Hyperliquid HIP-3 Reform: How the Open Perpetual Market Will Reshape the Decentralized Finance Landscape

The HIP-3 improvement proposal launched by Hyperliquid in May 2025 has attracted widespread attention in the DeFi space, and its minimum viable version is now live on the Testnet. This is not just a simple protocol upgrade, but a key step in Hyperliquid’s development roadmap that could have a profound impact on the future of on-chain derivatives trading.

To fully understand the importance of HIP-3, we need to first understand the overall design philosophy of Hyperliquid, which starts with its three core proposals.

Hyperliquid’s three-step development strategy

Hyperliquid has built a progressive and fully functional financial ecosystem through three key improvement proposals.

HIP-1: Lower the threshold for listing coins

For a long time, new projects have faced issues such as opacity, high costs, and harsh conditions on mainstream trading platforms. HIP-1 provides crypto project teams with an alternative. It allows anyone to create new tokens on Hyperliquid without permission, similar to the ERC-20 standard. Project teams only need to pay a certain fee to create their tokens and automatically open a spot order book market, significantly lowering the threshold for assets to enter the public market.

HIP-2: Automated Market Making

Another challenge faced by new tokens after their launch is the cold start of liquidity. HIP-2, also known as “Hyperliquidity”, is the native automated liquidity strategy of the Hyperliquid protocol. It acts as a market-making bot, providing basic tradable liquidity for new markets, effectively addressing the cold start problem of new assets at the initial launch stage.

HIP-3: Open Perpetual Market Creation Authority

Perpetual contracts are the largest trading volume area in the crypto market. HIP-3, also known as “Builder-Deployed Perpetuals”, completely opens up the creation rights of the perpetual contract market. Any “builder” can deploy custom perpetual contracts on Hyperliquid by staking 1 million HYPE.

Builders can independently define key parameters, including choosing collateral, price oracles, leverage limits, and margin parameters. Additionally, they can receive 50% of the market trading fees as a return on investment.

After these three steps, Hyperliquid has upgraded from a decentralized trading platform solely aimed at end users to a financial infrastructure layer, surpassing other competitors in narrative and deriving new business ecosystems and play styles.

The potential impact of HIP-3

1. Align with the trend of tokenization of physical assets

HIP-3 has set a high staking requirement of 1 million HYPE tokens, and this screening mechanism ensures that only well-capitalized, serious players can participate. Institutional capital is likely to target markets with huge and stable trading volumes in traditional finance, such as major global stock indices, commodities, and major foreign exchange currency pairs.

Take S&P 500 index futures as an example. If the corresponding perpetual contract is deployed on Hyperliquid, even if it only captures 0.1% of the CME trading volume, the builder’s daily income could reach around $250,000. This is highly attractive for institutions seeking stable returns.

In addition, the modular design of HIP-3 allows Hyperliquid to better adapt to the characteristics of different types of physical assets, laying the foundation for the secure and efficient on-chain introduction of various physical assets.

2. Foster a new token ecosystem

Although HIP-3 has high staking thresholds and initial liquidity issues, the community may leverage the composability advantages of DeFi protocols to provide third-party solutions. For example, aggregation protocols may emerge that allow retail investors to raise funds through crowdfunding to deploy perpetual contracts, which not only enables ordinary users to participate in the returns of HIP-3 but may also address the liquidity issues of new markets through token incentives.

With the emergence and development of these “liquidity aggregators,” a “Hyperliquid war” may unfold over the competition for user HYPE deposits, project partnerships, and the rights to real yield distribution, similar to the early “Curve wars.” This will further expand the application scenarios and market demand for HYPE, providing solid support for its coin price.

3. Meet the stock trading requirements before listing

The combination of Hyperliquid’s Hyperps feature with HIP-3 makes it possible to meet the market’s demand for trading stocks of unlisted companies. Although this mechanism provides futures contracts rather than real stocks, it offers retail investors the opportunity to benefit from the price fluctuations of these companies, and more importantly, it provides a price discovery function.

4. Responding to the competition of centralized exchanges with flexibility

In the face of challenges from compliant exchanges like Coinbase and Kraken starting to offer futures trading services, Hyperliquid’s advantages lie in its flexibility and responsiveness. HIP-3 will turn the contract market into a “permissionless” operation, further enhancing the platform’s agility in responding to market demands, something that centralized exchanges find difficult to match.

Conclusion

HIP-3 represents an important step for Hyperliquid towards becoming a core financial infrastructure that connects real-world assets, fosters innovation ecosystems, and agilely responds to market demands. Although there are still many challenges ahead, such as effectively guiding new market liquidity and navigating a complex global regulatory environment, HIP-3 undoubtedly paints a picture of a more open, composable, and imaginative on-chain financial future.