# Try Cool Crypto: Hyperliquid By [Untitled](https://paragraph.com/@0x22801e53e7d815f465718f5947cd9febf0734d14) · 2025-01-15 --- Intro ===== **In crypto, inaction can be very expensive.** I know this, and yet I often find myself failing to act when I first get the chance. Whether it's an exciting new protocol that I want to test out or a cheap token that I could be apeing, I have a tendency to add it to the 'to-do list' rather than diving in then and there. When (or if) I finally get around to investigating, it might be too late. I might have missed out on a lucrative airdrop, significant gains, or simply a chance to truly understand the latest CryptoTwitter craze. I'm hoping this newsletter will help with that. If I'm honest, I haven't fully worked out all the details just yet. But the general idea is simple: to **try cool crypto**. Each week or so, I want to make sure I'm checking out and documenting at least one new app or protocol that takes my interest. This isn't supposed to be an exhaustive deep dive into each project, just a few first thoughts and observations as I try something out. I want this to be a light and simple aid to my exploration of crypto, not a burdensome task that I feel compelled to complete. If anyone happens to be reading this, I encourage you to follow along and test things out yourself. After all, it's one thing to read or hear about an exciting new protocol, and it's quite another to actually play around with it. I may also add a few media highlights that I've come across in the week (as I've done below). There's an awful lot of crypto content out there these days and it's easy to miss something great. Right, that's probably enough of an intro for today. I don't know if I'll write something like this every time or just jump straight into the content. Probably a bit of both. If I don't do this again, I'd like to say thank you very much for reading and giving this a chance. And, if you want to follow my work, you can find me here on [Twitter](https://x.com/JDSHarris), or check out my channel Topic Crypto on [Twitter](https://x.com/TopicCrypto), [YouTube](https://www.youtube.com/c/TopicCrypto), and [Mirror](https://mirror.xyz/topiccrypto.eth). Read ==== The New Year means lots of retrospectives! **_Messari's Crypto Theses_** is always a must-read for me as one of the longest-running and most comprehensive explorations of the year in crypto. You can [check it out here](https://messari.io/report/the-crypto-theses-2025#messari-analyst-picks). I also enjoyed [**_Chain Abstraction in 2024: A Year in Review_**](https://x.com/OmniFDN/status/1867223208560148727) by Omni, Particle, and LiFi. It gives an overview of one of the most important growth areas in crypto. [This thread](https://x.com/binji_x/status/1874422557992263720?s=46&t=5-tZMyRWG1595DLh6wU5bA) by Optimism contributor [@Binji](https://x.com/binji_x) is a great introduction to Ethereum's next big update, Pectra. Finally, check out [**_Was Modular a Mistake? A Data-Driven Take on Ethereum’s Grand Strategy_**](https://blog.hack.vc/was-modular-a-mistake-a-data-driven-take-on-ethereums-grand-strategy/) by HackVC. It came out a couple of months ago, but it's definitely worth a read. There's also an accompanying podcast... Listen ====== That post was discussed in this week's episode of [**_Empire: ETH’s Modular Bet Will Work_**](https://overcast.fm/+AAqekFwBFKk). Try === ![](https://storage.googleapis.com/papyrus_images/837b4de47dd8a297b04ce224c6ae4fba1fd623806f251a241902305965bcd6e4.png) I thought Hyperliquid would be a good place to start this journey. Why? Well, it just might be the clearest example of how costly inaction can be. I believe I first came across Hyperliquid almost a year ago, when Airdrop Threadors kept mentioning it as something worth using. As usual, I added it to my to-do list. But I'm not much of a trader so naturally it never became a priority. Life got in the way and I never got around to testing it out. Late last year, Hyperliquid conducted what was probably the largest and most successful airdrop event in crypto history. Millionaires were minted overnight. As a regretful non-user, I remained poor. The airdrop certainly solidified Hyperliquid's already strong and sizeable community of supporters. But it had its cheerleaders long before it distributed enough money to silence any user's complaints. So, I thought it was time I checked out one of the most hyped-up apps in crypto. ### What Is Hyperliquid Hyperliquid is a decentralised perpetuals exchange. The team built their own high-performance chain to support that exchange, and they are in the process of transforming this chain into a generalised platform for all sorts of financial applications. ### Dangers It's worth noting that the Hyperliquid team claim their chain is an _L1 blockchain_. However, [L2Beat describes Hyperliquid](https://l2beat.com/scaling/projects/hyperliquid#risk-summary) as an _L3 hosted on Arbitrum_. That means we need to consider both the potential dangers and security issues of Arbitrum and Hyperliquid when thinking about what might go wrong here. I'd recommend checking out the L2Beat page for the proper risk summary. The TLDR is that you are currently putting a lot of trust in the Hyperliquid team when using their product. **They could freeze or seize your funds at any time**. So much for “decentralised”. [https://substackcdn.com/image/fetch/f\_auto,q\_auto:good,fl\_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F7b7e5b49-1f75-4dfe-a426-9f3b8eb4d769\_2386x908.png](https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F7b7e5b49-1f75-4dfe-a426-9f3b8eb4d769_2386x908.png) There's also been [a lot of talk on cryptoTwitter about North Korea potentially looking to exploit Hyperliquid](https://x.com/tayvano_/status/1870960207842701358). Many of the project's biggest supporters have dismissed this as FUD. I would take this quite seriously -- especially as it's being raised by [@Tayvano\_](https://x.com/tayvano_), one of the most reputable and respectable people in the entire industry. I believe Hyperliquid is currently operated by only 4 validators and all the code is closed source. I think the number of validators will soon increase to 16 in an initial attempt to increase the decentralisation of the project, which may reduce concerns a little but not a lot. All of this is to say you use the platform at your own risk. You could lose everything you have on there, so I personally won’t be putting large sums of money on Hyperliquid in its current form. Luckily, I don't need too much to test it out. First Thoughts -------------- My initial thoughts are the setup and onboarding are nice and simple. I recently had to create an account on a CEX, and there's no question that the Hyperliquid experience is better. Largely, this is because there are no checks for KYC here. ![](https://storage.googleapis.com/papyrus_images/3568b709c7c064101f6d8868049fb18bbfbc8fb7af67085e7c97df9078745237.png) It asks you to sign a few messages after connecting a wallet. One of these is to set up a payment channel, which means a wallet won't be necessary beyond this point. This is obviously a great UX feature, making it feel more like a traditional CEX rather than a DEX. It would certainly be a nightmare having to sign off on every trade you make. ![](https://storage.googleapis.com/papyrus_images/998fb2b1a0e5f31d7322cf6d0c134737e8d382791448836298948c9821144615.png) Depositing funds from Arbitrum is super fast, but of course, it requires you to have funds on the L2 in the first place. I realised I didn't have appropriate tokens on Arbitrum after I started the setup, so I had to go through a bridging process before I could deposit. A bit annoying, but not unusual in the current crypto landscape. It looks like they plan to support deposits from additional chains soon. That would probably be a good idea. ![](https://storage.googleapis.com/papyrus_images/e5a092c2683f4e83f9fd2a648acff51d29628276fe1e058ab7ebe2d3fc3134ac.png) Once I've set up, I take a look around the app. They have spot and perps trading. Spot seems pretty limited right now. I assume it's only Hyperliquid's native assets that can be traded in this way. I'm not particularly interested in any of the spot assets, so I'll just play with perps for now. It's also interesting to note that their coin categories include a pre-launch section. So, Hyperliquid is an option if you want to speculate on upcoming tokens or hedge an airdrop. I can also see that different assets allow different levels of leverage, which makes perfect sense. The largest assets allow up to 50x, whilst the smaller and more risky assets might only allow up to 3x. Something I'm not a fan of is the fact that every token seems to be set to maximum leverage when I first go to trade it. I can't help but think this could catch some users out and get them quickly liquidated. I guess most people who use this are degen traders who want high leverage, so they probably won’t care. Frustratingly, changing leverage seems to be one of the slowest interactions on the platform. It's not long, but waiting a few seconds for it to load feels like an age compared to the speed of most other actions, like making a trade. Is this intentional? Presumably, they want users to use maximum leverage to increase fees and liquidation income. The minimum trade size is $10. Placing the order feels very much like a CEX experience. I've tried perp DEXs before that feel clunky to use and take a long time to execute or fill even tiny orders like my minimal test trades. No such problems here. ![](https://storage.googleapis.com/papyrus_images/c022166516524b02b26d3a9b33e6707427e6e6222a7918c3d0966f0819a9fe72.png) One of the other features I want to look at is Vaults. These are essentially funds you can deposit your money into in the hope that it will provide a decent return. Vaults can be set up to act in all sorts of ways and manage all kinds of strategies. You can even create your own if you want — though you do need to maintain greater than 5% of the liquidity in the vault. Each vault has its own risks which vary depending on what strategies it’s employing. In theory, they should provide some information about this, but I guess there are no guarantees of anything being reported properly. A quick sort by returns shows a large number of Vaults have lost absolutely everything invested into them, so it’s probably worth taking great care when choosing one to deposit into -- especially if you're using meaningful quantities of money. ![](https://storage.googleapis.com/papyrus_images/7983d6e641b6b899b0cd04b843649880cc82ca8724f48a1398bfb3525b28e9eb.png) I’ll try the Hyperliquidity Provider (HLP) Vault. This is one of the protocol’s own vaults which manages liquidations, market making, and receives a portion of trading fees. Depositing is straightforward and, once again, snappy. ![](https://storage.googleapis.com/papyrus_images/e3434f5f925b1ce1e35611d1783d11e43e0a77f3020ce62c3334cc049015c0d6.png) Strangely, the Portfolio tab doesn't give any detailed Vault deposit information. The PNL graph does include Vault earnings, and it does tell you how much you have invested in Vaults, but it doesn't clearly display specific Vault positions in the way it displays open trade positions. Not a big problem, but I can't help but think some people will deposit money and then forget where they put it. Still, you can always go to the Vaults tab itself and order by _Your Deposits_, which probably is enough. But, personally, I'd have spelled it all out in Portfolios so users could truly see everything in one place. ![](https://storage.googleapis.com/papyrus_images/100205a45cf9b66a2fbcf37016b8d2b08788ba5d81a08b6b30f8fcf25722bb1d.png) Finally, I tried withdrawing from Hyperliquid. Withdrawals require a signature from your wallet -- as you'd expect when actually moving funds off of the platform rather than within it. They also cost $1, which is pretty expensive for an Arbitrum transaction. However, it seems roughly on par with CEX prices, so I can't complain too much. Wrapping Up ----------- Hyperliquid certainly provides a great user experience, and I can see why many prefer it to CEXs -- especially if you're not aware of quite how centralised Hyperliquid currently is. _(That’s not a criticism of Hyperliquid’s current approach, BTW. I appreciate a lot of projects start out quite centralised and progressively open up as they develop)._ As someone who doesn't do a whole lot of trading, and definitely not leveraged or perpetual trading, I don't see a massive difference between this and projects like DyDx or Drift. That said, I haven't used those platforms for a long time, so maybe I'm forgetting exactly what they were like (perhaps I'll check them out in a future issue). However, Hyperliquid is definitely in another league compared to many of the other trading protocols I have played with. With its dedicated community and growing list of ecosystem projects, Hyperliquid could certainly have a very bright future. I'm sure I'll be back to try out some of those emerging projects another time. But there are also reasons to be concerned. How will Hyperliquid navigate its decentralisation process? Will it be able to maintain its attractive UX and speed once it opens up to a wider set of validators? And will its lack of KYC draw regulators' wrath? I’m interested to see how Hyperliquid develops into the future. --- *Originally published on [Untitled](https://paragraph.com/@0x22801e53e7d815f465718f5947cd9febf0734d14/try-cool-crypto-hyperliquid)*