Hyperliquid, a platform for trading perpetual futures, is facing criticism over its governance and security. The company has responded to concerns about how it selects its network validators and whether its system is truly decentralized. Validators are the entities that help verify and secure transactions on the platform.
Are Validators Really Buying Seats or Is It Just an Allegation?
The issue began on January 7 when Kam Benbrik, an employee of the node operator Chorus One, posted on social media about problems with Hyperliquid. He said the platform was not decentralized enough, which made it harder for validators to do their work. Validators are like digital referees who make sure everything runs smoothly on the blockchain.
Benbrik also alleged that new validators had been allowed to “buy their seats.” He said that validators should ideally be chosen based on their technical skills, not their ability to pay for a position.
In response, Hyperliquid issued a statement on January 8, refuting these claims. The platform clarified that all validators were chosen based on their performance during a testing phase, known as a testnet, and there was no way to purchase a validator position.
Hyperliquid has denied all the claims made by Kam Benbrik. Source: X
The platform also said that, as the blockchain grows, it will add more validators over time. This is normal for most blockchain systems. This explanation seemed to ease some market concerns. The price of HYPE, Hyperliquid’s native token, which had dropped from $26.12 to $20.81 on January 7, briefly climbed back to nearly $24 before settling at $23.
Hyperliquid: Five Validators Control Over 81% Of The Staked Tokens
The criticism about decentralization isn’t new. In December, reports claimed that hackers from North Korea tested Hyperliquid’s defenses. At that time, Hyperliquid only had four validators. If hackers compromised three of them, they could take over the network. This created worries about the platform’s security.
Since then, Hyperliquid has increased its number of validators to 16. Despite this improvement, critics say the system is still too centralized. Five validators controlled by the Hyper Foundation hold over 81% of the staked tokens. This means that a single entity could stop the system if it controlled one-third of the stake. If it controlled two-thirds, it could take over the entire platform.
To address this possible vulnerability, Hyperliquid announced a program where it would share some of its staked tokens with other validators. The program aims to make the system more decentralized.
Hyperliquid’s Closed Source Code Creates Problem For Validators
Critics have also raised concerns about transparency. The code used by Hyperliquid’s validators is currently closed-source. This means people cannot see or review how it works. Some validators said they were penalized unfairly because they couldn’t understand the system.
Hyperliquid admitted that its code is not yet open to the public. The company said that it will release the code when it is more secure and stable. Open-source code is allows users to inspect and verify the system, which is a customary method of building trust in a platform.
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