Hyperliquid’s HIP-3 & HIP-4: Tokenized Stocks and Prediction Markets

HIP-3 and HIP-4 Overview

What are Hyperliquid Improvement Proposals (HIPs)?

Hyperliquid Improvement Proposals (HIPs) are a structured framework for introducing new capabilities to the Hyperliquid protocol. Blockchain networks typically follow the naming convention of "XX Improvement Proposals" — Bitcoin's are called BIPs, Ethereum's are EIPs, and so on.

What sets Hyperliquid apart from other blockchain networks, is that it treats these proposals sparingly and purposefully. Bitcoin and Ethereum have hundreds of BIPs and EIPs respectively, many of which cover minor technical housekeeping. On Hyperliquid, each HIP represents a significant structural upgrade — often introducing novel products, features, or capabilities that reshape what the protocol can do.

The first two proposals set the foundation. HIP-1 introduced a native token standard — the rules for issuing new assets on Hyperliquid, similar to how Ethereum's ERC-20 standard defines how tokens work on that network. HIP-2 built on this by solving the cold-start liquidity problem for newly listed tokens — an automated system called Hyperliquidity that seeds buy and sell orders around a token's current market price, so new assets have meaningful trading depth from day one rather than launching into a thin, illiquid market.

The Problem: Why Permissioned Listings Are a Bottleneck

To understand why HIP-3 matters, it helps to understand what came before it. On centralized exchanges (CEXs) like Binance or Coinbase, listing a new perpetual futures market has historically required going through an opaque, expensive, and slow approval process. Projects pay significant listing fees, wait months for decisions, and have no guarantee of approval. Even on decentralized perpetuals protocols, the list of available markets has typically been curated by a core team.

This gatekeeping creates friction. Promising assets go unlisted. Niche markets — like perpetuals for real-world stocks, commodities, or indices — never get built because no single party has the incentive to list them. HIP-3 removes this bottleneck entirely by replacing the committee with code.

What Is HIP-3: Builder-Deployed Perpetuals

Activated on mainnet on October 13, 2025, HIP-3 allows any qualified developer or team to deploy their own perpetual DEX directly on HyperCore — Hyperliquid's core execution layer that handles order matching, margining, and settlement at high speed (retail users see this as the main trading website, Hyperliquid.xyz).

Here's how it works in practice:

• Staking requirement: Deployers must stake 500,000 HYPE tokens as a security bond. This serves as both a spam deterrent and an economic commitment — if you behave maliciously, you lose your stake.

• First three markets are free: The first three assets a deployer lists do not require auction participation, lowering the barrier to get started.

• Dutch auction for additional assets: Any markets beyond the first three must be won through a Dutch auction — a reverse bidding process where the price starts high and decreases over time until someone accepts it, helping surface fair market value rather than creating bidding frenzies.

• Deployer responsibilities: Once live, deployers must manage their own oracle feeds (external price data sources that tell the contract what an asset is worth in the real world), set leverage limits, attract market makers for liquidity, and monitor risk parameters.

• Fee revenue share: Deployers earn a fixed 50% of all trading fees generated on their markets, giving them a direct financial incentive to operate well and attract volume.

• Slashing as a safeguard: If a deployer acts maliciously or negligently, validators (the network operators who process transactions) can vote to slash (permanently destroy) up to 100% of their staked HYPE. Crucially, the stake remains slashable during a 7-day unstaking window — you can't simply withdraw and escape consequences. The slashed tokens are burned, not redistributed, following proof-of-stake principles that keep incentives clean.

HIP-3 markets inherit HyperCore's full infrastructure — the same high-performance orderbooks and margining systems used by Hyperliquid's native markets — so builders get CEX-level execution without building from scratch.

A real-world example: trade.xyz became the first team to deploy under HIP-3, launching 24/7 perpetual markets for US equities including Tesla, Apple, Nvidia, and Amazon, as well as a synthetic Nasdaq index. 

HIP-3’s Explosive Growth

Since its launch on October 13, 2025, HIP-3’s trading volume has grown to represent over 35% of all trading volume on the Hyperliquid platform. HIP-3’s Open Interest (OI) showcased similar growth trajectories, continuously reaching new all-time-highs, most recently achieving $1.43B in March 24, 2026.

Source: https://dune.com/queries/6280948/10007199

Hyperliquid’s Next Upgrade, HIP-4: Outcome Trading and Prediction Markets

Announced and launched on testnet on February 2, 2026, HIP-4 introduces outcome contracts — commonly known as event contracts in the Trad-Fi space, these contracts are what enable prediction markets such as Kalshi, Polymarket and more. On Hyperliquid, these are fully collateralized, expiry-based contracts that settle at either 0 or 1 depending on whether a specific real-world event occurs.

If you buy a YES contract on "Will BTC close above $100,000 by March 31?" at a price of 0.60, you're paying 0.60 USDH per contract. If BTC does close above $100,000 on that date, the contract settles at 1 and you receive 0.40 USDH profit. If it doesn't, it settles at 0 and you lose your 0.60. Your maximum loss is always your initial stake — nothing more.

Potential use cases include crypto price milestones ("Will ETH hit $5,000 by Q2?"), macroeconomic events ("Will the Fed cut rates in June?"), sports results, election outcomes, and potentially even insurance contracts.

A particularly powerful feature is composability — because outcome contracts run natively on HyperCore, they live in the same trading account as a user's perpetual futures positions. This means a trader can hold a long ETH perpetual and simultaneously buy a downside outcome contract as a hedge — all within a single account, without moving funds between platforms.

HIP-4 will launch in two phases on mainnet: first with a curated set of official markets, then opening to permissionless builder deployment — following a similar path to HIP-3. No specific mainnet date has been confirmed as of March 2026.

Who Uses HIP-3 and HIP-4, and Why?

HIP-3 is designed for builders — trading teams, DAOs (decentralized autonomous organizations — community-governed entities that operate via smart contracts), fintech developers, and market makers who want to deploy a derivatives exchange without building their own infrastructure. The benefits are clear:

• No infrastructure overhead: HyperCore handles execution, clearing, and settlement.

• Immediate access to liquidity: Deployers launch into an ecosystem already used by hundreds of thousands of traders.

• Revenue share: Earning 50% of fees on a liquid market can be a substantial revenue stream.

HIP-4 targets a broader user base — from DeFi power users who want hedging tools, to casual crypto participants looking for simpler ways to express market views (through a yes/no trade), to institutional desks that want event-driven exposure without leverage.

Hyperliquid's Broader Vision: From DEX to Financial OS

Viewed together, the four HIPs tell a coherent story:

• HIP-1: Define the rules for creating assets.

• HIP-2: Solve liquidity for those assets automatically.

• HIP-3: Let anyone build a derivatives exchange on top.

• HIP-4: Add entirely new categories of financial contracts.

Each layer compounds on the previous one. True to their ethos of being “the blockchain to house all finance”, Hyperliquid is slowly working to build and account for every aspect of finance, attracting billions worth of liquidity while doing so.

HYPE, the protocol's native token, is the economic thread running through all of it. Staking HYPE is required to deploy HIP-3 markets. Dutch auctions for additional listings are paid in HYPE. Moreover, 97% of protocol trading fees are used to buy back HYPE — meaning every new market that generates volume directly supports the token's value. This creates a self-reinforcing flywheel: more markets → more volume → more fee revenue → more HYPE buybacks → higher effective staking cost → stronger security.

Getting Started: What Builders and Traders Need to Know

For builders considering HIP-3:

• Capital requirement: The 500,000 HYPE staking requirement is the primary barrier. At current prices this represents a substantial commitment of around ~$25 million.

• Self-managed operations: Deployers are responsible for maintaining oracle feeds, attracting liquidity, and setting appropriate risk parameters. Poor oracle management is slashable (Penalty fees affecting the 500K staked HYPE).

• Third-party frontends: HIP-3 markets do not appear on Hyperliquid's main trading interface — deployers must build or integrate with their own frontend.

• Auction mechanics: Plan for Dutch auction costs if listing more than three assets in your DEX.

For traders:

• HIP-4 is testnet only as of March 2026. Do not trade with real funds until mainnet is confirmed.

• HIP-3 markets carry different risk profiles from native Hyperliquid markets — they are not covered by the protocol's native liquidity pool (HLP — Hyperliquid's shared liquidity vault) and depend entirely on the deployer's liquidity management.

Future Outlook

HIP-3 is already validating its thesis. Open interest across builder-deployed markets has surpassed $1 billion, and Hyperliquid's round-the-clock availability has made it the de facto venue for trading commodities like crude oil and gold over the weekend. This has proven especially consequential in recent months, as high-impact market events such as Iranian airstrikes, tariff shocks, and beyond — have developed a habit of breaking on Fridays, leaving traditional markets dark precisely when traders need them most.

HIP-4's mainnet launch, expected sometime in 2026, could be the next major inflection point. If outcome trading gains traction, Hyperliquid would become the only platform in crypto offering spot trading, perpetual futures, and prediction markets natively on a single execution layer — a combination no centralized or decentralized competitor currently matches.

Longer term, the staking requirement for HIP-3 is expected to decrease as the infrastructure matures, potentially opening the door to a wider range of smaller builders. And future upgrades are likely to extend HIP-4 to permissionless builder deployment, mirroring the HIP-3 playbook.

Risks and Considerations

HIP-3 and HIP-4 are genuinely innovative — but they come with real risks that any user or builder should understand:

• Oracle manipulation risk: HIP-3 deployers are responsible for maintaining their own price feeds. A poorly designed or manipulated oracle can cause incorrect settlements and significant user losses.

• High capital barrier: 500,000 HYPE is a meaningful stake, which concentrates HIP-3 deployment among well-capitalized teams and potentially limits diversity of market creators.

• No HLP coverage: HIP-3 markets are not backstopped by Hyperliquid's native liquidity. If a deployer's liquidity dries up, users may face poor execution or inability to exit positions.

• Regulatory uncertainty: HIP-4's prediction market functionality operates in a legally ambiguous space. In January 2026, a Massachusetts court issued an injunction against Kalshi over sports betting contracts, indicating that decentralized platforms are not immune to regulatory action.

• Centralization of validators: The slashing mechanism depends on validators acting honestly and in good faith. Validator collusion, while unlikely, remains a theoretical risk.

• Smart contract and operational risk: Builder-deployed markets inherit HyperCore's infrastructure but add their own operational layer. Bugs in deployer logic, key compromises, or negligent management can harm traders.

• Testnet caveats: HIP-4 remains on testnet. Features, mechanics, and even the underlying design may change before mainnet launch.

Conclusion

HIP-3's success speaks for itself. trade.xyz has quietly become one of the most recognizable names in the Hyperliquid ecosystem, most recently securing official licensing rights to use the S&P 500 ticker — a milestone that would have seemed unlikely for a DeFi protocol not long ago. With HIP-3 still growing and HIP-4 on the horizon, the bigger question is whether Hyperliquid can replicate that success in the prediction markets space and take on established players like Kalshi and Polymarket on their own turf.

This article is for educational purposes only and does not constitute financial advice. Cryptocurrency and DeFi products carry significant risk, including the potential loss of all capital. Always conduct your own research before making any financial decisions.