DeFi has earned a spot at the grown-ups’ table—now the hard part begins
One of crypto’s most notable traits is how frequently new entrants emerge unexpectedly and, within a year or less, rise to become industry leaders. This occurred in 2017 when Binance burst onto the scene, and in 2023 when Blur overtook the NFT market (farewell) from OpenSea. Now, a similar trend is unfolding in DeFi, where Hyperliquid—a platform with around 11 employees—is generating over $100 billion in trading volume, competing directly with long-standing giants such as Binance and Bybit.
It was only after reading this insightful piece by Crypto’s Ben Weiss and Leo Schwartz that I grasped just how significant the platform has become. This is partly attributed to its straightforward co-founder Jeff Yan, who holds a Harvard degree and a gold medal from the International Physics Olympiad. Equally, it stems from Hyperliquid being a decentralized platform that is capturing market share from centralized exchanges.
The market Hyperliquid is capturing is admittedly specialized, catering to professional traders who use leverage to trade a popular derivative known as “perps” (short for perpetual futures). Most people, even those well-versed in crypto, would face losses if they dabbled in these instruments. However, though not mainstream, the massive amount of capital involved in perps trading means platforms offering this service can thrive financially. In Hyperliquid’s case, it generates approximately $600 million in annual revenue, and its token holds greater value than Uniswap’s.
Beyond this, Hyperliquid largely embodies decentralization in practice. While some criticize the project for having too few validators—a factor that could lead to centralized control—it does incorporate distinct DeFi features such as non-custodial wallets and an on-chain order book. Additionally, Hyperliquid does not implement Know-Your-Customer policies.
This absence of KYC is reassuring to traditional Bitcoin enthusiasts and crypto purists, who are cautious about government interference in personal financial matters. However, the lack of KYC might also place CEO Yan in an awkward position—particularly given his influence over Hyperliquid’s validator network and the code governing its smart contracts.
This conflict between decentralized principles and the influence of founders is unfolding across other areas of DeFi, including with Aave and Ethereum. Bloomberg’s Muyao Shen recently highlighted these tensions:
“[DeFi projects] have been praised by supporters as democratized enterprises, while critics argue their true aim is to make them hard to regulate. The drawback of decentralization in terms of actual control becomes evident when legal disputes arise,” she noted.
In the coming years, Hyperliquid and other major DeFi players will become increasingly intertwined with the mainstream financial world. This means legal disputes over issues like KYC and tokenholders’ right to profits are likely to grow more frequent. Meanwhile, DeFi projects may find it more challenging to make significant governance and policy decisions through obscure foundations or DAOs—a method many currently prefer.
While the DeFi sector may face legal hurdles in the years ahead, this is not necessarily negative if it leads to greater transparency. Simultaneously, Hyperliquid’s rapid ascent is the latest indication that DeFi is firmly established and that the sector will only expand in size and influence.
Jeff John Roberts