Hyperliquid Founder: Why Crypto Must Fix Finance Before AI Takes Over - Jeff Yan | E159
Jeff Yan explains how Hyperlquid aims to become the internet for money, why crypto must upgrade the financial system before AI dominates, and the core principles of transparency, decentralisation and permission‑less innovation that guide the project.
1h 29m·Guest Jeff Yan·Host When Shift Happens Host·
The Internet for Money
Hyperlquid is positioned as a neutral, on‑chain financial layer that functions like the internet does for information – open, composable and universally accessible. By removing corporate control and fragmentation, it seeks to become the default infrastructure for all monetary activity.
Hyperlquid wants to be the internet for money
- Jeff frames Hyperlquid not as a product but as a protocol‑level utility that anyone can plug into.
- Like the internet removed the need for a single gatekeeper of information, Hyperlquid removes the gatekeeper of financial transactions.
- This vision drives every design decision, from on‑chain transparency to permission‑less primitives.
- By being neutral, it can host a multitude of applications without privileging any single entity.
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00:00:42“I don't want it to be remembered for anything, but I hope Hyperlid becomes the internet for money.” — Jeff Yan
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00:38:50“Hyperlquid as an ecosystem is trying to do for finance what the internet did for information.” — Jeff Yan
Finance is finance; crypto upgrades the rails
- Jeff stresses that finance itself is agnostic; the value comes from the underlying protocol.
- Crypto provides programmable, trust‑less rails that can improve speed, cost and accessibility.
- Upgrading these rails is essential before AI can plug into the system, otherwise legacy finance will be a bottleneck.
- The upgrade is not a brand‑new product but an evolution of existing financial primitives.
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00:00:51“Finance is finance and crypto has the potential to upgrade the rails on which people conduct their financial lives.” — Jeff Yan
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01:27:22“We need a financial system that is programmable and accessible, otherwise humans will be cut out.” — Jeff Yan
Housing all of finance means eliminating fragmentation
- The goal is a single, composable platform where every financial service can interoperate.
- Fragmentation creates friction, higher costs and user‑experience gaps.
- By keeping the protocol open and not owned by a single corporation, multiple teams can build complementary modules.
- This network‑effect‑driven design mirrors the composability of DeFi today but at a system‑wide scale.
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01:01:02“It basically means that the financial system should not be fragmented.” — Jeff Yan
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01:09:05“The crypto part of housing all finance is that the platform on which people do this should not be controlled by a central corporation.” — Jeff Yan
Buybacks, Fee Burning, and Transparency
Hyperlquid’s token economics rely on an automated fee‑burn mechanism rather than discretionary buybacks. This design mirrors Ethereum’s fee‑burn model, providing predictable scarcity and aligning incentives without human intervention.
Hyperlquid does not have a discretionary buyback program
- The protocol automatically converts collected fees into HYP tokens and burns them.
- This removes any need for a board or governance vote to decide when to buy back.
- It also prevents market manipulation that can arise from timing buybacks around price spikes.
- The approach is baked into the chain’s state machine, making it immutable and trust‑less.
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00:00:05“The main problem is that Hyperlid does not have a discretionary buyback program.” — Jeff Yan
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00:35:42“Hyperlid burns its protocol fees in the same way Ethereum burns its priority fees.” — Jeff Yan
Automated fee‑burn is more reliable than discretionary buybacks
- Unlike a discretionary program, the burn happens on every block, ensuring constant scarcity.
- It avoids the governance overhead and potential conflicts of interest.
- The system mirrors Ethereum’s EIP‑1559 logic, where fees are burned regardless of market conditions.
- This predictability is attractive to long‑term holders who value transparent supply dynamics.
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00:35:54“You would not ask Ethereum developers to take fees when ETH price is high.” — Jeff Yan
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00:35:45“Hyperlid's fees are converted automatically to hype and then burned.” — Jeff Yan
Transparency of fee‑burn builds user trust
- Hyperlquid’s on‑chain data lets anyone audit every fee, burn, and token flow.
- Early on, the platform’s transparency attracted users when other venues were opaque.
- By publishing the full order‑book and liquidation data, the protocol demonstrates that no hidden minting occurs.
- This openness differentiates Hyperlquid from centralized exchanges that often hide fee structures.
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00:34:04“Hyperlid is the only transparent venue.” — Jeff Yan
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00:34:11“People latched onto it because it was transparent.” — Jeff Yan
Permissionless Ecosystem & Community Building
Hyperlquid is built as a permission‑less network where anyone can contribute primitives, plug‑in services, and collaborate without a central authority. A small, high‑integrity team steers the core while the broader community drives innovation.
Hyperlquid enables plug‑and‑play composability across teams
- When a team builds a new primitive, it automatically integrates with existing modules.
- This design creates network effects where each addition increases the overall utility of the system.
- The protocol’s state machine handles routing, so developers don’t need to coordinate manually.
- Such composability mirrors the modularity of the internet’s protocols.
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01:01:15“When someone builds something it should automatically plug in with other teams.” — Jeff Yan
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01:19:40“Hyperlquid is a decentralized development of the network.” — Jeff Yan
A tiny, high‑integrity team drives the core vision
- Hyperlquid deliberately keeps the core team small (≈11 members) to maintain focus and cultural cohesion.
- Hiring emphasizes integrity, competence, and a shared belief in the mission rather than short‑term financial incentives.
- The team’s values translate into a product that prioritises fairness over rapid growth.
- This approach contrasts with many crypto projects that scale staff aggressively at the expense of culture.
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00:22:33“We select for people we genuinely enjoy working with and who have a high integrity bar.” — Jeff Yan
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00:23:32“We have a very small team but we are high values people.” — Jeff Yan
Hiring decisions are made by consensus, not hierarchy
- Candidates spend a full day working with the team, allowing soft‑signal assessment of fit and skill.
- The rule is simple: if it isn’t a “hell‑yeah,” it’s a no.
- This informal veto system distributes hiring power across the whole group, reducing bias.
- It also ensures that every new hire aligns with the community’s long‑term values.
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00:27:56“We interview people for a full day and get soft signals.” — Jeff Yan
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00:28:01“If it's not a hell yeah, it's a no.” — Jeff Yan
Transparency & Trust in Financial Products
Financial products demand a higher level of trust than typical consumer apps. Hyperlquid delivers this through on‑chain verifiability, full auditability of every order, and a proactive stance against misinformation.
Financial products require deeper trust than consumer products
- Users entrust their capital to protocols that move money, not just data.
- This trust must be earned through immutable, auditable code rather than brand reputation.
- Hyperlquid treats every dollar as a liability that must be accounted for on‑chain.
- The higher trust threshold justifies the extra engineering effort for transparency.
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00:09:58“When someone uses a financial product they are inherently trusting in a very... way.” — Jeff Yan
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00:10:02“You don't have to get the same trust to a consumer product.” — Jeff Yan
On‑chain transparency guarantees accountability
- Every order, cancellation, and liquidation is recorded on the public ledger.
- Users can verify that no hidden minting or fee siphoning occurs.
- This immutable record replaces the need for third‑party audits.
- It also enables real‑time analytics for the community to monitor health of the market.
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00:11:02“Hyperlid provides an on-chain fully verifiable transparent version of what they were tired of in crypto.” — Jeff Yan
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00:34:31“Every order, cancel, liquidation, everything that happens is onchain.” — Jeff Yan
Proactive FUD handling protects ecosystem reputation
- The team does not ignore misinformation; they correct false statements when needed.
- Early on, they learned that simply waiting for “the truth to surface” can allow damage to spread.
- By issuing clear, data‑backed rebuttals, they maintain credibility and keep users informed.
- This approach also demonstrates that transparency is a defensive as well as an offensive tool.
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00:31:45“We address FUD by correcting false statements.” — Jeff Yan
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00:32:10“I learned that saying 'the truth will come to light' is not always right.” — Jeff Yan
Hyper EVM & On‑Chain Primitives
The Hyper EVM brings Ethereum‑compatible smart contracts onto Hyperlquid’s L1, unlocking fully on‑chain liquidity, staking, and permission‑less deployment of new financial primitives.
Hyper EVM lets Ethereum contracts run on Hyperlquid L1
- Developers can port existing Solidity code without rewriting for a new VM.
- The Hyper EVM acts as a blank slate that executes contracts against Hyperlquid’s state.
- This compatibility lowers the barrier to entry for DeFi builders.
- It also enables cross‑chain composability where Hyperlquid can host Ethereum‑style dApps with native on‑chain order‑book data.
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00:39:23“Hyper EVM is a way for people to deploy contracts they're used to deploying on Ethereum.” — Jeff Yan
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00:39:51“It looks like Ethereum but lives on Hyperlquid L1 state.” — Jeff Yan
On‑chain liquid staking is possible via Hyper EVM
- Kinetic, the largest liquid‑staking token on Hyperlquid, is built entirely on‑chain.
- Staking, unstaking, and reward distribution are handled by pre‑compiles, eliminating bridges.
- This removes trust‑risk associated with off‑chain custodians.
- It demonstrates that complex financial services can be fully permission‑less and composable.
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01:14:46“Kinetic is the biggest liquid staking token built on Hyper EVM.” — Jeff Yan
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01:15:06“Staking can be done fully on-chain without bridging.” — Jeff Yan
HIPP3 enables anyone to deploy permission‑less perpetuals
- HIPP3 (Hyperliquid Improvement Proposal 3) abstracts the creation of perpetual markets.
- Builders can launch a new perp by submitting a single contract, without needing core team approval.
- The protocol handles funding, liquidation, and margin logic automatically.
- This democratizes market creation and accelerates innovation across asset classes.
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01:45:10“HIPP3 is about letting anyone deploy perps on Hyperlquid.” — Jeff Yan
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01:46:23“It requires a lot of work but it's permissionless.” — Jeff Yan
Spot, Perps & Outcome Markets
Hyperlquid supports three core market types—spot, perpetuals (perps) and outcome markets—each serving distinct trader needs, from simple asset transfer to leveraged speculation and nonlinear belief expression.
Spot trading is the fundamental on‑chain asset transfer
- Spot trades move the base and quote assets directly on the ledger, mirroring Bitcoin’s original peer‑to‑peer vision.
- This simplicity ensures composability with any higher‑level protocol.
- Because spot is linear, it forms the base layer for more complex derivatives.
- Hyperlquid’s on‑chain order‑book provides transparent pricing for spot pairs.
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01:04:11“Spot is the fundamental asset that you hold and when you trade it, you are transferring things on the ledger.” — Jeff Yan
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01:00:01“Spot trading is essentially transferring funds on a ledger.” — Jeff Yan
Perpetuals provide leverage and capital efficiency
- Perps allow traders to amplify exposure without owning the underlying asset.
- They enable higher capital efficiency, especially for short‑term speculation.
- Hyperlquid’s on‑chain perp engine handles funding rates and liquidations automatically.
- This design gives traders the tools that traditional markets provide, but with on‑chain transparency.
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01:04:46“Per allow leverage more capital efficiency.” — Jeff Yan
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01:04:56“Per are useful for many use cases where leverage is desired.” — Jeff Yan
Outcome markets capture nonlinear beliefs
- Outcome markets let users bet on binary or bounded events, expressing views that cannot be modeled linearly.
- They are fully collateralised contracts where both sides lock capital until settlement.
- This opens a new class of financial products beyond simple price speculation.
- Hyperlquid’s permission‑less framework lets anyone launch a custom outcome market with its own payoff logic.
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01:05:27“Outcome markets let you express nonlinear beliefs like binary payouts.” — Jeff Yan
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01:06:01“They are fully collateralized contracts with custom payoff structures.” — Jeff Yan
Portfolio Margin & Risk Management
Hyperlquid introduces on‑chain portfolio margin backed by a robust lending market, avoiding the hidden credit risk of centralized exchanges while preserving capital efficiency for traders.
Portfolio margin needs a robust on‑chain lending backbone
- Traditional centralized exchanges extend credit arbitrarily, creating hidden bad‑debt risk.
- In black‑swan events, that credit can evaporate, threatening solvency.
- Hyperlquid solves this by requiring every margin position to be fully collateralised by on‑chain lenders.
- This design aligns incentives and makes risk visible to the whole ecosystem.
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01:17:20“Portfolio margin needs a robust borrow‑lend backdrop.” — Jeff Yan
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01:18:01“Centralized exchanges can mint balances, leading to bad debt in black swan events.” — Jeff Yan
Hyperlquid’s on‑chain lending fully backs margin positions
- Lenders provide the capital that traders draw on, and interest rates adjust dynamically.
- When demand spikes, borrow rates rise, limiting exposure rather than creating unchecked credit.
- This mechanism keeps platform risk low while still offering high leverage.
- It also creates a market for lenders to earn yield from margin usage.
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01:19:40“Hyperluid's lending markets fully back portfolio margin operations.” — Jeff Yan
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01:20:06“Borrow rates adjust to meet demand without increasing platform risk.” — Jeff Yan
Decentralised design eliminates hidden credit exposure
- Every dollar moved on Hyperlquid is accounted for on‑chain; there are no off‑balance‑sheet liabilities.
- The protocol cannot issue credit out of thin air, unlike centralized venues.
- This transparency reduces systemic risk and aligns with DeFi’s principle of full accounting.
- Users can audit the entire margin pipeline, from collateral lock to liquidation.
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01:19:55“Every dollar is accounted for; no hidden asterisks.” — Jeff Yan
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01:19:58“DeFi cannot accept the same credit model as centralized exchanges.” — Jeff Yan
AI Threat & The Need for a Crypto‑Powered Financial System
Jeff warns that AI will soon dominate value transfer, making legacy finance obsolete. Crypto’s programmable, open, permission‑less stack is the only viable foundation for an AI‑driven economy.
AI will soon supplant human intelligence and drive value transfer
- Jeff predicts that AI will reach a point where it can write and execute code autonomously.
- When that happens, the majority of economic activity will be machine‑driven.
- Existing legacy systems lack the speed, programmability, and openness to handle such volume.
- Therefore, a new financial substrate is required before the transition.
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01:26:09“AI is going to come and basically supplant human intelligence in the near future.” — Jeff Yan
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01:26:42“There needs to be a financial system that AI can plug into.” — Jeff Yan
Legacy finance cannot handle machine‑driven value transfer
- Traditional banks and payment rails are built for human‑initiated transactions, not autonomous agents.
- Code and value are on separate layers in legacy systems, creating friction for AI‑generated trades.
- This mismatch would cause bottlenecks, regulatory friction, and security vulnerabilities.
- Hyperlquid’s on‑chain logic aligns code and value, eliminating the gap.
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01:27:06“Legacy financial system cannot handle AI-driven value transfer.” — Jeff Yan
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01:27:12“Code and value are not on the same playing field in legacy finance.” — Jeff Yan
Crypto provides the programmable, open, permission‑less foundation AI needs
- Hyperlquid’s open protocol lets anyone deploy smart contracts that can be called by autonomous agents.
- Its permission‑less nature ensures no gatekeeper can block AI‑driven transactions.
- The system is designed to be fair, autonomous, and auditable, aligning with AI’s speed and scale.
- Jeff sees Hyperlquid as the best shot at preserving human stake in a future run by machines.
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01:27:35“Hyperlquid is our best shot to build a programmable, accessible financial system.” — Jeff Yan
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01:27:57“When AI overlords come, they'll adopt it because it's built well, autonomous, fair, open.” — Jeff Yan
Governance & Community Decision‑Making
Hyperlquid relies on informal consensus for hiring and protocol changes, emphasizing transparency and collective veto power rather than top‑down authority.
Hiring is decided by collective consensus, not hierarchy
- Candidates work with the team for a full day, allowing multiple members to assess fit.
- The rule is binary: a “hell‑yeah” means hire; anything less means reject.
- This distributes power and reduces the risk of nepotism.
- It also reinforces the culture of high integrity and shared mission.
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00:27:56“We interview people for a full day and get soft signals.” — Jeff Yan
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00:28:01“If it's not a hell yeah, it's a no.” — Jeff Yan
Protocol changes rely on informal veto rather than formal voting
- Anyone on the team can raise a “medium to strong” objection, which acts as a veto.
- The process is not a formal ballot but a consensus‑based check.
- This ensures that major changes have broad support before implementation.
- It mirrors open‑source governance where code reviews act as gatekeepers.
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00:28:24“If anyone has a medium to strong veto, that's enough.” — Jeff Yan
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00:28:04“It's not a formal vote because it's like an informal consensus.” — Jeff Yan
Transparent token‑vesting approach avoids community panic
- The community feared a $300 M monthly token release.
- Hyperlquid chose a different, less alarming distribution schedule.
- By communicating the actual mechanics early, they prevented a wave of FUD.
- This demonstrates that openness about token economics is essential for trust.
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00:30:22“$300 million worth of token would hit the market every month.” — Jeff Yan
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00:30:29“Instead, we have a different approach that hasn't caused panic.” — Jeff Yan
Alliance Stablecoin Model
Hyperlquid’s alliance stablecoin (USDH) aligns protocol yield, deployer incentives, and user fee discounts, creating a symbiotic ecosystem that unlocks new use‑cases.
Yield flows from treasury to protocol and stablecoin deployer
- The alliance model splits generated yield between the Hyperlquid treasury and the entity that launches the stablecoin.
- This creates a financial incentive for builders to create and maintain stablecoins on the platform.
- It also ensures the protocol benefits directly from the stablecoin’s activity.
- The design mirrors traditional bank‑deposit interest but is fully on‑chain and transparent.
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01:12:42“Yield can flow from the treasuries to a mixture of the protocol and the deployer of the stable coin.” — Jeff Yan
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01:14:19“The protocol earns yield and holders of hype are aligned with the stable coin.” — Jeff Yan
Traders using the stablecoin enjoy lower fees
- The fee schedule is encoded at the protocol level, automatically granting discounts to stablecoin users.
- This creates a network effect: more stablecoin usage leads to higher volume and lower overall costs.
- The mechanism is immutable, removing the need for manual fee‑adjustments.
- It also incentivises liquidity providers to support stablecoin pairs.
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01:14:25“Traders who use the stable coin also pay lower fees.” — Jeff Yan
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01:14:27“It's encoded at the protocol level.” — Jeff Yan
The alliance model unlocks new use‑cases through synergy
- By aligning incentives across protocol, deployer, and users, the stablecoin becomes a utility layer.
- New applications such as on‑chain credit, synthetic assets, and cross‑chain bridges become feasible.
- The symbiotic relationship reduces friction for developers building on top of USDH.
- This demonstrates how composable primitives can generate whole new ecosystems.
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01:14:33“It's a great synergy and will unlock a new set of use cases.” — Jeff Yan
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01:14:37“The stablecoin is symbiotic with builders and apps.” — Jeff Yan
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