Looking at the HIP-3 ecosystem landscape from Kinetiq: Can protocols other than trade.xyz break through?

Introduction

The core innovation of HIP-3 lies in builder-deployed perps: it allows external teams to deploy and operate their own perpetual contract markets based on the HyperCore infrastructure.

Under the HIP-3 framework, deployers must meet several key conditions:

• Staking threshold: each deployer needs to stake 500,000 HYPE;
• Fee sharing: deployers can receive up to 50% of trading fee revenue;
• Risk constraints: if malicious behavior occurs, such as incorrect oracles or improper market operations, the related staked assets may be subject to slashing.

Source: hl.eco

This mechanism opens up the imagination for more diversified and vertical markets within the Hyperliquid ecosystem, including long-tail assets, niche perps, specialized trading markets, etc. From the data, HIP-3's share in Hyperliquid perps trading volume is rapidly increasing: as of now, HIP-3 has at most contributed approximately 38% of Hyperliquid perps trading volume, with cumulative trading volume reaching about $200 billion.

At the same time, the 500,000 HYPE staking requirement creates a very high capital barrier, limiting most teams from directly participating in HIP-3 deployment.

This is precisely the entry point for Kinetiq's launch of Launch. Launch is an Exchange-as-a-Service (EaaS) platform built on the Hyperliquid HIP-3 protocol, aiming to enable more teams to deploy and operate their own perpetual contract exchanges with lower barriers.

Specifically, Launch combines Kinetiq's proven LST infrastructure with a crowdfunding model, helping teams raise the 500,000 HYPE staking capital needed to deploy builder-deployed markets. Each deployed market corresponds to an independent staking pool, meaning that when users support a specific exchange, their risk is isolated to that particular market and does not spread to the entire system.

Kinetiq's Business Model and Revenue Structure

Kinetiq can be positioned as key infrastructure driving the development of the HIP-3 ecosystem.

The 500,000 HYPE staking requirement, at current prices, equates to a capital barrier of approximately $31 million, which remains difficult for most teams to bear independently. Currently, two perp markets, market.xyz and Borsa, have been deployed through the Kinetiq Launch model. Perps.fun is also rumored to be deploying soon via Launch.

On this basis, Kinetiq's revenue model is gradually taking shape: HIP-3 markets and builder code generate trading fee revenue, while kHYPE staking and Launch LSTs contribute performance fees. Together, these two revenue streams form a model that is highly tied to Hyperliquid ecosystem growth and is sustainable.

Source: DeFiLlama

Kinetiq's revenue model mainly consists of two parts:

The first part comes from staking yields, including staking rewards from kHYPE staking and Launch LSTs, from which the protocol typically charges a 10% performance fee, with 30% going to the protocol treasury and 70% used to repurchase KNTQ, thus forming a clearer value return to token holders.

The second part comes from trading fees, which are a 40% fee share generated from HIP-3 markets.

Source: DeFiLlama

Looking at Kinetiq's revenue structure, kHYPE staking rewards remain its primary source of revenue.

Performance was relatively stronger in Q3 and Q4 of 2025, with average quarterly staking rewards of approximately $6.5 million. Entering 2026, as early incentives after TGE and the initial airdrop campaigns ended, the protocol's TVL began to decline, falling from a high of about $2.07 billion in Q4 2025 to around $1 billion currently, thereby driving down kHYPE staking rewards. Since 2026, average quarterly staking rewards have been around $4 million.

On the other hand, EaaS is an important component of Kinetiq's future growth narrative, so HIP-3 market fees are also worth focusing on. In the first half of 2026, HIP-3 Market Fees averaged approximately $330k.

Affected by generally weak market sentiment, Q2 performance declined compared to Q1, but the core catalyst for this revenue line is the deployment of more markets through Kinetiq Launch. For example, Borsa, as a newly launched perp market, has already validated Kinetiq Launch's potential role as an issuance infrastructure for HIP-3 markets. As more markets come online in the future, Kinetiq's growth path is relatively clear: on one hand, maintaining the staking yield cuts from kHYPE and Launch LSTs; on the other hand, continuously capturing trading fees through the expansion of HIP-3 markets.

Staking Yields

Source: DeFiLlama

In terms of profit margin capture ability, Kinetiq demonstrates strong profitability efficiency among LST protocols.

We compare it with other leading LST protocols in different ecosystems, including Ethereum's Lido, Solana's Sanctum, and BNB Chain's Lista. In the first half of 2026, Kinetiq's average gross profit was approximately $680k. Although its absolute TVL scale is not dominant, its gross profit / TVL ratio averaged 7.6 basis points, the best performance among similar protocols.

At the same time, Kinetiq's profit margin capture ability has significantly improved since Q3 2025, from about 1.2 basis points to 7.6 basis points in the first half of 2026. This shows that Kinetiq does not rely solely on TVL expansion but demonstrates higher efficiency in revenue conversion and gross profit capture per unit of TVL.

This improvement mainly stems from the fee mechanism adjustment after April 9, 2026: previously, 100% of kHYPE staking rewards were distributed to HYPE stakers, and the protocol itself mainly captured revenue through unstaking fees; after the adjustment, 90% of staking rewards continue to be distributed to stakers, while the remaining 10% is taken as a performance fee, captured by the protocol and further allocated to the treasury and KNTQ buyback.

Source: DeFiLlama

Based on Kinetiq's current TVL of about $1.02 billion and a quarterly gross profit / TVL ratio of 6.8 basis points, the protocol currently generates approximately $702k in gross profit per quarter. In comparison, Lido's single-quarter gross profit is about $10.5 million, a roughly 15-fold difference between the two.

It is worth noting that the TVL gap between the two is also about 15 times: Kinetiq's TVL is about $1.02 billion, while Lido's is about $15.1 billion. This means Kinetiq's ability to capture gross profit per unit of TVL is already comparable to Lido. The current gap in gross profit scale is more due to differences in TVL size rather than insufficient operational efficiency.

Source: Stakingrewards

Since the growth of staking TVL directly determines Kinetiq's future revenue generation capacity, it is necessary to further observe Hyperliquid's overall staking ecosystem.

A notable characteristic of the Hyperliquid staking landscape is:

The concentration of large staking service providers is significantly higher than in many other ecosystems. Currently, the top ten validators hold approximately 83.4% of all staked HYPE, with the Hyper Foundation accounting for nearly half, followed by a few mid-sized validators, mostly around the $1 billion level individually.

At the same time, Hyperliquid's current staking rate has reached about 45.7%, which is relatively high compared to other mainstream ecosystems (Ethereum: 33%, BNB Chain: 19%, Solana: 67%, Polygon: 33%). This means that from the perspective of overall network staking rate increase, the room for additional growth in Hyperliquid is relatively limited.

Based on the annualized TVL and gross profit margin data for Q2 2026, we can further observe changes in Kinetiq's staking reward revenue under different scenarios.

Changes in TVL mainly depend on the competitive landscape of the HYPE staking market.

Currently, HYPE staked assets are distributed across multiple institutions and validators, and Kinetiq, as one of the largest staking platforms open to retail stakers, still has opportunities to drive TVL growth through lower-barrier participation methods. On the other hand, if HYPE staking yields lack competitiveness, for example, the current level of about 2.24%, investors may rotate funds to other higher-yielding assets, exerting downward pressure on Kinetiq's TVL.

Gross profit margin is mainly affected by HYPE staking yield and the price of HYPE.

Since Kinetiq's core gross profit comes from charging a performance fee on staking rewards, the higher the HYPE staking yield, the more staking rewards generated per unit of TVL, and the higher the gross profit the protocol can capture, and vice versa. At the same time, the price of HYPE affects both the dollar value of staking rewards and the dollar-denominated TVL base, making it an important variable affecting gross profit margin performance.

HIP-3 Trading Fees

Source: hl.eco

HIP-3 trading fees are another revenue source for Kinetiq. Currently, two perpetual contract markets have been deployed through Kinetiq Launch: market.xyz and Borsa (in crowdfunding).

However, from the current HIP-3 trading landscape, trade.xyz still holds an absolute dominant position, contributing about 95% of HIP-3 trading volume. Its core advantage lies in weekend pricing capabilities for RWA perpetual contracts, giving it strong user mindshare and liquidity advantages in related trading scenarios.

Therefore, for platforms incubated by Kinetiq Launch like market.xyz, the key question is: can they offer sufficiently differentiated asset classes or trading experiences to attract traders to migrate from trade.xyz?

At present, this remains unclear. After comparing the asset coverage on both sides, it is found that most actively traded RWA assets are also tradable on trade.xyz. Although market.xyz has listed a few differentiated stocks, such as Tencent and Xiaomi, there are also many stocks only available on trade.xyz that have not been covered by market.xyz.

Therefore, at this stage, market.xyz has not yet demonstrated a sufficiently clear catalyst to challenge trade.xyz's market share. If it cannot form obvious differentiation in asset coverage, liquidity, pricing capabilities, or trading experience in the future, Kinetiq's revenue share from HIP-3 trading fees may face relatively limited growth.

Source: Kinetiq

Borsa is another perpetual contract market planned to be launched via Kinetiq Launch, with a core positioning as an on-chain trading terminal for professional traders, aiming to open up advanced execution tools that were previously only available to hedge funds and proprietary trading teams to ordinary traders.

However, at present, there are still several points worth noting. First, Borsa's fundraising progress is still far from the 500,000 HYPE deployment threshold. In the current environment of weak market sentiment and relatively tight on-chain liquidity, whether it can successfully complete fundraising and officially go live remains uncertain.

Second, although Borsa is a market incubated by Kinetiq Launch, Kinetiq does not receive a revenue share from its trading fees. In this case, the additional revenue Kinetiq can obtain mainly comes from staking rewards generated by the staked capital or potential redemption fees, rather than HIP-3 trading fees themselves.

This may be a strategy Kinetiq adopts to attract more deployers to use Launch, by lowering the platform's cut to increase market deployment willingness. However, from Kinetiq's own business model perspective, this also means it gives up a portion of the revenue that could have come from HIP-3 trading fees, thereby weakening Launch's direct contribution to protocol revenue growth.

Valuation and Outlook

To better assess Kinetiq's valuation and future outlook, we use a cash flow multiple method to measure the potential space for its token price. The core valuation metric is circulating market cap / holder revenue.

Circulating market cap is more suitable than fully diluted valuation for assessing a token's true value across cycles. The reason is that token projects typically have continuous unlocks and new circulating supply, so valuation must consider the actual circulating supply entering the market, not just static fully diluted valuation.

On the other hand, we choose token holder revenue as the denominator, rather than fee revenue or protocol revenue. The reason is that holder revenue is the economic value that actually flows back to token holders through mechanisms such as buybacks, burns, or direct distributions.

In contrast, even if protocol revenue enters the project treasury, if there is no clear value return mechanism to token holders, it cannot simply be considered as token holder income.

This is also one of the biggest differences between token valuation and traditional equity valuation.

In traditional finance, metrics like enterprise value / revenue hold because shareholders have a legal residual claim on the company's cash flows, and the entire profit distribution waterfall ultimately belongs to shareholders.

But token holders do not inherently have such rights. What token holders can obtain depends entirely on what economic rights the token mechanism grants them. If revenue only remains in the team-controlled treasury without clear buyback, burn, or distribution mechanisms, then that portion of revenue does not automatically belong to token holders simply by holding governance tokens.

First, it is necessary to clarify that the normalized annualized token holder revenue for $KNTQ should be $1.61 million, not $330k.

The latter is obtained by multiplying the actual Q2 buyback amount by 4, but Q2 is the first quarter in which buybacks were executed, and it includes a one-time retroactive payment of approximately $680k of accumulated Q1 revenue. Therefore, there is a non-recurring amplification. After excluding this historical accumulation, $1.61 million better reflects the current sustainable quarterly revenue rhythm.

In revenue projections, kHYPE staking reward performance fees remain Kinetiq's main revenue source, so growth assumptions need to be relatively cautious.

Considering that the Hyperliquid staking landscape is already dominated by a few medium-to-large institutions, it is not easy for Kinetiq to expand significantly in the existing institutional staking market. However, as a major staking platform open to retail investors and with synergies with the HIP-3 ecosystem, it may still drive growth in staking TVL. Therefore, we assume staking-related revenue achieves 1.5x and 2x growth respectively.

In contrast, Builder Code and HIP-3 revenue come from Hyperliquid perpetual contract trading activity, which has higher growth elasticity.

RWA perpetual contract trading volume grew from $29.7 billion in Q1 2025 to $524.8 billion in Q1 2026, an increase of about 17 times in one year; HIP-3 open interest also grew from $280 million to $2.38 billion in six months. Based on this, we set three scenarios:

A bear case of 2x growth, assuming trade.xyz competition suppresses market.xyz's share; a base case of 4x growth, assuming market.xyz follows the expansion of the RWA perpetual contract market and maintains a stable share, while new markets incubated by Launch contribute incremental growth; an optimistic case of 10x growth, assuming the market continues high growth, market.xyz expands into new vertical categories or increases share, along with more Kinetiq Launch markets going live to cover more long-tail assets.

In choosing valuation multiples, we need to set a reasonable comparable project reference for Kinetiq. Since Kinetiq is currently primarily an LST protocol, Lido is the most direct reference, especially since Lido also has a buyback mechanism for token holders, making it highly relevant in terms of holder revenue multiples.

At the same time, we cannot ignore Kinetiq Launch's value capture ability from the HIP-3 perpetual contract trading market. Although kHYPE is still the main revenue source currently, HIP-3 trading fees may become an important increment in the future. Therefore, in addition to LST protocols, we also include some perpetual contract decentralized exchanges as valuation references.

Based on Kinetiq's current revenue structure, we adopt a mixed valuation multiple method of 70% LST + 30% perpetual contract exchange: the 70% weight reflects that kHYPE and staking-related revenue still dominate, while the 30% weight reflects the potential revenue contribution from Launch and HIP-3 trading fees. After comprehensive calculation, we obtain a blended valuation multiple of approximately 18x.

The model uses the steady-state annualized holder revenue of $1.61 million as the base, applying growth assumptions to each revenue stream to project 2028 holder revenue.

In the base case, even assuming only 4x growth over two years, the combined contribution of Builder Code and HIP-3 would increase from $324k to $702k; in the optimistic case, with 10x growth, the contribution would rise to $3.24 million, significantly exceeding staking revenue in absolute terms.

On the valuation side, all three scenarios use a token supply of 490 million as the 2028 circulating base, which is the current 280 million circulating supply plus fully unlocked team and investor shares (starting from 11/25, 1-year lockup, 2-year linear unlock), minus the foundation portion. Meanwhile, the model uniformly applies the blended 18x valuation multiple.

Based on the current entry price of $0.16, the base case corresponds to a target price of $0.1183, about a 26% decline from the current price; the bear case corresponds to $0.0710, a decline of about 56%; the optimistic case gives a target price of $0.2133, corresponding to an approximately 33% positive return.

This means that at the $0.16 price level, the market has already priced in expectations somewhere between the base case and the optimistic case to some extent. The upside potential going forward mainly depends on whether Builder Code and HIP-3 revenue can continue to expand in line with the RWA perpetual contract market; if related revenue growth falls short of expectations, the downside buffer at the current price is relatively limited.

At the same time, although Kinetiq still has growth potential from kHYPE staking rewards and HIP-3 market fee sharing in the future, investors and core contributors together hold about 31% of the token allocation, which will gradually unlock over the next few years, creating significant dilution pressure on circulating supply.

If the new circulating supply cannot be effectively absorbed by market demand, the upside potential for KNTQ's price may be somewhat limited.

Can HIP-3 Still See a Hundred Flowers Bloom?

As mentioned earlier, trade.xyz currently holds over 95% of HIP-3 market share, and other protocols have not yet achieved effective breakthroughs. The core reason is that the supply of perpetual contract assets is relatively homogeneous. trade.xyz's trading volume is concentrated among a few large traders, who typically have high stickiness. Once liquidity and trading habits are established, their willingness to migrate to other protocols is relatively limited.

Therefore, several HIP-3 protocols have recently exited one after another, including Felix, Ventuals, and most recently DreamCash. These competitors to trade.xyz did not lack attempts at differentiation, such as Ventuals' semiconductor basket or Paragon's BTC.D market. However, under the 500,000 HYPE staking threshold, the revenue opportunities from such niche markets are usually insufficient to cover capital lock-up, liquidity shortages, and potential slashing risks.

trade.xyz was able to break out largely due to several factors: first, it built early trust by handling spot assets through Unit; second, while other deployers were still mainly building markets around USDH or USDT, trade.xyz listed USDC trading pairs earlier, capturing users and liquidity.

Therefore, when Coinbase became the official deployer of USDC on Hyperliquid and acquired the USDH brand, this put additional pressure on deployers using other stablecoin settlement systems, such as DreamCash using USDT and Hyena using USDe as settlement assets.

In addition, the actual returns for HIP-3 deployers are often weaker than surface data suggests. Deployers usually do not use their own HYPE entirely as staking capital but obtain the required stake through third parties or crowdfunding. For example, Felix relied on Hyperion to provide HYPE, while Kinetiq and Ventuals use crowdfunded staking models. Under this structure, the underlying HYPE stakers only receive a portion of the deployer's revenue. For instance, kmHYPE holders only receive 10% of Kinetiq's deployer revenue.

This makes the already weak deployer returns even less attractive to underlying HYPE stakers, increasing redemption pressure and making it harder for marginal deployers to maintain the 500,000 HYPE staking threshold.

However, the 500,000 HYPE staking threshold is just one capital barrier. For deployers, the more direct cost is actually auction expenditure, as each new market requires upfront payment of the corresponding auction fee.

Source: Hyperliquid Docs

Therefore, auction costs themselves constitute a second de facto entry barrier: even if a deployer has raised the 500,000 HYPE staking capital, they still need to pre-invest auction costs for new markets, which may take years to become economically attractive or may not even recoup the investment.

The Symbiotic Relationship Between Kinetiq and HIP-3

Kinetiq and HIP-3 are essentially a mutually reinforcing flywheel. HIP-3 provides the infrastructure for Kinetiq's EaaS, enabling it to more efficiently utilize staked HYPE; while Kinetiq helps third-party deployers raise the required HYPE through Launch, lowering the capital barrier to enter HIP-3.

However, looking at the current HIP-3 ecosystem, as projects like Felix, Ventuals, and DreamCash exit one after another, the problem has become apparent: the 500,000 HYPE deployment threshold, upfront auction costs, and the high concentration of trade.xyz are all compressing the survival space for non-leading deployers. Therefore, if HIP-3 wants to continue maintaining a diverse market ecosystem, lowering the deployment threshold is almost one of the most direct approaches.

Source: Hyperliquid Docs

The Hyperliquid official documentation also leaves room for this, mentioning that the 500,000 HYPE staking requirement may gradually decrease in the future as infrastructure matures.

But directly lowering the threshold also carries risks. The 500,000 HYPE is essentially forfeitable performance bond used to constrain deployers from using incorrect oracles, malicious market configurations, or bad debt risks. If the staking requirement is lowered, the margin available to cover risks when a single market has problems will also decrease.

At the same time, a lower threshold may attract more low-quality, repetitive, or illiquid markets to go live; if low-threshold deployers still retain high privileges such as cross-margin or backstop liquidation, risks may also spill over from a single market to the broader protocol level.

Source: Blockwork Research

Therefore, a more feasible solution is not simply to lower the staking requirement but to introduce a tiered HIP-3 exchange mechanism. Citing Blockworks Research's suggestion, for example, tiers of 100,000, 250,000, and 500,000 HYPE could be set, with permissions gradually increasing with staking scale. Lower-tier deployers could go live with a lower threshold but must accept stricter restrictions, such as lower open interest caps, lower leverage, and disabling cross-margin and backstop liquidation permissions.

This would both lower the entry barrier and limit risks to within a single market or exchange, rather than creating protocol-level risk contagion.

Additionally, for non-trade.xyz deployers, there are still many directions for differentiated asset supply. For example, focusing on thematic stock baskets, including Chinese internet, AI infrastructure, semiconductors excluding Nvidia, electric vehicles, crypto asset reserve companies, etc. Instead of competing head-to-head with trade.xyz on individual stocks, thematic baskets can more clearly express a trading view and are easier to form a differentiated positioning.

Beyond that, macro interest rate and policy markets are also worth exploring, such as the federal funds rate, 2-year/10-year Treasury yield, yield curve steepening trades, and SOFR. Compared to single stock perpetual contracts, such products are more differentiated and more suitable for macro traders, but the core difficulty lies in oracle design and initial liquidity building.

Volatility perpetual contracts are another potential direction, such as VIX, MOVE index, Bitcoin volatility, and Ethereum volatility. Volatility itself is an independent trading asset, currently relatively undercovered among standard stock, commodity, and forex perpetual contracts, so there is an opportunity for smaller deployers to enter this niche.

The key is that non-trade.xyz deployers need to launch these differentiated markets faster and capture trading volume and user market before trade.xyz replicates them. Only by being the first to establish liquidity, pricing power, and trading habits can they have a chance to become the main trading venue in that niche, rather than continuing to be squeezed by trade.xyz's liquidity advantage once the assets are copied.

Reference: