Hyperliquid founder Jeff's latest interview: Trump's nomination is a huge surprise, regulation should fall on the deployer level

Author: Rhythm BlockBeats

The name Hyperliquid is now known to almost everyone. Its on-chain revenue ranking remains stable in the top three. After being mentioned by Trump, along with the explosion of RWA trading, Hyperliquid's platform token HYPE has continuously set historical highs, approaching 100 US dollars. The ecosystem is becoming increasingly complete, and with the mechanism of HIP-3, giants like TradeXYZ have emerged; HIP-4 has also officially launched, beginning its foray into prediction markets.

This is the first time Hyperliquid founder Jeff has appeared on a podcast, where he interpreted the mechanism and operational logic of Hyperliquid, as well as his views on regulation.

TL;DR

· Hyperliquid is a protocol. Its slogan, or rather its aspirational goal, is "to accommodate the entire financial system." In simple terms, it is a neutral layer where finance can ultimately occur.

· We view the Hyperliquid protocol as a leap forward for "markets that are already electronic but still fragmented."

· We do not see this as building a trading platform, but rather as constructing an entire network. At that time, we examined existing blockchains, and none could support the throughput and latency required to "accommodate global finance" without making unacceptable compromises.

· At the very bottom of a global financial system, everyone must reach consensus. If we cannot even agree on the ledger of account balances or the basic state of the system, then everything else is moot.

· Liquidation is rule-based, determined by the clearing system, rather than by subjective discretion of an individual; the unique aspect here is that the clearing system is entirely on-chain, with the HyperCore execution module autonomously executing the clearing and liquidation mechanisms.

· The real brilliance lies in the modular separation of responsibilities: the protocol provides the track for execution and clearing, while the deployer specifies contract parameters and maintains the oracle; this modularity is unique to on-chain financial systems.

· Auctions occur approximately every 31 hours, as 31 and 24 are coprime, allowing the reset time to rotate across global time zones; prices linearly decrease from a high point, and the first bidder to accept the price immediately wins the position, thus naturally resisting wash trading.

· Look at this year's tech company IPOs: enormous wealth has been created, but this process has been heavily obstructed. When companies go public with valuations of one trillion, two trillion, or three trillion dollars, the vast majority of wealth creation has already occurred in private markets. This is a fundamental flaw in the existing system.

· The protocol executes mathematical boundaries, not subjective market opinions; regulation naturally falls on the layer where discretionary control exists, which is the deployer exercising control. On Hyperliquid, anyone in the world can audit in real-time, in a provable mathematical manner: the sum of all user balances exactly equals the amount of USDC held by the smart contract address.

Vision Positioning and Regulatory Status

What is Hyperliquid? What does "to accommodate the entire financial system" specifically mean?

Hyperliquid is a protocol. Its slogan, or rather its aspirational goal, is "to accommodate the entire financial system," and I believe the community takes this seriously. In simple terms, it is a neutral layer where finance can ultimately occur.

Decades ago, electronic trading was a leap forward compared to open outcry trading; similarly, we view the Hyperliquid protocol as a leap forward for "markets that are already electronic but still fragmented."

Trump previously mentioned wanting to bring Hyperliquid to the United States; were you aware of this in advance? What is the real regulatory status of U.S. users?

I was not aware in advance, so it was a huge surprise for me. Hyperliquid Labs is developing on this protocol. It may be necessary to clarify a few parts: the protocol itself is a neutral blockchain operated by a group of permissionless validators who collectively maintain a single, consistent global view. Hyperliquid Labs is a small team building technology for this blockchain.

As for what the CFTC means by wanting to bring this protocol to the U.S.: in fact, trading derivatives on this protocol is a violation of Hyperliquid and many other frontend interface terms for U.S. users.

However, I believe the current government and the CFTC want to take a more proactive stance on on-chain financial infrastructure. This is a technical judgment: the market can be improved, and the U.S. should not take an extremely restrictive position but should find ways to incorporate this technology into the existing financial system.

Underlying Architecture, Consensus Mechanism, and On-Chain Clearing

What roles constitute the architecture of the Hyperliquid protocol? How do validator nodes and the protocol collaborate?

From a high level, the protocol is a messaging framework, similar to HTTP or TCP, where different validators agree to communicate according to specific rules.

What is interesting about blockchain protocols compared to purely informational format protocols is that under certain assumptions, for Hyperliquid, if two-thirds of the network's stake is non-Bayesian and operates under normal rules, you will achieve good properties, allowing these validators to operate independently.

The entire network will reach a globally consistent world view. This is the foundation of finance. At the very bottom of a global financial system, everyone must reach consensus. If we cannot even agree on the ledger of account balances or the basic state of the system, then everything else is moot.

How does a decentralized validation network reach consensus and eliminate the single point of failure risk of traditional regulated trading platforms?

Is there a regulated entity deploying these markets? This is an orthogonal question. In fact, I believe there will be one in the future, and it is not an either-or situation. Even if a licensed single entity has authority over the markets they deploy, you can still enjoy the resilience of the on-chain network.

If you want to operate a 7×24×365 trading platform, this is not a simple task. Any error in the matching engine, clearing, or third-party vendor can create a single point of failure for critical financial infrastructure.

If the underlying track is composed of a diverse, distributed set of validators, where one or more may go down at any time, yet the network can still maintain state consensus and continue with normal throughput, then you suddenly have a much more stable foundation on which to build a regulated trading platform.

For example, how does buying a one million dollar perpetual contract for Bitcoin work in terms of order matching, collateral, and on-chain clearing mechanisms?

First, to emphasize again: as a U.S. user, you should not open this position. But for any user in a qualified jurisdiction, the core mechanism is not fundamentally different from traditional trading platform futures: there is a counterparty in the order book, and liquidation is rule-based, determined by the clearing system, rather than by subjective discretion of an individual.

The unique aspect here is that the clearing system is entirely on-chain. The threshold for triggering liquidation and the execution mechanism are similar to the traditional "default waterfall" arrangements of regulated U.S. futures trading platforms, but they are autonomously executed on-chain.

The HyperCore execution module can be seen as a dedicated submodule of the blockchain state itself, autonomously executing the clearing and liquidation mechanisms.

HIP-3 Asset Deployment, Deployer Role, and Dutch Auction Mechanism

How are perpetual contracts for real assets like Nvidia stock launched? What role does the Deployer play, and how is the oracle defined?

We use "deploy" instead of "issue" because "issue" carries too many other connotations. Deployment is a technical process that anyone can use to access this network. On Bitcoin, you can only move Bitcoin around; whereas on Hyperliquid, because it is a system built to drive finance, the functionality is much broader.

The deployer comes onto the network and stakes the required amount of native tokens, currently 500,000 HYPE, not HYPE worth 500,000 US dollars. Staking unlocks the ability to deploy directly on the blockchain.

On this basis, the deployer defines an oracle system that allows perpetual contracts to track the only external digital index: the index price. This is the beauty of perpetual contracts: they are expressive and powerful, but ultimately boil down to tracking that one reference index.

In the context of blockchain, oracles are published by one or more entities that track off-chain data, which cannot be derived solely from on-chain characteristics. In the future, as the spot market migrates to Hyperliquid, oracles may no longer need external publication but can be derived from on-chain properties.

How do deployers like TradeXYZ initiate contracts, and how are responsibilities divided between them and the protocol?

Deployment is simple enough that it only requires submitting a transaction to specify contract specifications. This way, the deployer inherits the existing order book technology, clearing architecture, and integrated USDC infrastructure of the network.

For example, TradeXYZ maintains a publisher system to push oracle prices.

The real brilliance lies in the modular separation of responsibilities: the protocol provides the track for execution and clearing, while the deployer specifies contract parameters and maintains the oracle. Together, they create an attractive final product for users. This modularity is unique to on-chain financial systems.

Where does the liquidity for these newly launched trading pairs come from?

Liquidity is entirely driven by the free market; it is just an order book.

Anyone placing an order must have corresponding collateral to support it. The protocol itself does not provide liquidity; it merely provides the mechanism for buyers and sellers to come together.

Is it allowed for multiple parties to deploy the same asset? How does the on-chain Dutch auction allocate scarce deployment positions?

Anyone can deploy; there are no restrictions at the protocol layer dictating what perpetual contracts must be. The protocol is a basket of tools, or primitives, that deployers use according to their needs.

However, deployment positions are a scarce computational resource, as each active order book and clearing engine consumes network computing power. To efficiently allocate these positions, we have implemented on-chain Dutch auctions.

Currently, auctions occur approximately every 31 hours. The reason for choosing a 31-hour interval is that 31 and 24 are coprime, allowing the auction reset time to rotate across different global time zones.

The game theory design of traditional auctions is flawed: bidders undercut each other by a penny, conceal information, and sniper bid or wash trade at the last moment. Dutch auctions work much better in an on-chain environment: prices start high and decrease linearly. The first bidder to accept the price immediately wins the position, thus naturally resisting wash trading. The transaction price is then reset to twice the winning price, entering the next round, thereby forming a natural market discovery mechanism that brings the price closer to the fair market value of the deployment position.

Financial Democratization and Wealth Thresholds for Giant IPOs

Will you pay attention to who wins the auction? How does the permissionless deployment mechanism solve the problem of wealth distribution in traditional IPOs being monopolized by a few?

Because this is a permissionless system, I personally do not track who wins the auction or what they plan to launch, although the community has built excellent analytical tools to audit and visualize this on-chain data.

Overall, I find it very exciting to see markets that have historically been restricted and fenced off become globally accessible 24/7. Providing retail investors and participants from around the world equal access to financial opportunities is something I deeply believe in.

Take a look at this year's tech company IPOs: enormous wealth has been created, but the process has been heavily obstructed. When companies go public with valuations of one trillion, two trillion, or three trillion dollars, the vast majority of wealth creation has already been completed in the private market. Ordinary people are excluded and only allowed to participate after most of the upside has been realized, which is a fundamental flaw in the existing system.

Trading perpetual contracts for unlisted companies does not grant equity dividends or cash flow claims. How do you view this trade-off?

Trading futures or perpetual contracts for an asset does not provide direct claims to dividends or future cash flows, but traditional futures are the same.

I am not advocating that perpetual contracts can strictly replace direct equity holdings, nor am I saying that everyone should trade such instruments. However, there is a significant group of people globally who can benefit from gaining price exposure to these assets.

At the same time, there needs to be parallel work in financial education to help people understand risk characteristics. But if the opportunity to participate is completely shut off by gatekeepers, no amount of education will help. The first step must be to make the infrastructure fair and democratized.

Founder Background, HRT Experience, and Underlying Reconstruction

You previously worked at the top high-frequency quantitative firm Hudson River Trading (HRT) and founded Hyperliquid in 2023 without venture capital funding. What was the reasoning behind this?

I went to Hudson River Trading (HRT) right after graduating from college. It was a fantastic experience; they are an extremely successful company but maintain the culture of a tech startup, and I learned a lot about market structure there.

When we started in 2023, the vision was very focused: to create what people truly need on-chain. We do not view cryptocurrency merely as memecoins. A centralized trading platform offering perpetual futures has undeniably found product-market fit, proving that users value this product.

However, centralized platforms expose users to counterparty risk from the trading platform and require them to relinquish asset custody. Our goal is to bridge this gap: to provide the execution speed and user experience of centralized perpetual contracts while maintaining on-chain self-custody and transparency. Combining these two sets of attributes represents a truly leap-forward improvement.

"Accommodating the entire financial system"—are you serious? Is it possible to introduce physically settled commodity futures in the future?

We are extremely serious about the goal of "accommodating the entire financial system." Even capturing 90% of global finance would be a tremendous success, and we are still far from that.

Physical delivery will always have its indispensable place in society. There is a misconception that our goal is to replace traditional market operators. On the contrary, our technology can serve all those currently operating markets in traditional scenarios.

Whether a market is a perpetual contract, has an expiration date, or involves physical delivery, the underlying demand is the same: order books, clearing systems, global distribution capabilities, and concentrated liquidity. What we are building is a neutral primitive, a tool that allows participants to freely combine and create whatever they need.

What is it like to independently write the code for the entire network? Why can't existing blockchains support this vision?

We do not see this as building a trading platform but rather as constructing an entire network. At that time, we examined existing blockchains, and none could support the throughput and latency required to "accommodate global finance" without making unacceptable compromises.

It feels a lot like working on consumer technology in the early 2000s: you realize that the underlying network infrastructure is inadequate, and you must lay down the foundational tracks yourself, just like Amazon did with AWS.

This realization means the scope of the project is much larger. And precisely because it is difficult, it becomes more worthwhile to pursue. We must dig all the way down to the consensus layer, questioning the basic assumptions of how distributed nodes communicate, and design a custom consensus architecture that can maintain a single global financial state.

What hardware configuration is required to run a validating node? Does it need a data center the size of a stadium?

There is a misconception that running this network requires a data center the size of a stadium. We do not operate this network; it is operated by independent validators. Currently, there are more than 30 validators, with the top 27 ranked by staking amount actually maintaining consensus.

The hardware requirements are surprisingly low. Recently, a validator remarked that ordinary consumer-grade hardware can drive a global financial network, and it does not require exclusive supply contracts with Nvidia, which is quite unexpected.

You cannot run it on a smartphone, but it requires about 128 GB of memory. You can easily buy a high-end laptop or standard server with that configuration. This network should remain accessible, with controllable operating costs, rather than needing a server farm the size of a stadium.

Degree of Decentralization, Team Boundaries, and Trust Assumptions

The team rarely faces the media and has anonymous co-founders. Will the development team eventually fade into the background like the TCP/IP protocol?

I believe the team is far more than just Hyperliquid Labs; it is a constellation made up of a group of teams within the entire ecosystem. For example, Purr, the digital asset treasury company, has a well-known public management team that directly interacts with traditional investors. The deployers and builders are also part of this collective team.

As for developers setting protocol parameters: in the early stages of any blockchain, the software must be written by engineers who translate community feedback into code. Over time, this role can become increasingly decentralized.

The core philosophy of this network—fairness, transparency, and neutrality—does not belong to the developers. It is an embodiment of what an open financial system should look like.

Under the HIP-3 framework, are users trusting the Deployer or the Hyperliquid protocol?

If this question is directed at Hyperliquid Labs, then the main trust assumption is that the node software accurately follows its publicly disclosed specifications, just as Ethereum users trust various client implementations.

In the HIP-3 framework, the operation of specific markets is governed by the deployer, who sets the contract parameters and publishes oracle prices that anchor external assets. If a user is trading a gold contract, then their trust lies with that specific deployer, believing they will push accurate index prices. Meanwhile, the underlying protocol remains a neutral execution track.

Oracle Mechanisms, 7×24 Trading, and Mathematical Hard Constraints

Can the trading volume of perpetual contracts exceed that of spot trading? What was the issue with the abnormal oracle pricing from SK Hynix?

Regarding the SK Hynix incident, TradeXYZ released a detailed post-mortem. It was an implementation issue with their oracle system, not a protocol failure. They acknowledged that the design was not intuitive, issued refunds to users, and patched the system. All software systems in the industry encounter bugs and apply patches.

Regarding trading volume, the trading volume of perpetual or futures contracts can safely exceed that of the underlying spot trading without damaging the market. We can see this in traditional markets: the trading volume of S&P 500 futures and ETFs is many times that of the underlying spot stocks.

The key is that mature market makers have the ability to provide liquidity for price fluctuations that do not reflect fundamental value. If derivatives deviate from fair value by 1% in a situation where the underlying spot trading volume is thin, market makers will trade against this misalignment, pulling the price back into alignment, thus allowing true price discovery to occur in the derivatives.

If the liquidity of the underlying asset is too poor or difficult to price, will the protocol refuse to list it?

The protocol does not have any semantic understanding of whether an asset is reasonable or liquid. It cannot make subjective judgments, just as traditional trading platform order book software providers do not judge whether a particular order book is appropriate.

What the protocol enforces are strict mathematical constraints. For example, the protocol has a hard rule: the deviation of one oracle price update from the previous update cannot exceed 1%. If the publisher attempts to push the oracle price by 2%, the protocol will automatically constrain it to 1% to ensure an orderly transition of state.

The protocol enforces mathematical boundaries, not subjective market opinions.

When the spot market is closed on weekends (such as during the Middle East conflict for WTI crude oil contracts), where do the prices for 24/7 trading come from?

How prices are handled during non-trading hours is defined by the deployer in their contract specifications.

However, for perpetual contracts, having an oracle that continuously tracks the underlying price 7×24 hours is not strictly necessary. The funding rate mechanism will naturally tether the derivatives to their underlying assets over time.

You can design the market this way: let the derivative prices float freely when the underlying spot market is closed on weekends; when the market reopens and funding payments resume, pull the prices back into convergence. The mathematics of the funding rate allows for a flexible market structure even during periods of lower funding payments.

Institutional Access, Integration with Traditional Finance, and Compliance Pathways

Are there currently large institutional traders and market makers participating on the platform?

Yes. Many of the larger traders are indeed institutions.

To be an effective market maker in a high-throughput order book environment requires considerable technical expertise and institutional-level capital.

Is it possible for traditional asset management firms like VanEck and State Street to become on-chain deployers within five years?

I do not agree with labeling traditional institutions as "old forces." The term "old forces" implies they will be disrupted or replaced, which is not our vision.

Traditional asset management firms have strong client relationships, trusted brands, and provide valuable services. Adopting new technologies that can improve their products aligns with their natural business interests, just as traditional companies embraced AWS and cloud computing in the past.

Seeing large asset management firms become deployers on Hyperliquid in the future would be an important and completely natural development.

Is it possible to form a regulatory landscape where "the Deployer is subject to regulatory constraints while the underlying protocol remains a neutral technical layer"?

This framework captures the essence well.

Just as internet technologies like TCP/IP are used to build financial systems but are not themselves regulated, regulation will naturally fall on the layer where discretionary control exists.

What changes need to occur in U.S. regulatory agencies for U.S. users to access without airport compliance?

First, if you are an American using an airport, you are violating the terms of service; this is not something to be taken lightly.

For this to happen legally, regulatory agencies like the CFTC must determine how this technology aligns with their statutory core principles, which are inherently technology-neutral.

Regulators are conservative because they bear the responsibility of protecting an existing system that serves many people. However, on-chain technology actually solves some long-standing regulatory challenges.

In traditional scenarios, verifying whether user balances match bank reserves requires an indirect, trust-dependent auditing process. On Hyperliquid, anyone in the world can audit in real-time, in a provable mathematical way, that the sum of all user balances exactly equals the amount of USDC held by the smart contract address.

When "verifying reserves" transforms from an intermittent administrative process into an inherent mathematical property, people will realize the tremendous benefits of integrating on-chain tracks into the financial system.