.01% and taker fees at 0.035%, implementing a volume-based tier system that rewards active traders. This revenue is strategically distributed between the HLP (Hyperliquid Liquidity Provider market making vault), insurance fund, and assistance fund (which uses accrued USDC to accumulate HYPE on the spot DEX), creating a sustainable ecosystem for all participants.

Spot trading has emerged as a significant additional revenue source after the launch of HYPE token, particularly through its innovative auction-based listing system. Recent auctions have commanded up to $975,000 per ticker slot, while the spot trading fee burn mechanism has already removed over 110,000 HYPE (~$2.5M) from circulation. In other words, it has implemented one of the most interesting value accrual mechanisms among L1 peers with buybacks through the Insurance Fund (from accumulated perps fees and spot auction ticker sales) and burn (from spot DEX fees).

The imminent launch of HyperEVM represents a crucial expansion of Hyperliquid's capabilities. Unlike traditional blockchain expansions, HyperEVM will operate as a parallel environment sharing consensus with the main chain, enabling direct composability with existing order books and trading infrastructure. This architectural choice positions Hyperliquid to become a comprehensive financial services platform rather than just a trading venue.

Source: ASXN, Spartan Capital

The ecosystem development has already attracted substantial interest, with over 30 confirmed projects preparing to launch across various sectors. These range from sophisticated trading tools and infrastructure to lending protocols and prediction markets. The ability to seamlessly integrate these services with Hyperliquid's high-performance trading infrastructure creates unique opportunities for innovative financial products. We are particularly excited about HyperEVM launch as it will enable new innovations with a direct token sink impact:

• HYPE token and its liquid staking derivatives to become collateral on borrow/lend dapps, boosting capital efficiency, enabling yield optimization strategies and predictably attracting more TVL.

• Launch of new tokens from protocols building in the HyperEVM ecosystem and the potential of HYPE becoming the new base pair (instead of USDC) for these spot tokens.

Notwithstanding its success to date, Hyperliquid has also faced some challenges and criticisms recently. On December 23, Hyperliquid faced intense scrutiny over its validator set centralization when MetaMask security expert Taylor Monahan alleged discovering some vulnerabilities in its 4-validator infrastructure, all operated by the Hyperliquid team. The situation escalated after on-chain evidence suggested activity from North Korea's Lazarus Group, triggering $250 million in net outflows from the L1 within 30 hours. The team firmly denied any allegations of being compromised and emphasized its strong operational security measures, with the situation shortly going back to normal.

A few days after, on December 30, HYPE token staking was launched with the purpose of decentralizing its validator set, taking a major step by adding 11 non-Hyper foundation validators to mainnet, which now stands at a total of 16 with over 410.7 million HYPE staked (41% of the total supply), of which 331 million tokens are staked in the foundation nodes, representing roughly 80.6% of the total stake. The team plans to continue growing the validator set overtime based on the uptime performance that new validators show in the testnet, along with open-sourcing the consensus code and redistributing the stake weight so it doesn’t mainly remain under the foundation entity.

Hyperliquid enters 2025 with both significant opportunities and clear challenges ahead. The platform has shown it can maintain strong trading volumes and grow its market share, even after the conclusion of its points program. Its quick addition of new validators and stable performance during December's outflows suggest the team can handle operational challenges while keeping the platform running smoothly. With the upcoming HyperEVM launch and growing ecosystem of projects, Hyperliquid looks well-positioned to become the leading layer 1network for onchain trading.