What is Hyperliquid's HIP-3? How it works and use cases

What is HIP-3?

Overview and how HIP-3 works

HIP-3, also known as Hyperliquid Improvement Proposal 3, or “Builder-Deployed Perpetuals”, is one of Hyperliquid’s major upgrades. Launched on mainnet on October 13, 2025, it enables the full decentralization of the process of creating new perp markets on Hyperliquid.

Previously, the creation of new markets was primarily managed by the Hyperliquid team, which selected assets under strict governance over technical parameters. Since the introduction of HIP-3, builders can now deploy their own perp DEX on HyperCore, Hyperliquid’s core infrastructure, while choosing the market structure, its parameters, and the front-end experience.

HIP-3 operates through a staking requirement of 500,000 HYPE. This amount, which can be slashed in the event of misconduct, serves as a guarantee of alignment between builders and Hyperliquid in order to preserve the quality of deployed markets as well as user and protocol security. That said, Hyperliquid’s documentation explicitly mentions the possibility that this threshold may be lowered over time as the infrastructure matures, which would logically broaden the pool of builders.

For each HIP-3 perp DEX, the first three assets can be deployed without needing to participate in an auction. Additional assets then go through a Dutch auction mechanism shared across the different HIP-3 perp DEXs, following a logic similar to Hyperliquid’s HIP-1 listings.

In practice, the market operator chooses all key parameters: the oracle, margin requirements, collateral asset, funding and liquidation parameters, the share of trading fees captured, as well as governance and market management. It is important to note that most HIP-3 markets are fully independent from Hyperliquid’s HLP, and the latter is under no obligation to intervene in them. On the less liquid HIP-3 markets, this translates into higher slippage and potentially wider spreads.

You can track live deployed markets, DEXs, open interest, volumes, categories, and 7-day charts from our dashboard of HIP-3 markets on Hyperliquid.

Strategic value for Hyperliquid

Hyperliquid’s value proposition rests on several pillars: optimized technical infrastructure, liquidity depth that rivals most centralized platforms, and a high-performance on-chain order book. The rollout of HIP-3 has strengthened Hyperliquid’s positioning as infrastructure for on-chain finance, and it is worth noting that this upgrade represents a core component of the “AWS of liquidity” thesis.

HIP-3’s model is designed to foster a network effect where each new market attracts new traders, strengthens liquidity depth, fuels demand for the HYPE token through staking and deployment requirements, and grows both Hyperliquid’s activity and revenue.

This approach is radically different from centralized platforms, where listing a new asset relies on opaque criteria and often extractive conditions for projects. HIP-3 gives builders access to Hyperliquid’s technology and opens the door to creating a wide range of new markets such as equities, U.S. indices, commodities, FX, structured products, and more.

To give an idea of HIP-3 adoption, open interest on these markets grew from around $790 million in January 2026 to over $1.4 billion in March, and even surpassed $3 billion in early June.

This momentum has been driven by the ability to trade 24/7 on assets historically reserved for traditional exchanges, but also by the introduction of “Growth Mode” in November 2025. In practice, this fully optional tool allows deployers to reduce fees on HIP-3 markets by 90% in order to accelerate growth when they choose to.

On their best days, HIP-3 markets have accounted for nearly 48% of Hyperliquid’s total volume, and tokenized assets (equities and commodities) now occupy 23 of the top 30 pairs on the platform by open interest, largely through the leading HIP-3 builder, TradeXYZ.

TradeXYZ

Overview of TradeXYZ

TradeXYZ is the perpetual futures arm of Unit, the leading tokenization protocol in the Hyperliquid ecosystem. It was the very first HIP-3 deployment on mainnet, launched simultaneously with the activation of the upgrade. Today, TradeXYZ overwhelmingly dominates this vertical and alone accounts for more than 90% of the total open interest across all HIP-3 markets.

In practice, TradeXYZ allows users to trade a wide range of perps with a particular focus on indices, equities, ETFs, and commodities. The platform truly gained traction in late February 2026 by offering access to assets traditionally reserved for stock markets, but without the associated constraints, meaning no KYC and, most importantly, 24/7 trading.

This value proposition proved especially relevant in the context of tensions between the United States, Israel, and Iran. A large share of the announcements and decisions tied to the conflict took place over weekends, when traditional markets were closed. In that context, TradeXYZ emerged both as an exposure tool for traders and as a price discovery source closely monitored by many institutional players.

For example, over the weekend of February 28, the platform recorded a HIP-3 activity record with nearly $720 million in volume, driven mainly by oil perp contracts as crude prices surged.

On the oracle side, TradeXYZ uses a hybrid approach. During U.S. market hours, prices rely on external feeds. But when markets close, the relevant oracle switches to a continuously calculated exponential moving average before reintegrating spot prices from traditional markets when they reopen. This process ensures price continuity, particularly to avoid liquidations caused by sudden valuation gaps.

In mid-March 2026, TradeXYZ made headlines by securing an official license from S&P Dow Jones Indices to operate the first-ever perp on the historic S&P500. This agreement matters because it represents the first explicit institutional validation of an on-chain derivative. The symbolism is particularly strong, as it marks the first time a historic pillar of traditional finance has agreed to work with an on-chain infrastructure that aims precisely to compete with it.

In May 2026, TradeXYZ expanded its offering with the introduction of “Pre-IPO Perpetuals”, also known as IPOP. In practice, these markets allow traders to gain exposure to shares of companies that are set to go public. Here, contract pricing relies on a Hyperp mechanism, where the market itself serves as the price reference.

It is important to understand that these contracts do not represent shares, IPO allocations, or tokenized stocks. As such, they confer no ownership, voting, or dividend rights. If the company goes public before a deadline, the contract automatically converts into a standard perp referenced to the market price.

This distinction became especially important when several companies, including Anthropic and OpenAI, denounced multiple tokenized stock initiatives that they viewed as “unauthorized stock sales.” Because of their structure, TradeXYZ’s IPOP contracts, and more broadly all contracts operating on HIP-3, did not fall into that category.

TradeXYZ’s first IPOP market focused on Cerebras (CBRS), the AI chipmaker whose Nasdaq listing was expected in mid-May 2026. The outcome validated the on-chain price discovery thesis in practice, as one hour before Nasdaq opened, TradeXYZ’s Cerebras perp was trading around $354, only 1.1% above the stock’s opening price.

For perspective, over the same period, Cerebras shares were trading at around $187 on Hiive, one of the leading traditional secondary platforms. That was less than half the price shown by TradeXYZ, which proved significantly closer to reality than the conventional secondary market, despite the latter existing for much longer.

Building on this first success, TradeXYZ launched a second IPOP market focused on SpaceX on May 18, 2026. It quickly surpassed $50 million in open interest, even before the company officially filed its S-1 with the SEC two days later.

TradeXYZ perfectly illustrates the possibilities unlocked by HIP-3. By specializing in traditional finance assets while leveraging Hyperliquid’s infrastructure, the platform has established itself as one of the market’s leading perp DEXs by volume, behind Hyperliquid itself and Aster.

Kinetiq

Overview of Kinetiq

Kinetiq is the native liquid staking protocol of the Hyperliquid ecosystem. It allows users to transform staked HYPE into kHYPE, a liquid staking token that generates yield and can be used in on-chain finance applications on HyperEVM.

Thanks to the integration of CoreWriter, Kinetiq offers a non-custodial service. In other words, HYPE deposited by users is immediately transferred to HyperCore and staked across multiple validators. Moreover, allocation between validators is active through a scoring algorithm called StakeHub.

Launched in July 2025, Kinetiq quickly became one of the leading HyperEVM protocols by TVL.

→ To learn more about Kinetiq, find our full overview below:

Kinetiq and HIP-3

At the end of July 2025, Kinetiq announced “Launch,” an initiative presented as the first “exchange-as-a-service” (EaaS). Put simply, it is infrastructure specifically designed to help teams deploy new perp markets on Hyperliquid via HIP-3.

Thanks to Kinetiq’s liquid staking architecture, Launch allows teams to create crowdfunding pools to raise the 500,000 HYPE required to launch builder-deployed markets. Launched on mainnet in June 2026, Kinetiq’s Launch solution provides several services:

• Technical infrastructure to easily deploy and manage markets through HIP-3.
• A crowdfunding mechanism to raise the amount of HYPE tokens required for staking.
• A risk management and fund protection system for kHYPE holders.
• An automated revenue-sharing system to distribute part of the fees generated by the market to kHYPE holders who participated in the crowdfunding.

The first deployer to adopt Launch was Borsa, on June 16, 2026.

At the same time, Kinetiq launched “Markets” in January 2026, its own HIP-3-based perp DEX. Participants can gain exposure through kmHYPE, a yield-bearing LST representing staked HYPE used to support the market, with part of the deployer’s revenue redistributed to its holders.

So far, the DEX has seen only limited success, with $6 million in open interest and average daily volume ranging between $10 million and $20 million.

Liminal

Overview of Liminal

Liminal is a yield farming protocol built on Hyperliquid and accessible through HyperEVM. Liminal’s thesis is fairly simple: between spot trading, perps, HIP-3 and 4, and more, there is now a wide range of yield sources on Hyperliquid. Through its different products, Liminal aims to become the aggregation and distribution layer for these various yields within the HyperEVM ecosystem and beyond.

In practice, users deposit USDC, which the protocol uses to deploy strategies combining spot exposure with an equivalent-sized short position on the corresponding perp market. This setup is designed to neutralize exposure to the underlying asset’s price in order to primarily capture the revenues generated by derivatives markets.

In practice, yield mainly comes from funding fees paid by Hyperliquid traders. Depending on the strategies deployed, it can also be supplemented by staking rewards or revenues from lending protocols.

The entire process is automated by Liminal, which handles deposits, opening and closing positions, rebalancing, and associated risk management. The protocol directly leverages Hyperliquid’s infrastructure and liquidity in order to benefit from fast execution and limited slippage.

The protocol applies a simple fee structure, including performance fees and transaction fees depending on the strategies used.

HIP-3 at the core of Liminal

The arrival of HIP-3 marked an important milestone for Liminal, far beyond simply automating delta-neutral strategies. Since the strategies available on the protocol are directly tied to markets deployed on Hyperliquid, HIP-3 significantly expands the universe of assets around which Liminal can build.

At first, HIP-3 enabled the development of markets beyond crypto-native assets, notably tokenized equities, commodities, FX, indices, and other real-world assets. By combining tokenized spot assets available on the spot market with associated perp markets via HIP-3, Liminal offers fully on-chain managed delta-neutral strategies on these new asset classes.

Later on, HIP-3 also opened the door to markets supporting new collateral assets, such as Ethena’s USDe, BTC, or ETH, rather than only USDC. This created new opportunities for Liminal:

• USDe-collateralized markets can offer users dual yield, both through funding and through the stablecoin’s native yield.
• New strategies, for example where BTC is held spot while a short position is opened on the BTC-margined BTC-PERP market. Since both assets are the same, this reduces depeg and volatility risk between the two.

In this context, Liminal introduced xTokens ($xHYPE, $xBTC, $xETH) at the end of 2025, tokens that tokenize users’ delta-neutral positions and turn them into composable DeFi primitives. In practice, xTokens allow users to use their delta-neutral positions as collateral in lending protocols or AMMs, both on HyperEVM and other EVM networks. In other words, they transform Hyperliquid’s native yield into a liquid and portable asset within on-chain finance.

In May 2026, Liminal further expanded its offering by launching limUSD, a “USD expression” of Hyperliquid yield. More specifically, this is a dollar-denominated asset whose price starts at $1 and gradually increases as the underlying strategies generate yield.

The product functions as an automated allocator. It distributes capital across different yield sources (funding, lending, staking, and eventually options or TradFi strategies) while continuously adapting to market conditions, ultimately resulting in a single, composable asset.

In summary, HIP-3 gives Hyperliquid the ability to create new perp markets, tokenized asset issuers can provide spot exposure, and Liminal positions itself as the yield engine to access delta-neutral strategies across a broader asset universe.

HIP-3’s regulatory challenges

As HIP-3 markets expanded into equities, commodities, and pre-IPOs, Hyperliquid gradually moved into territory historically reserved for traditional finance players. This shift in the platform’s center of gravity naturally ended up attracting the attention of regulators, but also that of established exchange operators, who are understandably reluctant to see a new competitor emerge.

In the United States, the current context paradoxically appears more favorable than it did just a few months ago. As a reminder, at the time of writing, the SEC has been working for several months on an “innovation exemption” aimed at tokenized assets, a project that would create an experimental framework allowing certain platforms to offer on-chain financial products without immediately having to comply with the full set of constraints imposed on traditional intermediaries.

If such an approach were to materialize, it would represent a major shift for the entire sector and could indirectly benefit players like Hyperliquid, which currently excludes U.S. users to avoid regulatory constraints.

That said, the exact contours of this future framework remain unclear, and the key question is whether or not it would imply KYC. Regardless, Hyperliquid and Lighter, which operate in the same segment, both welcomed the upcoming introduction of this new regulatory framework, which suggests a certain level of confidence for what comes next.

At the same time, the CME Group and the Intercontinental Exchange (ICE), parent company of the NYSE, have warned U.S. authorities about the risks posed by continuously accessible markets operating outside traditional regulatory frameworks. Among other examples, both groups are particularly concerned about the potential consequences for price formation in strategic commodities such as oil, especially when traditional markets are closed.

But what makes this case truly interesting is that traditional finance incumbents are now forced to acknowledge Hyperliquid’s rise. For instance, during a conference hosted by Bernstein in May 2026, ICE CEO Jeffrey Sprecher openly stated that Hyperliquid was “bigger than Nasdaq,” described its teams as “very, very smart,” and revealed that he had met them several times. In short, we are increasingly witnessing a kind of duel between two worlds that have every reason to oppose each other, but also to respect one another.

In Europe, the landscape is, as often, no more favorable to the development of this type of platform. It is worth recalling that in May 2026, the UK’s Financial Conduct Authority (FCA) added Hyperliquid to its list of unauthorized entities.

At its core, these tensions are probably a reflection of HIP-3’s very success. As long as Hyperliquid-developed markets remained marginal, they mainly sparked curiosity. Now, as they begin capturing part of the activity traditionally reserved for established financial infrastructure, they have become both a regulatory and competitive issue in their own right. For now, however, the winds remain favorable for the platform, especially in the United States.

Conclusion on HIP-3

By making the deployment of new perpetual markets more open through HIP-3, Hyperliquid has done more than simply expand its catalog. It has become a true infrastructure for on-chain finance, capable of hosting markets across asset classes that were previously inaccessible or constrained by the limitations of traditional exchange infrastructure.

The numbers speak for themselves, with over $3 billion in open interest, tens of billions in monthly volume, and up to nearly half of Hyperliquid’s total trading volume on its best days.

For users, this also paves the way for a multiplication of use cases. Whether through Markets by Kinetiq, Liminal’s yield architecture, or the democratization of pre-IPO markets driven by TradeXYZ, HIP-3 enables the emergence of investment and yield opportunities that simply did not exist before within the ecosystem.

This new model nonetheless raises fundamental challenges, notably regarding oracle quality and robustness, smart contract security, liquidity fragmentation, which is already visible on the HIP-3 markets of smaller platforms, and the lack of regulatory clarity.

In June 2026, at the time of writing, HIP-3 also presents a certain paradox. More than 90% of total open interest across all HIP-3 markets is now concentrated in TradeXYZ, which tempers the narrative of a truly distributed ecosystem spread across a multitude of actors. In other words, while HIP-3 remains entirely permissionless, its adoption is, for now, objectively dominated by a single deployer.

In that sense, Hyperliquid will likely need to work on solving this “problem.” This could, for example, involve reducing the 500,000 HYPE stake required to deploy a HIP-3 DEX, a possibility explicitly mentioned in Hyperliquid’s documentation.

That said, the main obstacle does not appear to be the stake amount itself. Liquidity depth, oracle quality, the ability to attract market makers, and user trust remain the real barriers to entry for newer deployers. This is precisely what explains TradeXYZ’s overwhelming dominance, because beyond infrastructure, building a liquid market is above all an execution, distribution, and network effect challenge.

→ Continue reading with our overview of HIP-4, Hyperliquid’s latest upgrade introducing prediction markets and options: