What Is Hyperliquid and What the Hyperliquid Airdrop Means for DeFi

What Is Hyperliquid?

Hyperliquid is a high performance Layer 1 dedicated to being a low slippage and extremely fast decentralized crypto trading platform. Hyperliquid prides itself as a DeFi (decentralized finance) platform with a CeFi-like (centralized finance) experience. Hyperliquid is well loved by the community and its users for being a reliable trading hub for all things crypto.

What Is The Hyperliquid Airdrop?

On 29 November 2024, Hyperliquid airdropped its token, HYPE to over 90 thousand users rewarding many lucratively. Hyperliquid’s airdrop shocked many with how generous the token allocation was to their community and has set the tone for future crypto airdrops to come.

Key Takeaways

• Hyperliquid is a high performance decentralized crypto trading platform using its own Layer 1.

• On 29 November, Hyperliquid airdropped its token, which continued to surge massively in price, making it the largest airdrop in crypto history.

• Hyperliquid’s generous airdrop allocation and “community first” ethos has resulted in a large sentiment shift against crypto venture capitalist (VC) investors.

What Makes Hyperliquid Special?

Slippage is always a concern when trading on decentralized platforms. High slippage can occur as decentralized platforms tend to rely on a mechanism known as automated market makers (AMMs) and liquidity providers. These mechanisms, while effective, sometimes produce high slippage scenarios in volatile markets which is a cause for concern for most traders.

Let’s take a look at GMX, a typical decentralized pepetuals trading platform:

Notice how $1000 of USDC trades to become $999.80 of Bitcoin due to slippage. While this is still considered low slippage, this can become much worse when markets are volatile. Overall, traders still prefer the higher reliability that comes with an orderbook type of exchange offered by centralized exchanges such as Binance.

In comparison, let’s look at Hyperliquid’s decentralized orderbook solution, which is favored by many traders:

Orderbooks is a method of matching buyers and sellers of an asset, typically used in traditional financial markets such as the stock market for their efficiency, price transparency and low slippage. However, this method is typically not used in decentralized crypto markets because a high amount of liquidity is needed in order to make orderbooks work effectively. Hyperliquid positions itself as the go-to hub for on-chain traders who want both the benefits of trading on centralized platforms and the anonymity and control of trading on decentralized platforms.

Hyperliquid’s Features

Let’s take a look at some of the features Hyperliquid has to offer starting from the beginning.

Bridging into Hyperliquid

After connecting your wallet at https://app.hyperliquid.xyz/trade, you must bridge USDC or USDT in from Arbitrum (Ethereum Layer 2). At time of writing, Hyperliquid only supports Arbitrum as a source chain.

Hyperliquid Supported Tokens

For trading, Hyperliquid supports over 30 of the hottest tokens offering up to 50x leverage on major cryptocurrencies such as ETH and BTC. (margin trade at your own risk!)

Copy Trading Vaults

If you’re not feeling up to the task of trading, you can consider pooling your funds to someone who has been doing well, letting him trade with your funds with profit sharing!

You Can Be the Proverbial House (Liquidity Provider)

As the saying goes, the house always wins! Funds deposited with Hyperliquid are loaned to traders for them to trade with, the current annual returns at the time of writing sits at 54%.

Climb the Ranks

Make your mark on the world as an anonymous trader by trading your way up the Hyperliquid leaderboards. The very best traders have been blessed with not only amazing profits but with a hefty HYPER airdrop as well.

The Hyperliquid Airdrop

Hyperliquid’s airdrop gained significant attention because of how generous and lucrative it has been for the airdrop recipients.

Token Distribution

• 38.88% for future emissions

• 31% for the genesis airdrop

• 23.8% to current and future contributors

• 6% to Hyper foundation

• 0.3% to community grants

• 0.012% to HIP-2

In total, 76.2% of the token supply is earmarked for the community with team members being vested for at least 1 year after token genesis (29 November 2024). This was a huge allocation to the community, relatively speaking. The main difference between the Hyperliquid airdrop and most other airdrops is the lack of an allocation to private investors. This is because Hyperliquid has no private investors and therefore were able to allocate significantly more tokens to the community.

Hyperliquid’s Airdrop Statistics by ASXN Data.

94,000 users were eligible for the airdrop with the average allocation being worth $45,000 at the time of writing. This airdrop showed that they preferred quality over quantity as only 94,000 users were eligible for the airdrop, while most other major crypto projects usually have between 500,000to a million wallets eligible. However, if Hyperliquid had allocated to a million users, the average allocation would’ve still been worth around $4,500 each, which was still much higher than everyone else at the time.

How Hyperliquid Shifted the Airdrop Meta

Before Hyperliquid’s airdrop, the past few prolific airdrops such as Scroll, Orderly, Catizen and many others have largely been disappointing due to the overall low allocation to the community. Hyperliquid’s airdrop is not only significant due to its value but also because it has become an example of what it means to conduct a successful crypto airdrop.

Anti-VC Sentiment

Photo from @CC2Ventures.

Before this airdrop, the general consensus on Crypto Twitter (the crypto community on X) was that greedy venture capitalists (VCs) were responsible for most airdrops being unsuccessful. This sentiment came as several crypto projects allocated large amounts of the token (20% or more) to VCs while community airdrops were only allocated sometimes only 5%.

Layer 2 projects such as Scroll, Blast and Manta saw huge fund outflows out of their blockchains after their token generation event (TGE) airdrop. While this is to be expected, social sentiment on these projects were unusually bad with comments calling Scroll “a scam” underneath every single X post made by the Scroll team still being done today.

Angry comments continue to be posted despite the airdrop being months ago.

Popular airdrop farmer CC2Ventures described Scroll’s team handling of the airdrop as a “fumble”.

IMO Scroll had all that was required to create a monster airdrop and create a cult following:

- Vitalik endorsement
- Massive funding
- Insane engagement early on
- Listening to the community and continuously reiterating (e.g. scraping Galxe Campaign after negative feedback,…

— CC2 (@CC2Ventures) December 9, 2024

Airdrop Tokens Usually Dump

Airdropped tokens usually decline in value after the initial airdrop as airdrop farmers sell their allocation to realize their profits. This was not the case with HYPE as it continued to surge from $4 on genesis all the way till $16 today.

This was highly unusual and never before seen for an airdrop of this size. There is no precedent as to why the token and airdrop surged like this. But if one had to guess, the overwhelming support by the crypto community towards Hyperliquid is why this was able to happen. This further emphasized and exemplified Hyperliquid of what putting the community first can do for a crypto project’s token.

Activity Usually Dies Down After an Airdrop

A common criticism of crypto airdrops has been that airdrops do not necessarily promote activity and usage of a crypto project. It was well known that trading/usage activity of a crypto project dies down after a crypto airdrop event. However, this was not the case for Hyperliquid as it continued to show total value locked (TVL) growth.

Hyperliquid’s TVL grew explosively after the airdrop.

The more commonly seen TVL decline after an airdrop seen in Scroll.

Conclusion

Hyperliquid has allocated 38.88% of their token supply to future initiatives, making a 2nd airdrop season likely. Farming this airdrop could perhaps be extremely lucrative and suggest why usage activity picked up even after the airdrop. However, as Hyperliquid positions itself as a perpetuals trading platform with up to 50x leverage, users are advised to be cautious when trading with leverage. Always do your own research before interacting with any crypto protocols and make sure you never overextend yourself with leverage even in this bull market!