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Dark Pools on Hyperliquid with Silhouette
Recorded: Feb. 23, 2026 Duration: 0:53:17Space Recording
Full Transcription
Life's a casino, I'm telling you
And everybody's playing
Boys and girls, women, children, me and you
The dice are loaded and everything's fixed.
Even a hobo would tell you this.
Welcome to hard times And feeling low
Do you like sinning?
Where you will be before you go
We got lots of gambling
Oh, and we're telling lies
You're certainly welcome to Hard Times. Take a look in my eyes
Tell me what you see
Besides the bright blinking lights
Stretched out in front of me
I wonder if you'll notice Blinking lights stretched out in front of me.
I wonder if you'll notice.
Would you even care?
If I told you my life just isn't fair.
Welcome to Hard Times And feeling low
Do you like sinning? No
Well you will be before you go
We got lots of gambling
Oh, and we're telling lies.
You're certainly welcome to hard times.
Yes.
Hope you're feeling welcome to hard times.
All right. We've been told we need to be a little bit more optimistic, to hard times. Thanks for jumping on. As I said, this is what you guys are building is one of the most interesting things, I think,
not just in the perp space, but across the full industry.
And I'll be completely honest,
I'm going to use this selfishly as a total lesson for the next 45 minutes to an hour
just because I want to pick apart the architecture
and how it works as a bit of a learning curve for myself.
But yeah, so where's this idea started from?
Like, how's it all came in?
Yeah, could you just kick us off where it's actually initially stemmed from
and how we've got to this point now?
Yeah, of course.
So my background, I was meant to be a typical TradFi graduate.
Like most folks that come out of university,
they get a job at a bank or some hedge fund.
And I sat at the desk for two weeks
at the graduate program and I looked at everyone around me and I was like, immediately, no, I'm not
going to spend 16 hours a day of my most like excitable time where I was willing to do all the
work. And see, you know, everyone around me was somewhat uninspirational. So I decided to shift gears a little bit and quit that job and joined a small crypto startup in about 2016 and have been there ever since.
And I've been working in the crypto space on various projects.
And then it was around about the ZK time when, you know, everything was going to be um that i i also kind of got pulled within the um
with the tech the tech stack and the overall like promise that it was um going to bring um
and kind of just you know started reading the paper started seeing some of the projects and
kind of got involved with the community uh and it was around about this time that the
coinbase was looking for a a grant funded they looking for a grant-funded team to basically build out a proof of reserves mechanism.
It had to be ZK. Obviously, we can't know all Coinbase's wallets and they want that to be the case.
And so we built a prototype that we thought was pretty cool on what it could do.
And we had like a really nice roadmap of what we wanted to build out to be able to say to every custodian, you know, no matter how fast any blockchain could propagate,
this proof of the assets would be kind of there. And, you know, this was round about the same
time as FTX. So it was quite a poignant topic. Overall, at that time, you know, this project
kind of came to an end after we had delivered the project.
And we realized quite quickly that this idea was a cool novelty more than anything.
And built out a, you know, we were trying to sell it to a bunch of custodians, trying to raise on it.
And we noticed that there wasn't really good business case attached to this concept.
And so this idea of cool tech doesn't always mean cool business.
And so we pivoted the idea, me and my co-founder, to basically using our cryptographic background and our blockchain experience to build something that we saw sorely lacking.
And that was the idea of privacy privacy mechanisms in the kind of the DeFi space.
It was at the same time I also got to ingratiate myself within the Hyperliquid ecosystem, met some
of the builders and participants there and some of the Hyperliquid team. And the way we kind of
describe this is that being an early Hyperliquid builder basically felt like being an Ethereum in like 2016, 2017,
or Solana in the early 2020s. The community was just extremely excited. The community was extremely helpful. And our kind of big thesis bet was if you're going to build all of finance,
you have to build privacy mechanisms that like a whole bunch of business use cases require even
today um and that's what silhouette's going to be kind of tackling head on awesome yeah so it's
obviously had um kind of a bit of a resurgence and i think like privacy as a narrative feels a bit
like you can't necessarily talk about crypto and the ideals of crypto without having privacy so closely tethered to it, you know?
How is like the outlook on privacy change since, as you say, you're coming in 2016?
It's like where we're at now because it feels like we got a bit of a full circle moment.
Maybe tech's met up with use cases and now it starts to actually see like some of the implementations that were talked about way back when.
And now like a reality, which is quite cool to actually see some of the implementations that were talked about way back when, and now a reality, which is quite cool to actually see.
Yeah, I mean, just from a couple weeks ago, a couple days ago, we just saw the Jolt team
come out.
For anyone that doesn't know, they could basically prove Ethereum blocks at a ridiculous pace.
And they were a little skunkworks team that were kind of building components out there for a while. Some people knew what they were up to,
but it was really designed to just be like flex, like the technical prowess.
We're seeing ZK tech and kind of cryptography tech being used in crypto kind of more prominently with
a bunch of the other shielded platforms platforms that are being built on Solana.
Zcash had its nice rise, and anyone who kind of captured that was kind of knew and understood why that meta exists. But the actual value proposition of privacy, it's the boring tech. No one actually
kind of cares about privacy. You fundamentally kind of just take it for granted in many respects in like your communication lifestyle. You care about it when it comes to like, you know, can anyone read your
emails or can somebody, anyone intercept your bank transfer? All of those things, people do genuinely
fundamentally care about those. And now that like more of finance is coming on chain, more use cases
are coming on chain, the whole payments infrastructure is kind of moving on chain, the whole stablecoin infrastructure.
It's not just the speculative side of the world.
And if we see how folks trade today, crypto has really just been built on speculation
up until this point.
But we're seeing the proliferation of so many other use cases that actually, for us, is the foundation of why we should exist.
Yeah, and I feel like with privacy,
it's always one of those things where people only care about it
after something tragic happens.
But the people who are so idealistically built on that idea of privacy,
I kind of feel that same way, but in practice,
it becomes more and more difficult. And I feel like you need an escape patch sometimes even if it's just like
a better option you know um but what have traditional rails got right when it comes to
privacy with regards to let's let's talk about it with regards to markets uh that crypto that
hasn't necessarily cracked just yet when it comes to particularly on-chain trading?
Yeah, on-chain is fundamentally transparent. And this is actually a feature, not a bug.
You look at Aave, you can read the code, you know exactly what's happening with Aave at all points in time. There are thousands of analysts that all kind of read that data
and make informed opinions on the health of the market. Same thing with Uniswap,
same thing with the other DeFi blue chips. For us, like crypto is built on that component of transparency that we
fundamentally agree with. Like that's what made DeFi cool early on. That's what made the whole
concept of, you know, openness, open and permissionless that anyone can kind of participate.
You don't have to sit through like, you know, a 350 page KYC document
just to kind of get access to some of these more interesting, you know, traditional type
use cases. And it really lowered the barrier to entry, but it was still very crypto denominated
and it was kind of segregated from the rest of the world. We're seeing less of that today,
but the other side of it, you know, we want to kind of preserve that open public markets component.
But we also do believe that individuals, when you're playing in these public games, don't necessarily want to have everything that you're doing completely tracked.
I think with the rise of AI now, the bots will move faster than any human ever could.
And maybe you have your own bots and this is bot warfare on chain today.
So you want to be able to have the tools to be able to protect and guard against that in some way, shape or form.
You know, markets fundamentally move risk and to understand risk, you need information. your actions in those markets, if you don't want that information to be used either for or against
you, there should be a tool and use to kind of make that be the case. And so for us, it's this
whole like, you know, where do we draw the line between open public markets and personal privacy?
And how do those two games play in the market has been what we've seen, you know, other teams take
certain strong stances on
some teams take weaker stances on and we want to try and kind of like take the learnings from all
those other teams and kind of build a product that people like to use that actually solves
some real problems and ties into you know ecosystems that are like you know beloved by
by everyone in crypto yeah Yeah, so like,
I'm kind of like conflicted in my thoughts around,
well, obviously seeing this kind of rise of like corporate chain type situation
where it's kind of semi-permissionless.
There's definitely some permissioned nature to it.
There's a lot of incentives for KYB and KYC
for these certain chains for bringing people in
through that avenue because i feel like the industry is kind of just sacrificed the idea
that you can have a fully put permissionless system in a fully public chain and that unless
you like bow to the wills of what the big corporations want and have this kind of like
permission chain which at that point it's just like well why don't we just have a fucking
spreadsheet um do you think like there's both sides of the fence here so like the big institutions
and the big big people who can move like some serious size want to know who their counterparty
are but they also want to be in a situation where you're not getting um like any one of these on
chain sleuths just spinning up some high engagement accounts and trying to
like flash people's orders so people can kind of see where they're going to get stopped out because
like i don't know how many times andrew kang or maki big brother and like numerous other accounts
as soon as they're opening a position like full timeline knows that the liquidation price and you
know that's not yeah that's not conducive to like being an environment where you actually want to
come on chain start trading you know yeah exactly um i mean the whole james wind saga
was it was like a highlight of this but let's kind of like unpack that so you spoke about the
counterparty side of it um that that is actually a super important component why on why i believe
most of the other privacy protocols uh really didn't allow for too much liquidity to go to kind of be sustained
in their system outside of incentives. So if you think about it, like, you know, you and I want to
do a trade, I know your grant, cool, let's do the trade. There are some knowledge that you are at
least, you know, part of, you're not part of a list of like unwanted that I don't want to trade with um but and we can agree to those terms cool that that's totally fine in a world where you know we
do have sanctions list we do have like uh folks that are um you know part proceeds of crime you
don't want to be trading with some of those and in open markets that's a lot harder for many of
these corporate corporates and their compliance team to wrap their head around. There's many reasons around that.
And we've kind of got to figure out why does that,
like what is the core premise of what they're trying to mitigate against that?
And, you know, for sanctioned addresses, it's literally the law.
But so if I'm trading in a private pool, that's completely, I have no idea who the
counterparty is, I don't have that information. So I've introduced some uncertainty into that
trade, a little bit of uncertainty increases the risk. And if it's too risky, I simply don't trade.
You know, there are other types of risk, counterparty risk is one of them. The other
one is execution risk, timing risks, and many of the other privacy protocols really didn't understand
how to make the their pools be conducive to moving risk especially in the trading world so
you know we we kind of saw these corporate chains that are also launching i think arc
and tempo being examples that they are building privacy natively into the chain, but not necessarily
privacy for the kind of sake of just like, you know, the cypherpunk version of it, but
a lot more to kind of reduce, like I can keep my portfolio private and mitigate against
some of those components around, you know, the unwanted that we don't want to trade
with. That style of privacy pools kind of marries itself a little bit closer to what we're trying
to build over here at Silhouette. And that's a really important component around, you know,
what, and at the end of the day, that validates our thesis. And so we're quite excited about them building their stack out.
To ask a kind of natural follow-on question to that is,
why don't we just build Silhouette in those sorts of environments?
And for me, it's not necessarily that exciting.
I think there will be amazing chains and solve a lot of problems
for certain use cases.
And they'll kind of gather a decent amount of liquidity and a decent amount of users.
And a lot of transactions will happen on them.
But kind of being a little bit more early on into crypto, I still hold true to a lot
of the crypto ideals and kind of the openness, decentralization and permissionless nature
of these ecosystems, I feel will be a lot more exciting to to build in and that's kind of
why we chose Hyperliquid as the venue for us to build in. Awesome yeah that makes a ton of sense
and I think it's I think it's a good spot to get into the architecture of it and I think the easiest
way to go through this without getting I'd like to go technical on into the weeds on this but I think
if we speak about it from a user journey and maybe like a liquidity providers side of it as well. So like kind of what does this look
like from a user who's placing a trade, like what's actually getting rooted on the back end,
how the LP is coming into that, and then people can like tangibly understand what the hell's going
on under the hood. Cool. Yeah. So maybe one step before that, you know, we built a privacy dark pool type component using all the privacy preserving technologies.
There was a fully homomorphic encryption. It was epic, really cool, but really too slow for a trader's use case.
Multi-party computation, NPC, was also super helpful.
You could get the same level of privacy with a large
amount of performance. The only concern there was that it would require users to actually
download or install some software. And there was a little bit of a clunkiness involved in that. Or
you could use a relayer, but then that introduces. There was some onboarding kind of complexities that we felt like wasn't going to be a really good use case.
ZK, ZK will always have a component within our systems.
But then the other type of technology that existed, and it's actually been an old piece of technology,
is called trusted execution environments.
And that's what we decided to kind of go with.
The reason behind that as well is if you look at trading environments, they're like every central order limit book, like your advantage is directly
correlated to how low you can get your latency. We saw that with the Flash Boys era is lots of
like stories and even books written about that. And a lot of papers around that. We see that with,
you know, some of the hyper liquidquid nodes being co-located.
So that component for us was really, really important
to try and optimize for.
So we saw a trusted execution environment
as introducing the lowest amount of latency into our system.
And so we kind of went with that.
Now, trusted execution effect in their own technology stack.
So, you know, we're kind of working through those issues to make sure that at all points in time, the system does what it says it does.
We can verifiably prove it.
Funds are always on the L1.
And that in the event, like, you know, a catastrophic failure happens, happens you know there are these fail-safe
mechanisms. The way that we kind of architected and for like a mental model is you can kind of think of this as a co-processor. So you've got your hyperliquid blockchain that processes
transactions and then you have this co-processor that sits on the sideline this is the silhouette
trusted execution environment. Autoflow goes into that mechanism. We match and batch that. You can do it
tied directly into the hyper liquid order book. You can settle within our system. You can do an
RFQ. You can do a T-WAP. You can do a V-WAP. There'll be a large amount of trading tools that
many of the traders will be familiar with, and they can clear and settle within Silhouette.
Now, that would like fragment liquidity
if it would only be able to do that.
The core component of why we think
what we're building is slightly more interesting
is this trusted execution environment
can execute transactions on hypercore
at all points in time.
So you can kind of think of this as like a privacy pool, folks can trade within that mechanism, and then also be able to trade
directly on the Hyperliquid order book. An example here is, let's say, you know, I'm a HIP3 deployer,
I need 500k hype, I'm going to buy that on the open order book, I might move the mark a little
bit, but or get bad execution outcome. But I also, particularly for many reasons, don't want to
signal that I'm acquiring this hype, not just yet. So you can use silhouette to say, all right,
like, you know, here's an RFQ, this is the amount of hype it fills up over a period of time,
folks can can kind of see those orders and kind of place their corresponding bids.
But let's say, for example, you match 450,000 of that hype,
and you need the last 50,000 to kind of go through the order book.
And you can simply say, all right, this last 50,000 hype,
let me TWAP it in the Hyperliquid order book.
And that can be something that we enable.
The other side of this that I think is quite interesting is we're on the path and the road to be the cheapest venue for anyone to trade assets on Hyperliquid.
Given the fact that most of these transactions go through the Silhouette-controlled wallets, these wallets only take instructions from the trusted execution environment, but all the flow aggregates through these wallets. So everyone will be able to see the net outcomes of the flows, but those wallets will accumulate a decent amount of volume and will have a decent amount of hype stake towards those wallets. And so you can be a new user coming
to Hyperliquid day one, use Silhouette and based on kind of no trading volume from the user side,
get the lowest fees of as if you were trading at the you know the top tier
trading fee tiers that's awesome and this is is this zero lift for any new assets and markets as
long as they're just on hyper liquid dependent if they're hip three just regular assets spot like
how does how does that look yeah so the roadmap for us now is our reliable spot. We're going to be kind of covering all the major tokens there.
That's something that over the next week or two,
we're going to be adding new markets,
basically in a fairly frequent cadence.
In terms of the perp side of things,
yes, we will have full support for we call them RFMs, but basically
large order matching for
perps. All the perps on Hyperliquid will extend to the
HIP3 DEXs as well. And so if there is a market on Hyperliquid,
our goal is to cover that.
And a little side tangent before we get stuck into it a bit further, but
HIP4 and prediction markets, is this, do you think it's a really well-timed announcement? Do
you think there's a lot of merit to it? Yeah, just general thoughts on that.
Yeah, I really like prediction markets. They're like value, not just as like really good trading,
like trading mechanisms, basically being able to trade non-financial things and basically trade information.
And their effects on the value of that information, I think is super cool.
Like, you know, prediction markets in early Ethereum was a very interesting killer use case that even Metallic wrote about.
And, you know, the rise of Polymark and Kulshi and a couple other ones that are being built in the hyperliquid ecosystem
like Atkham, there is going to be really exciting kind of mechanisms
built on that.
Now, an interesting part about why privacy would actually matter
for these prediction markets is based on the fact that their information,
your trading information, and your assessment of how factual that information
is based on the information you have or what the market would have. And so the case for privacy
from the user's perspective is going to be super cool to see. As long as the end price that you see,
that that's not distorted, that there's no like genuine private pools around those.
I believe that like, you know, Grant, you might have a bet that you think that this market's going to go in one direction and you don't want
the world to see that because you're going to be copy traded that i think is going to be really
important to to kind of see how how the dynamics play in in that world yeah i think that's a huge
problem at the minute because of i mean every single viral thread at the minute is
i've seen a really funny tweet actually saying the stupidest person you know is buying a mac
mini and setting up a polymarket trading pot because everyone's just following the same
player book um if you're totally like untrained in that space and coming into it totally fresh
you think you're going to have an edge um sorry to burst the bubble but really don't
um but at the same time a lot a lot of these people are getting quite a lot of significant
volume followed through and if i was one of the exchanges i'd probably be encouraging it because
it's just going to put significant more volume through people are just following certain wallets
you see like threads coming in the timeline this wallet started out with 200 over the weekend now
it's up to 80k what's going to happen everyone's just going to follow into trades on that specific wallet um
so it can be used as a negative thing it happened in the meme coin space it happened in the social
trading space like you know it's the same pick different lipstick and just messed up in a
different way but um people will be farming that and particular users if they've figured out a way
to actually kind of make sure their wallet is well known and people want to follow them in after but um it's pretty big deal and can be quite
easily manipulated but so like that's the nefarious side of it but at the same time there is all there
is particularly if you're a person of influence there is a lot of the time that you would be
wanting to play some bets you wouldn't really want people like signaling to the market
what your position and what your
stance is on that particular market as well and i think it's we're in a really weird position where
the industry has just totally accepted that privacy can never happen uh it's been tried and tested
before regulators might just come in and totally screw everything up um but yeah i think i think
that aspect of not wanting to telegraph to the rest of the market, what your stance and what your position is, is probably a bit of a bug in the industry being on chain, truly, I think.
And I think we're in the early stages of moving towards what could be seen as a little bit more of a fair system.
Yeah.
I mean, if you just look at the whole regulatory apparatus, it's designed like the traditional world works on privacy.
If you own a firm that's private, you do not have to disclose your financials.
You do not have to do too much.
There are some rules if you take other people's money, and those rules are designed so that there's openness and transparency at a reporting level.
and transparency at a reporting level.
And like, you know, accountants and lawyers kind of like,
you know, this is why they're like,
and compliance analysts are employed by these companies.
And so the whole regulatory apparatus is designed
so that there is a fair playing field.
But, you know, I don't know what JP Morgan's like,
what their desk is doing.
I don't know what some hedge fund is doing. I don't know what some hedge fund is doing.
I don't know what Jump, Jane Street
and kind of these other funds are doing
with the like exactly trade by trade.
And they like that.
You talk to one of the trading guys
at these very large desks,
like they almost think of their trading flow
as their IP, how they enter markets,
how they exit markets.
It's fundamentally such an
important part. And the rules around the game that gets played at a macro level is that folks will
find the market price based on assets and based on a collection of views. The same thing will
actually fundamentally apply in prediction markets. We will fundamentally see that the price that you
see is the aggregate view of, as long as it quite like actively traded and there's a lot of liquidity, that
price should reflect people's viewpoints on that.
So by introducing privacy into these open mechanisms, you're not necessarily changing
the game at a fundamental level, as long as like, like I said, like earlier, that public
market component, like where everyone can see the rules of the game, and what blockchain does really, really well, as long as that's
maintained, the idea of like a collection of private individuals that are placing trades
that aren't kind of viewed within the market, like directly, like IE, I don't see this person's
wallet, I don't see that person's wallet, but I can kind of see the aggregate outcomes.
I believe that's a really good balance of how these mechanisms will play out.
And another way to kind of think about it is if everything was to be open and transparent,
then before like all information and kind of like edge gets eroded too quickly.
So if we kind of, you know, the meme coin game, we all knew what
was happening, we could trace the wallets, we could see, you know, there were signals within
those markets where we could see like what was actually going to be happening. And that's really
important. But you haven't, you know, there are still many meme coin rugs that we don't actually
know the people behind them. So the privacy component there wouldn't actually change much
for them, they're still going to kind of do those components. They're still going to kind of do that activity
and those tools will still exist. But to kind of bring it back to like, you know, how do we make
these permissionless and open-ended markets a lot more tangible for a few folks, have a really good
set of principles that like, you know that everyone can understand the rules of the game
at a more codified level
and maybe some social acceptances of what we see in Hyperliquid today,
but then also allow some folks to place bets in those markets
and keep their specific IP private to themselves.
Yeah, because you don't have to throw
all the beauty of what comes with like trading on chain out
just because not every single transaction is going to be infinitely trans like trans
transparent to absolutely everyone you know like the verifiable nature of it
can still remain that's completely fine it's just as we move further and further closer to
solutions like what you guys have brought on chain as well i think it's just, as we move further and further closer to solutions like what you guys have brought on chain as well,
I think it's just going to be,
we'll probably look back in a few years time
and think, how the hell did anyone make any money,
particularly at size on chain,
if they were actually operating that way.
I'd go a step further and to put out like a bit of a hot take
and say, if anyone is trading on a public wallet,
you'd probably second guess from a bit of game theory
and think, well, why do they want everyone to see it?
It's probably why we'll end up in the next couple of years, I think.
Yes. I mean, you see this now, right?
The modus operandi for most whales, they go to centralized exchange,
they get a brand new clean wallet, they come into the ecosystem,
they have to start that fee tier basically from zero,
they eat those fees from day one.
That happens daily.
And in fact, you look at a big prop shop, whales, they all do this. It's part of their
like morning ritual, like as they're sipping their first cup of coffee, all right, let's
rotate some more. Let's start this process again. And, you know, just that in itself, like just that tiny piece of friction,
is just illustrative of the grander problem. And so while we think like, okay, if you had to say,
like, do we solve that? Yeah, sure. And that's a nice to have for some folks. But if you kind
of think about like, you know, if you go talk to some other funds where like, they just simply
can't touch open blockchains today.
One layer of it, it's like the compliance kind of sanctioned list
unwanted that I was talking about.
But then the other side of it is many of them also realize that
whatever strategy that they're going to deploy will be
a high school looking retrofit what they're doing very, very quickly.
Yeah. So if the regulatory side of it gets solved let's say we just click our fingers overnight and clarity comes in and there's a lot of just like there you go off off you go
on chain you can start trading like the rest of these degenerates um the other side also probably
has to be true though because you're not creating an environment that is
as good as or as equal to what they can get um in the traditional markets particularly if it comes
down to the ipa if like they're trading style they're trading the stands they definitely don't
want to be spending tens if not hundreds of million dollars every single year and then have
as you say someone track every single transaction pump it it into a code and then spit out a really nice script. Obviously, it's not as simple as that. I'm
oversimplifying it. But again, if there's no incentive to come on chain because that
edge could be, as you say, quite quickly eroded, where are the next large players actually
going to come from then if this doesn't get solved?
doesn't get solved.
I think there'll be an appetite
for crypto markets to grow over time.
After the 2017 bull run,
we saw that was completely retail field.
And then the big pundits basically had said,
all right, the next one will be institutional adoption.
This is about 2019.
That didn't really happen.
Then the next bull run, institutions were coming on.
They didn't really come.
And only recently now, like many years later, are we seeing some institutions make some plays.
But during that time, we built a whole series of other institutions that are, by definition, institutions themselves.
Some of the successful VCs, they have some of the biggest liquid funds out there.
Imagine you're a VC that you have to rotate capital.
It's a very normal thing.
I have to rotate capital back to my LPs, which means I have to liquidate some of my tokens.
to my LPs, which means I have to liquidate some of my tokens. Imagine that gets out.
Imagine that gets out.
That's like a bearer signal for the project, but it's actually just a normal course of
their responsibilities. They took this bet, it became successful. We took other people's
money, we have to give them a return. That's an institution. We know some names out there
of very big VCs that kind of do that. And then, you know, the big market makers within
crypto, how many of you know, some have kind of died out over time, but how many of them have been
around from like some at the beginning, and they make markets today liquid, that's a big
institutional play. There is a bunch of prop shops that are around there that we might not even know
the names of, but they have like hundreds of millions of dollars under AUM.
And they were also looking for these kind of opportunities.
At the same time, kind of there's this like real worldification of assets
that are coming on crypto.
So crypto is very dominated by the tokens that we could create and generate.
But now we've got like these tokenization projects of real world assets.
I've never loved that term, but everyone kind of uses it.
You know, we've got these spot equities, we've got commodities coming on.
There's even metals coming on, which are like very, very actively traded.
And this kind of gives a really low barrier to entry in terms of like access to these markets.
barrier to entry in terms of like access to these markets, but you're not seeing like
the same kind of the same participants in these markets are folks that maybe just because
they're a bit more online and didn't really work for a big fund, have access to these
sorts of systems.
And then there's a natural arbitrage when you've got an asset on one side,
it's tokenized version and in the real world,
and you can plug into both,
there's natural arbitrage opportunity from there.
And we kind of, we see the evolution of the crypto markets
as being kind of like one step further
of what the traditional markets were.
We're not replacing them.
I think everyone that goes like, okay, you know,
this is completely gonna replace that system.
It's never gonna, it's never gonna do that. But what you will see are, you know this is completely going to replace that system it's never going to it's never going to do that but what you will see are you know more efficient um like mechanisms which crypto
does enable to be able to trade these sorts of assets and you know as as the lindy effect on
those types of markets become kind of par and parcel like you know trading real world assets
and kind of maybe even maybe even getting derivatives through
perps becomes like a normal motor stop around for some folks. And as that market grows,
there will be these two markets that exist. One in a more traditional sense, which I would want
my parents' retirement funds to be in, and one for this emerging new world that basically can have access to that
and play around with it.
And the kind of fundamentals behind them are not too different.
Yeah, I got that silver kind of like blow off a few weeks back
when I'd locked on and was looking at some of the volumes.
And I think it's the first time I'd seen anything basically flip
absolutely everything else over than Bitcoin on Hyperliquid. And was just like oh shit we're here it's it's arrived like
open interest was absolutely insane um that was a strange moment but obviously the market was doing
doing its thing but now it's like this is a very very real environment yes there's also on the
backdrop that not a lot of alts are going up so people are
looking for other ways to kind of trade on chain and i love looking at other opportunities but
um i didn't expect it to happen so fast um but here we are and i think we're like kind of in
this new paradigm where there's probably going to be a lot of other alts where they now have to
contend with traditional assets and they now have to contend with you know fang and they now have to contend with traditional assets and they now have to contend with, you know,
Fang and they now have to contend with commodities
in like turbulent markets and stuff like that.
So I think there's been a bit of a weird washout
and opportunity rotation, I think,
because now all these assets are on chain.
So I don't know if you've got any further thoughts
on like how this just continues to expand.
I love like the different deploys on HIP3.
I think it's really, really interesting
how they're all just approaching it in different ways,
even though there are some conflict in markets.
And I think those will probably power out over time.
But is there anything interesting that you'd like to see
from an asset side come to Hyperliquid
that you guys would be interested in?
Yeah.
So your comments around the washout on tokens,
I fundamentally agree on that one what's
the point of holding an asset that becomes unproductive that there's no value accrual
mechanism and like they're you know the asset itself becomes basically it tanks and becomes
worthless so and we've seen that like how many projects have died like how many projects started
off at billion dollar valuations and are now barely scraping the hundred million dollar mark.
And I think that that's actually a really healthy mechanism so that, you know, there were some perverse incentives previously, but seeing how that.
You know, the kind of market aggregated towards it, I think it's quite metals. Metals buy, like the metal itself, unproductive in itself.
But you mine, let's say, gold.
You put that in cell phones.
You put that in wedding bands.
You put that in jewelry.
Like there is demand for that in such a way that you can create a market around that.
There are speculators that want to kind of basically take some bets on that.
There are producers that want to try and hedge out some of that exposure.
And that kind of makes a ton of sense for those kinds of assets, right, to create a market around that.
Now, we've seen that in the traditional world for hundreds of years at this point in time.
And the rules around that basically make a ton of sense.
And the rules around that basically make a ton of sense.
But the underlying thing that needed to be there
is that somebody wanted to have that asset
and there had to be a value ascribed to it.
And so some mechanism was creating the push or pull
of that specific asset.
And in most of those alts,
we didn't see too much of that pull, right? Like, what was the reason to pull people into these assets? There's only push factors there. And so I kind of see crypto assets going from these just like, you know, we're just creating a token for token sake, to teams that are really genuinely thinking about the value accrual of that asset more than just simply like a random token. So from Bitcoin's perspective, it's this digitized version of gold. There's
an underlying energy economy under that and the value of it is somewhat speculative from
that perspective, but there is a whole economy, a push and pull factor there. If you look at Ethereum, they've got their value accrual mechanism, the burn, you know, supply demand,
that's driven by ultimate like usage. And overall, that's its mechanism hype have their buybacks.
And so we're seeing this, like the tokens that are really doing well, have thought very deeply
about like, what's the underlying force that like pushes or pulls the market in a certain direction.
And, you know, traders, speculators and kind of even portfolio managers will look at that
and like then decide, OK, is this asset worth holding?
Is it not worth holding?
And then kind of figure it out from there.
So I don't necessarily think crypto assets in themselves are dead.
I just do want to see them evolve to basically understanding like why a market should form around them. And then, you know, kind of moving one step further
is then taking those traditional worlds and bringing them to crypto rails, I think is a
whole different kettle of fish as well. So we're looking at, I mean, you just look at all the
markets that are launching on Hyperliquid today or through all the HIP3 deployers. We've got traditional stocks.
We've got commodities.
And trading those with just 100,000 USDC, and I can go up and down,
figure out what I want to do, with the barrier to entry to be ridiculously low,
that's insane.
If I wanted to get exposure to any of those assets in a derivative format,
I would, I didn't think, I don't know of anyone that does that today. The other flip side of that
is, if I did want exposure to those assets, I'd have to go through some sort of prime broker.
And then they're paying, I'm paying for that payment for order flow mechanism. So, you know,
I'm getting kind of like my, I'm getting extracted even before I enter on this one.
So kind of just seeing that from that first principles approach,
let's take away all the middlemen, let's take away all the layers
and just give direct access to that exposure.
Cool. That I think is pretty cool.
That's where I see the feel of these open systems
continuing to grow for a long period of time.
Not only does that make, from my perspective, it really exciting to build in these ecosystems,
but it also kind of showcases the other side of it.
So like, you know, while we can bullpost about why this is all great, you know, 95%,
I don't know what the exact stat is, but like more traders lose money than they actually make money.
And so when we kind of think about what makes these open markets actually more sustainable for a long period of time, 10, 20 years from now,
are these layers that basically enable more sophisticated strategies to last on-chain?
that basically enable more sophisticated strategies
to last on-chain.
You know, there's a reason why I pay
to like a retirement annuity
and then there's an active manager or passive manager
that manages that funds on my behalf.
And most of the time they don't lose money,
most of the time.
And that's a service that can kind of be built
on top of that.
But then you pay for that service as well.
So figuring out when like these open access systems
become genuine like
abilities to accrue and grow wealth. I think that's also going to be something that we see
aggregate with, I would say in the next five years. Awesome. So how do you guys effectively
as a business, where's your fees? How do you guys make money? What does that side look like?
fees? How do you guys make money? What does that side look like?
Yeah, so we make money. So Hyperliquid have a fee schedule, you pay lower fees, the more volume you
push, and you pay even lower fees if you can stake a certain amount of hype to a wallet.
Given that our trusted execution environment trades using a subset of wallets, these wallets
crew the lowest amount of fees. And so those wallets that users will be trading up against, you know,
will be paying much lower fees than the user would.
And so we pass on some of that savings to users and we take a little bit of the
fee delta as our revenue stream.
So the way we like to think about it is we're giving users lower fees and we
make some money on top of that as well.
Nice. Perfect. So how has it been building on HyperCore and what are the avenues for HyperEVM
as well? I know I've heard really, really good things. I've heard it can be a little bit glunky
at times, feels very early ecosystem type vibes, what you were saying about early Ethereum.
But how do you see that playing out over time?
I think when we were speaking about HIP4 previously,
I think there's probably a lot of really good front-end deployments
that could happen on Hyper-EVM with regards to prediction markets.
You can probably see some really interesting innovations there.
But how has that been building across like as well as a dual ecosystem architecture yeah i mean there there's naturally going to be sharp edges it's a new ecosystem if
if you're not willing to kind of go through that you're not really willing to like see a good
opportunity and go for it like if it was easy it wouldn't be worth it um but i mean i i haven't
seen any ecosystem in the world like start off off, like as an amazing developer experience. It's kind of where I think developers cut their teeth. And realistically, you know, Uniswap was probably built in a time where they had to figure out, they didn't even know some of the things that they had to figure out.
small team, they can't get to everything at all times.
That being said, you know, seeing the quality of the apps that have come out,
seeing the quality of the builders there, and seeing, like, the types of apps
that are gaining success in Hyperliquid, it can be done.
So it's been quite interesting to see that grow.
The dual architecture component, I think, hasn't been fully realized at this point
in time.
So you've got HyperCore, which is what HyperLiquid was built
on. You've got the HyperEVM, and then you've got CoreWriter that's the communication layer between
those two. There's a lot of improvements on all fronts that the HyperLiquid team are going to be
working on. But a key premise is that a lot of those components are extremely composable. You can build a money market on Hyper EVM that can directly tie into a liquid order book.
So if I'm like, you know, an Aave fork or an Euler fork,
I don't necessarily have to worry about like getting my liquidation bots up and running day one.
I've really got a liquid order book that I can work with that's actively traded, a lot of volume going through there.
I've really got a liquid order book that I can work with that's actively traded.
A lot of volume going through there.
If I'm a swap market, I can do some sort of arbitrage between what's happening on the hyperliquid order book and what's happening on my curves,
and basically do some smart routing from that perspective.
So I think there's a lot of growth that still needs to happen on that.
growth that still needs to happen on that. I still think that the majority of use cases is very core
dominant and the emergence of EVM apps still needs some time to grow and kind of, you know, be
built out a little bit more. But I definitely think that having Hyper EVM be this Lego block
that you can kind of build the standard DeFi tools out there.
Basically, just kind of enable so much more.
Listing new tokens on Hyperliquid.
Can't do that without Hyper EVM.
If we looked at a really cool use case here, if I typically had to launch a token, if I'm
a new project launching a token, I'd have to pay the kind of centralized exchange tax.
We've all kind of seen what that looks like and feels like over the last six months.
But now I can just simply do that on Hyperliquid.
What I have to do is buy my ticker.
There's a ton of bridge services that can bring the asset to Hyper-EVM.
The bridging to core is seamless.
And I can go at like orders of magnitude, cheaper
cost, launch my own token on HyperCore and all I had to do is get one bridge and buy
a ticker.
And it can be that simple.
And so I think like these sorts of mechanisms have a huge amount of like growth over the
next two to three years yeah we're just persistently
seeing that that spot decks and perhaps decks volume start to eat into centralized counterparts
and slowly starting to get to the point where people are like i feel like this time even with
like what you're seeing on solana people came in through phantom wallet like this last cohort of
people like i don't think we'll get much retention because i think it was a lot of meme coiners but you're starting to see that like the
early signs that as opposed to someone downloading the coinbase or downloading like a finance like
i came in on coinbase i don't think that's going to be a primary mechanism of people
coming to trade now i feel like there's so many good like application particularly in like
hyper liquid ecosystem i know liquid's great um even phantom have got like their perps built in under the hood
like that will probably be the onboarding mechanism of choice for like future cohorts
that come on chain and stuff like that but um it would be quite cool to see you guys as a native
i suppose privacy provider through these kind of like applications that are
that next on board and wave and is that anything that you guys have thought of um getting in the
hands of like actual mobile first users as well because that felt like a big shift in the and how
people actually got on chain how people actually came to to start trading in this industry yeah of
course um it's a fairly simple like we've thought about it a ton on how do we make this happen, but to the user, it'll be a toggle. Like, I want this transaction to be private. And the UI has got the integration to Silhouette and it happens seamlessly, you know, very, like, basically like you would, you know, do on any sort of Web 2 type app, you know, I want this to be private. Okay, cool, private message.
Like on Telegram, you know, you have the option to set up a private chat.
And so that will be kind of a toggle as you're inputting the details of your trade
or the transaction that you want to do.
You can simply make that toggle.
Now, that user experience is quite simple, like, to think about.
But, like, all the things that need to happen beforehand is kind of currently what we're working on um and so you're you know if we do our job well in the near future your
favorite ui that you like to trade on hyperliquid will have a privacy feature built in and it'll be
powered by solowet awesome well chandler is there anything else i might have missed off you want to
kind of bring up the floor is kind of yours in case I've missed anything out.
What's next, I suppose, as well, just to kind of so we can wrap this up.
Yeah, what I'm quite excited about is being the cheapest venue.
That's the mission right now.
We're on the road to that.
Keep an eye on our socials for the updates there.
We'll also be one of the cheapest venues to swap between all stables.
So USDT to USDC to USDH.
We know that that's a very popular route
and we want to basically take your $100 million of AUM in stables.
You want to do some stuff on Hyperliquid
and you want to trade some of the more efficient markets there.
We'll kind of reduce the barrier to entry there,
which is probably the most exciting thing
that's going to be happening in the near future.
And then we'll also be announcing
our privacy perp component
that will kind of come out in the TBD on timelines,
but working quite hard.
Don't get dead.
Not in this industry.
No, no, no.
No, I know.
I'm just personally super excited about it.
I'm going to tell the world about it,
but we're cooking quite a lot on kind of enabling that fairly soon.
We've got it up and running internally in our system,
and I was playing around with it literally before this call.
So, yeah, excited for more folks to tell me what they love about it.
Awesome.
Well, thanks so much for coming on, mate.
And as I said, I feel like we hit a point of where there wasn't too many
completely new novel outside of the box ideas getting thrown around.
And then I've seen you guys and I've been chatting to Wayne
and chatting things like that for quite some time now.
So I'm really, really happy to see you guys actually go live.
And yeah, all the best to what's happening over the next 12 months.
And if you need anything, you know where we are.
But yeah, thanks again for coming on.
Thanks for having me, dude. This has been epic.
Awesome.
All right, Josh, Henry, take it away. I'm going to go to the next episode of the
