Original title: How Hyperliquid’s insanely lucrative airdrop launch changed the game
Original author: Tom Mitchelhill
Original source: https://cointelegraph.com/news/how-hyperliquid-airdrop-changed-game
Translation: Tom, Mars Finance
Hyperliquid airdropped 28% of the total supply of HYPE tokens to early users in November, becoming the highest valued crypto airdrop in history, with a total market value exceeding $7 billion.
This achievement has been praised by the industry as the most successful and rewarding airdrop in crypto history, benefiting from the DEX's high emphasis on community participation and rejection of venture capital (VC). However, experts warn that other projects attempting to replicate Hyperliquid's airdrop strategy may not achieve the same level of success.
Excluding venture capital, creating 'artificial demand' in the short term
Greythorn Asset Management analyst Jae Sik Choi stated in an interview with Cointelegraph that Hyperliquid's significant exclusion of venture capital and focus on community participation not only stimulated the token price performance after the HYPE airdrop but also shaped a unique 'cult-like' following of HYPE on social media.
'One of Hyperliquid's primary success points is creating 'artificial demand' in the short term by keeping venture capital out—venture capitalists can only buy tokens after they are listed, just like everyone else.'
—Jae Sik Choi
Choi emphasized that Hyperliquid has returned to the original concept of 'fair issuance' in crypto. 'As long as the project itself is decent and the issuance method is fair—regardless, the token price can almost always see a short-term increase.'
Choi also pointed out that another key reason supporting HYPE's price performance is an entity called 'HYPE Assistance Fund,' which buys back HYPE on the market daily using protocol revenue to create sustained buying demand. 'And right now, it's the Trump era; I don't foresee any regulatory issues.'
Source: Steven.hl
'Every day, real revenue provides sustained buying demand, which is fantastic. Although technically, this still counts as 'artificial demand,' it can trigger 'organic demand' in the secondary market through the FOMO effect.'
However, he also warned that buybacks cannot be sustained indefinitely.
'It can only be sustained for a while, similar to the 'Ouroboros' effect.'
'Egalitarian' airdrops and key timing
Synthetix founder Kain Warwick stated in an interview with Cointelegraph that much of Hyperliquid's success comes from its 'egalitarian' reward system for every early loyal user—regardless of investment size—and it also benefited from the right market timing.
'Hyperliquid gained sufficient attention and recognition during the bear market. For teams that are now trying to launch new projects, it will be more difficult to replicate that airdrop effect. The market noise is much louder than it was then.'
—Kain Warwick
Recently, Warwick adopted a similar approach when fundraising on his new platform Infinex: selling Patron NFTs at the same price to both the general market and venture capitalists using a patronage model, ultimately raising $68 million. He explained that this model can attract a more sticky community and prevent venture capitalists from dumping their holdings when fully diluted valuations (FDV) occur, thus impacting the project's long-term development.
'The core of this idea is: no longer adopting those 'extremely low circulation and extremely high FDV, venture capital-led' fundraising practices. By rewarding early and continuous actual users, you can engage more real communities.'
Hyperliquid's HYPE token was officially launched on November 29, airdropping 27.5% of the total supply to approximately 94,000 users. Initially, the total value of the HYPE airdrop was about $1 billion, but by the time of this publication, it had rapidly ballooned to over $7.5 billion, becoming the largest crypto airdrop in history.
Source: Kain Warwick
Warwick previously stated that Hyperliquid may be able to 'break' the 'curse' of decentralized perpetual exchanges being gradually forgotten after launching their tokens. The reason is that many DEXs lack motivation to continue attracting users for large-scale use after issuing tokens. But currently, HYPE's performance has far surpassed that of other airdrop-based exchange tokens such as Ethereum DEX Uniswap (UNI), perpetual contract DEX dYdX, Solana's aggregate exchange Jupiter (JUP), and Aevo (AEVO).
Price performance of major DEX tokens after airdrops. Source: VanECK
Choi compared HYPE with the token TIA of the data availability protocol Celestia, which has faced controversy for being accused of OTC insider trading and providing extremely high FDV returns to early investors.
'Looking back, TIA's rise was due to the Celestia foundation privately selling tokens to OTC buyers. Once the actual TGE began, early investors received discounts of up to 70%. After the token price rose to $10 in the public market, they shorted to lock in profits.'
'But for Hyperliquid, this method doesn't work; they can only buy tokens on the market first and wait for the price to rise to a suitable level before shorting.'
Success is hard to replicate
Although Hyperliquid's 'generous' token distribution strategy has received unanimous praise from airdrop recipients, Warwick also cautioned that other protocols wishing to replicate this model of distributing large amounts of tokens to users must be very cautious.
'This is not a lesson all projects can learn. We have seen many projects do over 30% airdrops, and the results were not good. If your project itself hasn’t built up a lot of heat and recognition, such airdrops will only trigger a downward spiral in token prices.'
Asset management company VanEck pointed out in a report on January 6 that Hyperliquid's market share in the perpetual contract DEX ecosystem skyrocketed from 10% to 70%, and there were no significant 'pump' events or other anomalies throughout the year.
Choi believes that Hyperliquid's true highlight lies in its outstanding product experience: deep liquidity, high throughput performance, and a more competitive fee structure compared to market leaders.
'From a user experience perspective, Hyperliquid feels like using Binance, but without the need for KYC or AML, and it offers higher leverage and functionality.'
At the product level, Hyperliquid focuses on throughput as a key indicator, quickly outperforming decentralized perpetual exchanges like GMX, Vertex Protocol, and dYdX. According to VanEck data, Hyperliquid can process 100,000 orders per second, while competitors like GMX and Vertex are several orders of magnitude less efficient. At the same time, Hyperliquid's fees are also lower than those of its competitors.
'Hyperliquid uses an order book model, so it does not experience issues like slippage and 'toxic flow' as AMMs do. Market makers must think twice before manipulating the market.'
The security shadow from North Korean hackers
Although Hyperliquid has performed exceptionally in profitability and user enthusiasm, it faced controversy at the end of December. MetaMask security researcher Tay Monahan stated that hackers associated with North Korea have been 'testing the waters' on the Hyperliquid platform since October 2024.
North Korean hacker groups (such as the Lazarus Group) stole $1.3 billion worth of crypto assets in 2024, doubling from 2023. Monahan and others also criticized Hyperliquid for being overly centralized, as the platform currently has only about 16 validator nodes, making it potentially more vulnerable to hackers or other powerful attackers. While centralization raises security concerns, Choi quipped that it also brings user experience benefits that are not fully recognized by the outside world.
'Sometimes centralization actually brings a better user experience.'
