Hyperliquid Co-founder: The leverage system and HLP liquidation mechanism have been updated, and a loss limit has been set.

Odaily News Hyperliquid co-founder @chameleonjeff posted on the X platform stating that it is sad to see the misinformation campaign against Hyperliquid, and will provide a detailed, factual explanation of how Hyperliquid works: The margin design of Hyperliquid strictly ensures the platform's solvency through mathematical mechanisms, and the losses of HLP are always limited to its own treasury. The operation of the protocol never relies on HLP—this feature existed before the JELLYJELLY incident. The newly added protective mechanisms after the incident only optimize HLP's resistance to losses in backup liquidation, and the underlying architecture of the protocol has not changed. Recently, during the JELLYJELLY incident, an attacker attempted to manipulate HLP (liquidity provider pool) by establishing massive long and short positions for themselves. Although the position limit for unliquidated contracts at that time allowed the establishment of a position worth 4 million USDC, the logical flaw lies in HLP using its entire fund balance as collateral for this liquidation. It should be clarified that the platform itself does not face solvency risk, but HLP did face excessive risk exposure due to market manipulation. Currently, the HLP liquidation component's treasury has set a collateral limit, restricting potential losses through a backup liquidation mechanism. Hyperliquid still maintains its original operating mechanism, handling under-collateralized positions in the following order: 1) market liquidation 2) backup liquidation 3) automatic deleveraging (ADL). The current HLP backup liquidation has added protection mechanisms, setting a loss limit that makes the cost of manipulating the marked price far higher than the limited gains that can be obtained from HLP.