On Saturday, September 27, 2025, at approximately 22:00 Singapore time (SGT), the Hyperdrive team was alerted to suspicious on-chain activity affecting the Primary and Treasury USDT₀ markets. Out of an abundance of caution, all markets were immediately paused while we investigated.

Following a rapid internal review, we confirmed that the activity was the result of a malicious exploit. Our incident response plan was activated, and a dedicated war room was assembled consisting of the Hyperdrive core team, external auditors, and an on-chain forensics group.

Technical Summary

Each Hyperdrive Market is a stand-alone ERC-4626 vault where the loan token serves as the vault asset. Markets allow users to supply and withdraw collateral, and to borrow and repay debt.

A key feature of the protocol is support for the Operator model defined in EIP-7540, which allows approved operators to manage user positions on their behalf. Currently, the only approved operator across all markets is the Hyperdrive Router — a multicall-style contract that batches multiple actions into a single transaction to enhance user experience.

The Router also includes a general CALL action type, designed to permit external contract calls. For safety, the CALL action is governed by an allowlist that restricts execution to approved external contracts. However, this allowlist was referencing the Hyperdrive Address Registry, which serves as a canonical mapping of all protocol contract addresses — including core Market contracts themselves.

Root Cause

By using the Router’s CALL action in combination with the Address Registry, the attacker was able to target the Market contracts directly and perform operations as an authorized operator. This led to three distinct exploit vectors:

1. Borrowing USDT against user accounts on the Primary USDT₀ Market.

2. Withdrawing thBILL collateral from the Treasury USDT₀ Market.

3. Sweeping unspent ERC-20 token allowances from users who had previously approved the Router but never completed a redemption.

The first two exploits were mitigated when the markets were paused. The third vector targeted residual token allowances and was unrelated to active market state.

Containment and Resolution

Upon confirming the exploit:

• All markets were paused to prevent further action.

• The Router contract was upgraded to a bricked version, effectively disabling all functionality and eliminating any further risk.

• The response and containment measures were completed within a few hours of the initial alert.

After stabilizing the system, the team elected to perform a remediation of user funds before resuming market operations due to the nature of the exploit involving user-level borrowing actions.

Remediation and Next Steps

Our priority throughout the process has been user protection and transparency. The following steps were taken:

• Comprehensive forensic analysis to identify all affected accounts.

• Balance and position remediation for impacted users.

• Security patch and architectural update to the Router and Address Registry integration.

While all components of the system had previously been audited, the Router’s CALL action had been reviewed in isolation. In context, the design was secure, but the interaction with the Address Registry introduced an unforeseen systemic risk — a lesson that underscores the importance of holistic, system-level audits in modular architectures.

Attribution

We are unable to publicly identify the threat actor responsible at this time. However, on-chain forensics indicate that the threat actor has been involved in multiple exploits across other protocols. The threat actor is currently the target of at least one ongoing law enforcement investigation. We are cooperating with ecosystem partners to share intelligence and strengthen collective defenses.

Closing Statement

This incident serves as a reminder that even well-audited, permission-restricted systems can be exploited through unexpected composability.

We remain deeply committed to maintaining the security, integrity, and transparency of the Hyperdrive protocol.

We thank our community, partners, and users for their patience and support as we continue to make Hyperdrive stronger and more resilient.

— The Hyperdrive Team

Through this partnership, holders of Unit assets can use their BTC and ETH as collateral on Hyperdrive to borrow USDe and other stablecoins, unlocking new capital efficiency for self-custodial users across HyperEVM.

Powering Capital Efficiency for Native Assets

Since launch, Unit has facilitated over $100 million in BTC and ETH inflows, making Hyperliquid the #1 DEX for native BTC spot volume.

With the Hyperdrive integration, those assets are no longer just tradable — they become productive collateral. Users can:

• Borrow stablecoins against native BTC and ETH

• Access liquidity without selling their holdings

• Use borrowed assets across DeFi applications on HyperEVM

This unlocks a new layer of financial utility and composability for assets historically difficult to deploy in DeFi — especially Bitcoin.

A Unified Onchain Finance Stack

Hyperdrive and Unit together form the foundation of Hyperliquid’s broader vision: to create a fully onchain alternative to centralized finance — one where assets can move, trade, and generate yield without intermediaries.

“This partnership is a major step toward making Hyperliquid the most capital-efficient onchain trading and lending platform in crypto. Unit brings native assets in. Hyperdrive puts them to work.”

— Hyperdrive Core Contributor

Availability

Collateralized lending against Unit assets will be live on hyperdrive.fi next week. Supported collateral includes Unit BTC and ETH, with additional assets to follow.

To stay up to date, visit https://x.com/hyperdrivedefi

Though this view may be consensus today, the foundations for Hyperdrive to support this vision begun to be built many years ago. As we prepare to launch, we will outline below why we chose to focus on stablecoin lending, and why on Hyperliquid.

The Stablecoin Market

Just 5 years ago in 2020, Ethereum had found its flagship product - DeFi. With just over $600M in TVL at the start of the year, DeFi grew explosively and hit a whopping $15.5B TVL by the end of the year. That’s a growth rate of 2583%.

Yet one vertical stood out to us — stablecoins. People were using it to beat bank account savings rates, conduct remittances, make payments and protect themselves from hyperinflationary currencies. The eventual proliferation of stablecoins was extremely obvious to us.

Today, we have behemoths in USDC, USDT0, USDe, and the total circulating stablecoin supply amounts to >$243 billion.

The Pain Point

There was one problem however, DeFi yields were unsustainable and declined in 2022. This led to an outflow of stablecoins from the market as people redeemed them for cash.

So the question we posed to ourselves were — how do we ensure yields are sustainable for our users?

Enter Hyperliquid.

Hyperliquid HLP

The Hyperliquidity Provider (HLP) is Hyperliquid’s market making vault. Its performance is driven by proprietary strategies set by Hyperliquid, as well as priority access to liquidation orderflow.

This had instantly caught our eye, as HLP derives it yield from sustainable mechanics unlike many ponzi-like sources we have seen in the past. This is why we started building on Hyperliquid.

Tokenized HLP and using it as collateral will be enabled on Hyperdrive once Hyperliquid dependencies are available.

The House of Finance x The Home of Stablecoin Yields

As Hyperliquid grows into the House of Finance, we foresee a myriad of activity taking place on it. More assets through tokenization protocols such as Hyperunit, more stablecoins such as Ethena’s USDe and USDT0, more vaults, payment rails, NFT projects, yield farming opportunities, etc.

Hyperdrive intends to capitalize on all yield opportunities to create products for our users. This mean tokenizing more HyperCore vaults, enabling them as collateral, creating managed yield and looping strategies.

Everything that pertains to yield will be on Hyperdrive - The Home of Stablecoin Yields.

A Closing 5 Year Vision - Becoming Crypto’s Default Yield Infrastructure

Hyperdrive is built for maximum utilization — Meaning every dollar on Hyperdrive should earn more, move faster, and create more value than anywhere else. Every crypto wallet will hold stablecoins, and every stablecoin will be earning, borrowing, and compounding through Hyperdrive.

We believe every crypto wallet will hold a stablecoin, and every stablecoin will be earning, borrowing, and compounding through Hyperdrive. It won’t just be a product. Hyperdrive will be the default infrastructure that yield flows through.

Hyperdrive is ready. Are you?

https://x.com/hyperdrivedefi/status/1921958583085957288

When Hyperdrive unlocks HLP as a collateral asset, a 0 to 1 shift will take place in the market. A sustainable strategy boosted by liquidation privileges on Hyperliquid, not ponzi yield driven by minting tokens, that is leverageable on Hyperdrive.

Some key characteristics of HLP are its:

✅ 100% Transparent Proof of Reserves

✅ Sustainable MM Strategies

✅ Low Volatility

✅ 0% Performance Fees

✅ To Be Tokenized and Supported as Collateral on Hyperdrive

✅ Swift Withdrawal Liquidity with Hyperdrive - No AMM slippage when liquidating deposits

Addressing Recent Events

In March, there were two economic attacks on the HLP vault. Both attacks used a strategy that liquidated the trader's own toxic position. March 12's incident left a 0.7% loss for HLP, while March 26's ended up in profit for HLP after Hyperliquid validators closed toxic positions at an agreed mark price.

The outcome of these events left HLP with minimal losses, and an upgraded strategy that is more resilient against attacks. These events also showed that HLP could process all withdrawals smoothly, even as there were large panic outflows from the vault.

Empirical Analysis of HLP Performance:

Due to the attacks, there is some ongoing negative sentiment around HLP.

• 1Y Return = >19%, inclusive of March's drawdown

• More than 70% of daily returns are positive

• <1% of daily returns were below -1% over the past 14 months

• Significantly lower volatility than major cryptoassets like BTC and ETH

Most traditional investors would kill to get access to funds with this type of risk-adjusted performance.

HLP's Strategy

HLP's performance is driven by proprietary market making strategies set by Hyperliquid, as well as priority access to liquidation orderflow.

Liquidations and volatility often cause extreme wicks, allowing buyers to cheaply acquire tokens from distressed positions. On CEXs, this orderflow is often privatized, giving the internal desk or privilieged market makers an advantage. On Hyperliquid, HLP vault depositors get access to this orderflow.

Farming Alpha

Hyperdrive will support partner assets such as Kinetiq and Thunderhead’s HYPE LSTs on its lending markets in the near future. To further boost yields and point farming, users can supply kHYPE or stHYPE on Hyperdrive, borrow USDC, and loop into tokenized HLP.

Maximize exposure across Hyperliquid verticals with Hyperdrive.

The Ultimate Collateral Asset

Hyperdrive’s tokenized HLP is coming soon, bringing the ultimate collateral asset live to the public. Users will be able to use it as collateral on Hyperdrive’s very own spot lending market, allowing them to leverage loop for extra yields, or borrow USDC from it to use elsewhere.

The Home of Hyperliquid Yields.

Hyperdrive.

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The HYPED Difference: Real-Time, On-Chain Exchange Rate

HYPED is a 0-fee LST for the HyperEVM, designed to eliminate these inefficiencies by leveraging a real-time exchange rate instead of relying on an Overseer.

🔹 How HYPED Works

HYPED calculates total assets, including staking rewards, completely on-chain and in real-time, thanks to Precompiles provided by the Hyperliquid team. This approach ensures that:

• No external trust is required – The protocol doesn’t rely on third parties to update its state.

• Users always receive the correct number of shares – The real-time exchange rate reflects the most up-to-date staking rewards.

• Security is maximized – Since there are no permissioned accounts updating the protocol, the risk of an exploit is eliminated.

• Instant response to slashing events – Unlike Overseer-based LSTs, which might be vulnerable to outdated accounting, HYPED automatically adjusts to any slashing events.

Why Choose HYPED?

✅ 0 Fees – No intermediaries taking a cut of your rewards.

✅ Secure by Design – No externally controlled permissioned accounts.

✅ Accurate Yield Tracking – Real-time updates ensure fair minting and redemption.

✅ Built for HyperEVM – Optimized to leverage Hyperliquid’s precompiles for maximum efficiency.

Just use Hyperdrive.

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Hyperliquid flips this model on its head. Through the HLP vault, liquidation profits flow directly back to users, creating a sustainable, high-yield ecosystem. Hyperdrive is now supercharging these profits with one-click leverage, unlocking unprecedented yield potential.

How the HLP Vault Generates Yield

The HLP vault earns yield from multiple sources, making it a powerful tool for passive income:

• Market Making Strategies – The vault profits from bid-ask spreads while ensuring deep liquidity.

• Liquidations – Exclusive access to liquidation order flow on Hyperliquid allows the vault to capture profits before anyone else.

• Platform Fees from Market Making – A share of transaction fees from Hyperliquid trading activity further boosts returns.

This diversified approach ensures consistent income generation, outperforming traditional DeFi yield strategies that rely solely on lending or staking.

Amplifying Profits: HLP Leverage on Hyperdrive

Hyperdrive takes HLP yield to the next level by enabling leveraged exposure. With 3x leverage on HLP, returns would have reached approximately 120% APR in 2024, before accounting for borrowing costs.

This unlocks "Hyperdrive-level yields"—a strategy that allows users to maximize earnings without the complexities of manual leverage management. With one-click looping, users can enter leveraged HLP positions effortlessly, compounding their gains while maintaining full control.

The Hyperliquid Advantage: Proven Performance

The numbers speak for themselves:

• 40%+ APR in 2024

• 21 profitable months out of 22 since launch

• Best month: +16.06% return

• Only negative month: -0.79% drawdown

Unlike traditional DeFi vaults that struggle with yield sustainability, the HLP vault thrives on real trading activity and liquidation profits—ensuring long-term profitability for depositors.

Cross-Chain HLP: Expanding Hyperdrive’s Yield Opportunities

Hyperdrive is pushing the boundaries of HLP liquidity even further. Once Hyperliquid enables precompiles, Hyperdrive will tokenize HLP positions on HyperEVM, bringing leverage and liquidation farming to the next generation of DeFi traders.

Additionally, through our partnership with LayerZero, HLP will soon become cross-chain compatible, allowing capital to flow seamlessly across 120+ blockchains. This means:

✅ Cross-chain collateralization – Use HLP across multiple ecosystems

✅ Unified liquidity – HLP will be tradeable and borrowable beyond Hyperliquid

✅ Increased capital efficiency – Yield farming strategies become more powerful

This expansion will make Hyperdrive the most capital-efficient way to farm yield in DeFi, reinforcing its position as the leading leverage market on Hyperliquid.

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Liquid HLP

HLP holders can unlock additional liquidity by using HLP as collateral to borrow USDC. This allows users to maintain their exposure to HLP while accessing stablecoin liquidity to deploy elsewhere in DeFi.

• How it works:

  • Deposit HLP as collateral in the Hyperdrive lending market.

  • Borrow USDC against your HLP position.

  • Use borrowed USDC for trading, farming, or other DeFi strategies.

This feature enables users to leverage their holdings while still benefiting from the yield generated by their HLP.

Leveraged HLP

Hyperdrive enables HLP loops for users that want to scale their HLP exposure.

• How it works:

  • Deposit HLP as collateral in the Hyperdrive lending market.

  • Zap in to loop your HLP positions

This strategy is for users who understand risk and want to maximize capital efficiency within the Hyperdrive system.

Get Ready for Hyperdrive

Hyperdrive has been working on HyperEVM testnet since July 2024, allowing us to acquire a deep technical understanding of how the Hyperliquid L1 works. This technical knowledge is then applied to:

• Be the first to make HLP liquid, unlocking deep composability and advanced trading strategies for HLP holders.

• Seamlessly integrate with Hyperliquid to make HyperEVM DeFi capital-efficient and scalable

• Battle-tested — Developed over 10+ months, already live and proven.

Learn more about Hyperdrive:

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With the launch of HyperEVM, Hyperdrive is set to channel more users into Hyperliquid’s perpetual markets, reinforcing its position as a high-growth, community-first ecosystem—all while ensuring that $HYPE holders benefit directly from its success.

The Perpetual Trading Opportunity

Binance makes approx. $38 billion in annual revenue from perpetuals Markets. That’s 5x the entire market cap of $HYPE in just one year.

Today, Binance dominates in users, distribution, and TVL, largely due to years of aggressive growth strategies—referral programs, staking incentives, and high-yield opportunities. Hyperliquid is crypto’s fastest-growing exchange, ranking top 10 in protocol revenue. The missing piece? Onboarding more users into its perpetual ecosystem.

And how can we accelerate Hyperliquid’s Growth?

As HyperEVM’s DeFi hub, Hyperdrive will supercharge Hyperliquid’s user growth by offering:

✅ Spot Lending – Accessible, sustainable yield rates for traders

✅ HLP Tokenization – Unlocking leveraged exposure to high-yield strategies

✅ $HYPE Liquid Staking – Staking with liquidity, maximizing capital efficiency

✅ One-Click Yield Strategies – Easy, automated ways to earn

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When HyperEVM Goes Live, We Go Live

Hyperdrive is built for scale, and as soon as HyperEVM launches, we’re hitting the ground running.

All gas, no brakes. Hyperdrive.

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How to Get Started:

1. Stake $HYPE on Hyperdrive and receive $HYPED tokens for liquidity and rewards.

2. Trade with $HYPED, supply $HYPED, or borrow more assets using $HYPED as collateral.

3. Use one-click strategies to maximize your earning potential.

4. Track everything on Hyperdrive in real-time.

What Is Liquid Staking and Why Does It Matter for You?

• Traditional staking: When you stake your tokens, they’re locked up—you can’t use them in trades, loans, or liquidity pools.

• Liquid staking: On Hyperdrive, you can securely stake your HYPE tokens and receive HYPED tokens representing your staked position. These HYPED tokens can be used across DeFi, allowing you to:

  • Lend or trade your staked position for more earnings.

  • Provide liquidity while still earning staking rewards.

  • Borrow against your staked tokens without sacrificing your earnings.

Liquid staking effectively lets you "double-dip" by keeping your staked position productive in multiple ways.

What is Hyperdrive?

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Visit https://x.com/hyperdrivedefi today!

• Earn - Earn yield on USDC or access Hyperdrive’s curated list of yield strategies. Battle-tested, double-audited lending infrastructure built on Hyperliquid.

• Borrow - Use Hyperliquid tokens such as $BTC, $HYPE, $PURR as collateral to borrow USDC.

• Liquid HLP & Leveraged HLP — HLP is Hyperliquid’s flagship vault. Through market-making and liquidation strategies, the vault has generated >40% APR in 2024. With Hyperdrive’s HLP Market, users can attain leveraged exposure to HLP.

• Liquid Staking ($HYPED) — Earn yield on your HYPE by staking it with Hyperdrive. HYPE staked with Hyperdrive gets tokenized as HYPED, allowing users to post it as collateral on Hyperdrive to engage in other yield strategies.

Why is Hyperdrive Better?

The best risk-adjusted strategies — Hyperdrive offers risk mitigated high-yield strategies to those looking to safely park their USDC. This is achieved via Hyperdrive’s proprietary mechanisms that manages risk and utilizes Hyperliquid’s low-latency response times and spot orderbook.

Yield for all risk-profiles — Users can choose from multiple yield strategies, including high-yield opportunities such as leveraged exposure to top-performing vaults.

HLP functionality — Hyperdrive has been working on HyperEVM testnet since July 2024, allowing us to acquire a deep technical understanding of how the Hyperliquid L1 works. This technical knowledge is then applied to:

• Be the first to tokenize HLP, unlocking deep composability and advanced trading strategies for HLP holders.

• Seamlessly integrate with Hyperliquid to make HyperEVM DeFi capital-efficient and scalable

• Battle-tested — Developed over 10+ months, already live and proven.

Hyperdrive is built by a team of seasoned DeFi veterans. Our goal is to be the layer that HyperEVM’s DeFi ecosystem is built upon, ensuring a robust and sustainable financial network is accessible to everyone. Visit Hyperdrive today!

Let’s Build Together: Hyperdrive Office Hours

We’re committed to growing the Hyperliquid ecosystem by supporting builders and users. Through Hyperdrive Office Hours, we provide mentorship, technical guidance, and strategy sessions for those looking to build on HyperEVM. If you’re working on something innovative, we’d love to help — let’s build together!

Learn more:

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https://mirror.xyz/0x0c31773aF12C949f671e138FC28dD7E7289304d3/kltoq-ULJWBNDjYpPdUZGnnarPgCqnA1dLjTOFA3MFQ