QCP Clarifies: HYPE & Hyperliquid

Hyperliquid comes up in a lot of client conversations. Some of that is noise. Some of it is a genuine question about what the platform is and why it grew the way it did. 

We asked Eugene Kwok, Business Manager at QCP, to work through the questions we get most. 

What is Hyperliquid, and why has it drawn so much attention?

It’s a decentralised exchange where people trade perpetual futures. That part isn’t new. What’s different is how it was built, and that’s the bit most coverage skips over.

I’ve watched it almost since launch. They approached the problem very differently from everyone before them.

What do you mean by differently?

Before this, you picked a layer one — Ethereum, Solana, some layer 2 — and used smart contracts to build exchange capabilities on top. Hyperliquid did it the other way around. They built a purpose-built layer one: HyperCore provides native order-book and trading functionality, HyperEVM gives developers an EVM environment for smart contracts. 

“It’s not simply a decentralised exchange with its own token. It’s a trading-optimised blockchain whose flagship application happens to be one of the largest decentralised derivatives exchanges.”

So the matching engine and the margin system are part of the blockchain’s native state. The old complaint about decentralised exchanges was that they were slow, because a high-speed order book on-chain is hard. Building it into the chain is their answer. 

Where does the HYPE token fit into that? 

This is where it’s easy to hear the mechanics and draw the wrong conclusion. Under the protocol’s current fee mechanism, a portion of trading fees is directed to an on-chain Assistance Fund that automatically purchases and burns HYPE. The mechanism is publicly observable, but it is a protocol design choice, not a contractual entitlement for holders. 

“The token has functions on the network: it is used for gas on HyperEVM, staking and delegation to support validation, and fee discounts for stakers. None of those functions gives holders equity, a dividend, or a contractual claim on protocol fees, and the fee mechanism does not give tokenholders a right to payment from the protocol. “

The token distribution was unusual. What happened there?

The usual sequence is: raise venture funding, launch at a large valuation with small circulating supply, retail buys in, then the team and investors unlock later.

Hyperliquid Labs says it was self-funded and did not take external capital, and the genesis distribution did not include a private-investor allocation. The product came first, followed by users and volume, and then a meaningful distribution to eligible users.

That created goodwill. Worth saying clearly though: the absence of a venture allocation does not mean there is no future supply. Core-contributor and other allocations remain subject to applicable release or emissions schedules.

There has been visible interest in perpetuals referencing equities and commodities. What do you make of that? 

Quick caveat. Synthetic contracts referencing equities and commodities; they do not confer ownership of the underlying assets. So take this as an observation about market behaviour, not as a suggestion that anyone use them.

“Perpetual contracts build on an idea from traditional finance that crypto markets developed at scale. Market participants are now applying similar infrastructure to synthetic exposure referencing equities and commodities. That is interesting from a market-structure perspective, but different products carry different legal, regulatory and risk considerations.”

QCP is a supervalidator on the Canton Network. How is what Canton is solving different?

Very different. Canton is designed for institutions to settle and interact with each other, and they need things an open environment can’t give them. It lets them settle tokenised assets while revealing data only to the parties entitled to see it, not to every participant.

“Both are asking different questions. Hyperliquid is asking how do we put financial markets entirely on chain without sacrificing performance. Canton is asking how do we put regulated financial assets and workflows on chain without exposing confidential information to everyone. Same problem area, completely different constraints.”

What should people understand about HYPE?

The reason to pay attention isn’t necessarily the token; it is what sits underneath it. The venue places the order book, margin and liquidations within the chain itself. One growing segment has been perpetuals referencing equities and commodities rather than the underlying assets themselves. 

“That’s primarily an infrastructure story, rather than a conclusion about the value of the token.”

Now the other half, and I’d rather be blunt. Finding the infrastructure interesting is not the same as owning the token. People collapse those two decisions constantly.

The token is volatile and speculative, is not protected by deposit insurance or an investor compensation scheme, and you can lose the entire amount you put in. Similar economic designs may also be replicated by competing protocols. Finding the tokenomics compelling does not remove those risks.

You’ve been at QCP over seven years. Has your view of this industry changed?

Completely. I joined as a bright-eyed crypto native who thought this would disrupt a centuries-old industry outright. I loved the underdog story. That view has evolved with the space. 

“It used to be about how crypto would disrupt the world. Now I think it is about how blockchain infrastructure can strengthen the systems that already exist, as traditional and digital assets converge.”

More institutions are building the capability to issue, trade and settle on-chain. Not because blockchain is an end in itself, but because in appropriate use cases it may make aspects of market infrastructure faster or more efficient. The case is practical, not ideological.

My longer-term view is that more asset classes will trade and settle closer to 24/7. And it won’t just be you and me trading; it may include millions of automated agents. Traditional infrastructure was not built for that, and it’s a much longer-term development than any individual token.

If this resonates with how you’re thinking about market infrastructure, leave us a comment. Want to chat directly with Eugene and the team? Reach out to us here. 

Disclaimer: The views expressed herein are our own and do not constitute investment advice, financial advice, or a recommendation to buy or sell any digital assets. This commentary is provided for informational purposes only and should not be relied upon as a basis for investment decisions. Please consult with a qualified financial advisor before making any investment decisions. Full list of our disclaimers here.