Hyperliquid: A Unique Revenue Engine That Combines an Exchange and a Smart Contract Platform

In the fourth quarter of 2024, Syncracy Capital built a large position in HYPE and continued to increase its position in the first quarter of 2025.

Hyperliquid is quickly becoming one of the hottest topics in the crypto sphere. Its unique revenue engine, combining an exchange and a smart contract platform, makes it the blockchain with the highest fees in the crypto industry. Its vertically integrated design, weaving together these two businesses with a unified interface, allows Hyperliquid to aggregate users more efficiently than any other platform to date, providing it with a structural advantage in accommodating all financial businesses around the world.

In the long run, Hyperliquid has the potential to "disrupt" Binance, offering performance superior to other decentralized platforms and outperforming centralized exchanges in terms of cost, accessibility, auditability, composability, security, and asset availability. At the same time, its smart contract platform has the potential to become one of the leading application ecosystems, leveraging Hyperliquid’s exchange and trader base as the foundation for its growth.

Syncracy estimates that the combined market size for its exchange and smart contract platform will reach hundreds of billions of dollars in the coming years.

Recently, Syncracy Capital has been largely investing in HYPE in the fourth quarter of 2024, and they continue to increase their position in the first quarter of 2025. In a recent statement, Syncracy Capital shared multiple reasons for their increased investment in HYPE.

Here is the full statement from Syncracy Capital (some modifications have been made to this article by Felix, from PANews):

The Art of Progressive Decentralization

Trading is one of the “killer” apps in the cryptoeconomy to date, yet the majority of trading volume still occurs on centralized platforms. Can an exchange be built with features similar to Bitcoin's origins and yet achieve liquidity on the scale of Binance at the time of FTX's collapse? This was the question Hyperliquid co-founder Jeff Yan set out to answer when he launched his new exchange in 2022.

Hyperliquid did not receive any external funding from VCs, instead choosing to be completely self-funded. This was a critical decision that allowed the team to focus on developing the product without external pressure and ultimately distribute the majority of ownership to the community.

Two years later, Hyperliquid has become one of the fastest growing projects in the crypto industry, capturing more than 60% of the on-chain perpetual swap market. In doing so, Hyperliquid has played a key role in leading the shift to on-chain perpetual swap trading, which now accounts for approximately 12% of global trading volume.

Keys to Success

It all starts with the team’s product-first philosophy. The team does not optimize for ideological purity, for example, the priority from the beginning is not maximum decentralization, but providing the best on-chain transaction experience. This strategy can be understood as progressive decentralization - a practical approach to building successful projects in the crypto industry, which involves the team first finding product-market fit and then gradually giving up control over time.

While decentralization and open source are critical to reducing counterparty risk and improving product scalability in the long term, most users prefer performance and usability over strict adherence to Cypherpunk principles. Therefore, in the two years before the HYPE token was launched, the team refined the platform through direct engagement with traders.

This feedback proved valuable, as the Hyperliquid team often implemented feature requests and bug fixes within hours, building deep trust in the community. It also led to key product features such as order cancellation priority for traders, which enables market makers to quote tighter spreads, and the Hyperliquid Vault, which enables exchanges to quickly bootstrap liquidity for new token pairs. The result is a high-performance chain with a fixed order book (CLOB) capable of 100,000 transactions per second (TPS) throughput and sub-second finality, an order of magnitude higher than other platforms.

As trading volume grew exponentially by the end of 2024, Hyperliquid airdrops 31% of its token supply to users. The airdrop is a huge success.

Crucially, the HYPE token also had a clear intrinsic value, with fees at the time being $228 million per year. This not only provided an incentive for recipients to hold rather than sell, but also provided buying momentum for HYPE due to the high revenues, driving large-scale buybacks. Furthermore, since there was no pre-allocation to any insiders outside of the core team, large buyers had to buy on the market. Not only did this force these participants to join Hyperliquid directly, increasing trading volume in tandem, it also highlighted that the next step in Hyperliquid's development was more than just a simple derivatives exchange.

Everything Exchange

Exchanges are winner-take-all markets, where liquidity network effects, scale efficiencies, brand equity, and regulatory moats concentrate trading activity in a few dominant players. This model has shaped the financial market landscape for centuries, solidifying the CME’s dominance in derivatives, the NYSE and Nasdaq in equities