Crypto Twitter lights up every week with new token promotions but most spark and fizzle out. That all changed in December when DeFi challenger Hyperliquid pulled off an extraordinary airdrop coup.

To launch the HYPE token for its proprietary DEX, the project took a unique route to market, holding back the lion's share for early users and avoiding set-asides for VCs, centralized exchanges, or market makers.

A cult-like following, pent-up VC demand, and analyst enthusiasm culminated in the most successful airdrop in history. Valued at close to $7.5 billion at the start of this year, HYPE’s launch was so lucrative that crypto watchers now wonder if the project's airdrop approach can ever be repeated.

Hyperliquid’s hybrid model

Hyperliquid is a layer one (L1) blockchain designed by Hyper Foundation to host decentralized finance (DeFi) applications. It uses delegated Proof of Stake secured by its own HyperBFT consensus mechanism.

The project claims its network can handle throughput of 100,000 orders per second, recording every trade, order, liquidation, and cancellation with a block latency measured in milliseconds.

A note to investors from Mutual Fund manager VanEck calls Hyperliquid a "hybrid blockchain" with aspects of both layer 1 and layer three networks.

HYPE's price trajectory since December 2024 | Source: CoinMarketCap

Operating its own set of validators places Hyperliquid firmly in the L1 category. By Van Eck’s analysts noted that the network’s trading capital is denominated in USDC, which is bridged from Arbitrum, an Ethereum layer-2 chain. That combination of elements pushes Hyperliquid into L3 territory — dependent on both Arbitrum and Ethereum for the state of its USDC tokens.

Hyperliquid chose that unconventional framework because it allows the blockchain to process many more transactions-per-second while also giving Ethereum users a stable bridge.

"The L1 architecture gives Hyperliquid a scaling advantage over competitors while the L3 framework gives Hyperliquid access to Ethereum's massive base of users and assets," Van Eek added.

Future proofed

Hyperliquid's L1 was optimized for Hyperliquid DEX, the project's flagship application. A fully on-chain order book perpetual futures exchange, it promises low fees, transparent on-chain trades, up to 50x leverage, and one-click trading.

Although Hyperliquid had announced in April 2023 that the project has no plans to "support general-purpose smart contracts" on the Hyperliquid L1, a general-purpose Ethereum virtual machine (EVM) called HyperEVM is now in development.

HyperEVM isn’t a separate chain as it’s secured by the L1’s HyperBFT consensus mechanism. According to the project, this will allow it to interact directly with network native components.

The Hyperliquid Stack | Credit: Hyper Foundation

Assembling a top team

Hyper Foundation is led by CEO Jeff Basedzos and a group of tech heavyweights from Harvard, CalTech, and MIT who’ve previously worked at Airtable, Citadel, Hudson River Trading, and Nuro.

The team initially worked on proprietary market-making in crypto in 2020, later expanding to develop DeFi solutions in 2022. According to project’s website, Hyper Foundation is fully bootstrapped with no outside capital.

HYPE's Tokenomics

The golden airdrop

In a year marked by crypto community frustration over sky-high valuations of venture capital-backed tokens, Hyperliquid's novel token drop reinvigorated a bloated crypto airdrop market. Today its at the crest of a month-long uptrend that’s added 75% in value.