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Hyperliquid's Unique Positioning: Not Just Another EVM Chain
I believe many are overlooking a crucial fact:
Hyperliquid's EVM is not just another EVM chain. Those expecting to follow the same old L1 playbook will be in for a surprise.
This EVM is not focused on the general categories of crypto; instead, it aims to be the chain where unique and disruptive financial applications are built.
Why L1?
Hyperliquid began as a DEX with a focus on perpetual trading.
The development of their L1 aims to expand this into a broader financial ecosystem, leveraging their infrastructure and dedicated user base they've already established.
Hyperliquid’s L1 is uniquely positioned imo because it already has a strong user base, cult community and significant liquidity—3 of the hardest elements to establish in a new ecosystem.
Typically, the path for many chains involves securing huge funding and attempting to incentivize users with the promise of airdrops.
However, they often fail to create a true ecosystem, lacking a defining dApp that gives the chain a soul.
Instead, they try to consolidate users by rehashing what’s been done on other chains, tweaking the UI/UX slightly, and importing their brand themes into regular dApps—just look at the metrics of projects like Blast.
Hyperliquid’s goal is to build on its foundation, aiming to create a comprehensive DeFi ecosystem.
Hyperliquid evm composes natively with L1 state, meaning that builders will be able to atomically achieve the state with their existing HIP-1, HIP-2.
The atomic nature of the transfer means that the token balances on the L1 and the EVM are so called fungible and can be exchanged or transferred in a single, indivisible operation.
This eliminates the need for complex bridging solutions and ensures that users can move assets between the L1 and EVM environments seamlessly and atomically.
Why a Native Token?
The native token for the L1 is crucial, primarily for staking within a proof-of-stake system.
While it’s often associated with gas fees, the core necessity of the $HYPE token is to enable staking, secure and decentralize the network.
Decentralization of the entire financial applications in the universe and beyond is the end game.
Competitors and Industry Position
Hyperliquid operates in a unique niche, with no direct competitors attempting to achieve exactly what they are doing, imo.
This allows them to innovate without the pressure of mirroring or outdoing others in the same space.
They believe that constantly focusing on what others are doing can limit creativity and lead to incremental improvements rather than groundbreaking innovations.
The bull case for Hyperliquid is that it can become the single composable chain for finance.
Their vision is to consolidate financial applications on a single composable chain, just imagine.
By not taking external funding and avoiding short-term profits from protocol fees, they aim to create a neutral, long-term platform—much like Bitcoin—where there are no insiders with disproportionate control or benefits.
One interesting observation is that while Hyperliquid doesn’t focus on competitors, they do pay attention to successful practices in the broader market.
For example, they study how centralized exchanges like Binance have maintained user trust and volume, but they use this information to inform their own distinct strategies rather than to compete directly.
Study how they refunded lots of users back in the time because of market turmoil wicks and paid liquidations that are below Bybit standard, study how after that event HL started to perform better at mark prices, wicks and MMing.
Innovation Matrix Perspective
I’m quite fond of the below matrix and have been contemplating its implications for our industry and where different use cases fit within it.
While we might blame meme tokens for dominating this cycle or express frustration with VCs and endless rotations like the "$TRX pump season," these are reflections of the choices our builders make in this space.
In 2021, we witnessed countless disruptive and radical innovations—new DeFi primitives, LB protocols, insurance, fixed interest, derivatives, yield aggregators, and more.
This cycle, however, there is only one protocol that has truly disrupted the status quo with its focus on yield tokenization and yield trading (long yield-short yield): $PENDLE .
"Hyperliquid’s L1 is designed to expand beyond just trading, into a broader financial ecosystem.” - @chameleon_jeff
This reflects an ambition to create a new market with their L1, beyond existing trading platforms. It’s not just an incremental improvement but an entirely new home with broad financial applications.
Now it’s crucial to understand what Hyperliquid L1 aims to achieve: to become the center of financial applications to be the home of Pendle(s) that can disrupt the status quo and achieve composability on a universal level within a single chain.
"We are focused on first-principles thinking rather than studying and emulating competitors." - @chameleon_jeff
This approach is indicative of Radical Innovation, where the goal is to develop entirely new technologies and markets.
By not focusing on existing competitors, Hyperliquid is paving its own path and creating new opportunities within the ecosystem.
Hyperliquid L1 is what we’ve been missing—Hyperliquid’s vision embodies what was lost since 2021.
It’s a project dedicated to performing radical, disruptive innovations that can bring the masses on-chain.
DeFi has been in a slump, and what we need is a kickstart.
We’ve tried to awaken the space with incremental, superficial innovations and failed.
Hyperliquid is the one that can kickstart DeFi, and you should be ready.
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