Hyperliquid founder Jeff talks about three sources of inspiration for entrepreneurship.

Author: TPBN, Translated by: Wu Says Blockchain

This issue features an interview with Jeff Yan, the founder of Hyperliquid, on the TPBN program. Jeff shared his experience of transitioning from a trader to an entrepreneur, as well as the opportunity to rethink the decentralized spirit of the crypto industry after the FTX collapse. Jeff discussed the birth process of Hyperliquid, its technological concepts, and development vision: dedicated to creating a completely decentralized, on-chain native financial system, becoming the “underlying network” for all future financial infrastructure.

He explored in depth why to reject traditional venture capital, how to draw on Satoshi Nakamoto's spirit to maintain protocol neutrality, and the unique growth path of Hyperliquid at the brand and community level. The interview also covered the mechanisms and innovative significance of perpetual contracts, team building principles, and the brand philosophy driven by decentralized communities. The entire conversation not only revealed Hyperliquid's technical thinking but also showcased the balance DeFi entrepreneurs strike between idealism and pragmatism.

The Birth and Vision of Hyperliquid

John: Welcome Jeff to the show, thank you for taking the time. Most of our audience is familiar with technology, but may know little about cryptocurrencies. Could you briefly introduce yourself, your background, and your business? After that, we can dive deeper into some different directions.

Jeff: Of course, it might be more appropriate to start with my story. In May 2022, we were a small team focused on cryptocurrency trading, primarily in DeFi and SCI-Fi. At that time, we realized we wanted to do something in the DeFi space, as DeFi products were still in a very early stage. Basically, all the products were not very good, and we, as traders, felt we could do better. Later, the collapse of FTX became the motivation for us to fully commit and build Hyperliquid. At that moment, we suddenly realized that discussions around decentralization and self-custody in the crypto space had been written about in the past, but it seemed no one took them too seriously. But suddenly, these issues became very important. Everyone began to realize that “not your keys, not your coins.” We had deviated from the original spirit of Satoshi Nakamoto and Bitcoin. So, we believe the world is ready to trade cryptocurrencies in a decentralized and self-custodied way.

Back to the present, Hyperliquid has now become the primary on-chain price discovery venue, a fully on-chain financial system. Our goal has always been to build a platform that can ultimately support all financial activities. While today it primarily serves as an exchange, it is actually much more than just an exchange. Most notably, it is a trading platform that supports on-chain perpetual contracts, generating over one billion dollars in revenue annually, and in many ways, it has pioneered the way.

Construction of Decentralized Protocols and Thoughts on Venture Capital

John: It's interesting to hear you say that. Most founders would say “we”, but clearly you see yourself more as the guardian of this project, responsible for building and releasing it. Do you see yourself this way? Is this your way of thinking about the project?

Jeff: Yes, we have indeed drawn a lot of inspiration from Satoshi Nakamoto. I think the founder of Bitcoin is very unique, whether it's him or them, it's uncertain who it is, but if it's Satoshi Nakamoto, Bitcoin is indeed the first in many ways. Its uniqueness lies in the fact that it is not a traditional product; as you said, it is not a top-down company, but rather a product. I believe that the DeFi and cryptocurrency industry has also drawn a lot of inspiration from Bitcoin, after all, everything originates from Bitcoin, and there will never be another major project like Bitcoin. Many cryptocurrency projects still operate in a top-down manner; for example, centralized exchanges are a good example. Although they are good business models, their core operations do not align with the intrinsic spirit of the crypto world. Therefore, Hyperliquid is based on this thinking, striving to establish a truly neutral protocol that ultimately becomes the infrastructure for upgrading all financial systems.

John: So you don't have venture capital? Can you explain this in detail? Is it because your capital efficiency is high and you don't need financing, or do you have a specific philosophy that defines the role of venture capital in the crypto industry?

Jeff: This can indeed be traced back to Satoshi Nakamoto. If Bitcoin had undergone Series A funding in its early days, today's Bitcoin might not be the Bitcoin we know. Even the best investors in the world, with the most powerful investment desks, cannot change this fact. So I believe that venture capital actually provides a very important service to the world; they effectively allocate capital and help many projects to develop. Although they are not always perfect, overall, I think their contributions outweigh the negative impacts.

But in this case, I believe that when you are building a neutral protocol, there may be some important elements involving the flow of funds and transactions on top of it. At this time, neutrality is more important than anything else. I think there is a path dependency issue in this situation. If insiders dominate from the beginning, no matter how decentralized the supply, ideas, talent, and other resources are, it is impossible to avoid that “big bang” moment, which will leave a mark on the history of the protocol. Therefore, for any project being built, this way of early capital entry will have an impact. I believe that financing and rapid expansion are feasible strategies, but when you are building a project that needs to maintain long-term neutrality, the influence of history is very important. We would rather take our time to ensure that everything can be done correctly.

Venture Capital, Market Competition, and the Original Intention of Hyperliquid

John: I want to continue discussing this issue. You can't stop venture capital from establishing positions in the public market, right? Suppose a major investment institution says, “We want 20% equity, and we will purchase tokens in the public market to establish positions.” Its performance would be like any other asset in our portfolio. Has this situation occurred before? Is it irrational to do so? Are there legal structural limitations that prevent them from doing this?

Jeff: You can make the same argument for Bitcoin. For example, many venture capitalists are major holders of Bitcoin. I know of several venture capitalists who got involved with Bitcoin very early on. So the issue is not who owns it, but its origins. It’s more of a principled issue. If you can’t claim on one hand that this platform is neutral and anyone can come build on it, and on the other hand say, “These people had the opportunity to establish this platform first,” then it’s not perfect. Although from a practical standpoint, any project that emerged after Bitcoin needs to launch in a competitive market, and innovation must be funded, we still want to get as close as possible to Satoshi Nakamoto's ideals, which is still worth pursuing.

Jordi: So, did you know what you wanted to do from the beginning and directly execute that plan, or did you iterate through the process until today to achieve the results you have now?

Jeff: I think we weren't completely clear about what we wanted to do at first. We just wanted to do something we could do well, and even doing one thing well was very difficult. At the beginning, we focused on finding a big opportunity, and we found a field in cryptocurrency that might really need a completely permissionless platform, and perpetual contract trading was an obvious choice. At that time, this type of trading might have accounted for over 50% of the revenue in the crypto market. That's where we started from. Importantly, we were unwilling to compromise on the principles of how it would operate from the very beginning.

Which companies have particularly inspired Hyperliquid?

Jordi: You learned a lot from FTX, avoided those mistakes, and were inspired by Satoshi Nakamoto. So, are there any off-chain companies that particularly inspired you?

Jeff: There are many. In fact, every large company, especially tech companies, has been very inspiring to me. I grew up in the Bay Area, so it's hard not to be influenced by it. I think Amazon is a huge source of inspiration, especially their approach from first principles, being both driven and very pragmatic. I believe it was Bezos, and perhaps others, who realized that they had built most of the content of the internet stack, and if these technologies were only used for retail, wouldn't that be a waste? Why not abstract it a bit and create appropriate APIs so that anyone could leverage the powerful infrastructure they built? That's the story of the birth of AWS and cloud computing, and I think it's a remarkable story.

This also reminds me of Hyperliquid, which was originally an optimized Blockchain specifically designed for conducting on-chain perpetual contract trading, as there was no other infrastructure capable of doing this at the time. Later, we gradually realized that many other areas in finance, and ultimately the entire financial system, could benefit from this high-performance decentralized ledger. So it can be seen as a way to provide infrastructure for liquidity.

John: What do you think about Bezos's background at D.E. Shaw, where he was a trader? This might have influenced Amazon's shape to some extent, and how does that compare to Google, a company that originated from academic research? What were you doing before this? Do you think you entered the entrepreneurial path with a trader's mindset?

Jeff: Yes, I think so. Although I don't fully understand what kind of trades Bezos is doing, at least the approach similar to automated trading is very much like doing physics. You make a lot of approximations because you can't be 100% accurate, as the market is inherently filled with randomness, and the noise is greater than the signal, which is precisely the beauty of the market. It's like filtering signals from noise. It's completely different from the supervised learning setup in AI, which has almost unlimited data and very high quality.

I feel that the process of building Hyperliquid has a similar feeling. In fact, we do not rely on a lot of data to drive decisions, but rather on intuition. We just think very seriously about what the world should look like and try our best to make it happen. Of course, if obvious bad things arise, we will adapt and adjust, but we do not deliberately create data, especially when the data is unreasonable. Therefore, methods like A/B testing are something we almost never use.

Introduction to the Concept and Advantages of Perpetual Contracts

John: You have mentioned perpetual contracts (perps) several times. Could you provide a clear definition for our audience and explain what perpetual contracts are? Why are they so appealing?

Jeff: Well, if you want to know what people are trading today, you can actually trade a specific asset, like Amazon stock. If you want some leverage, which means making more money with less, there are two ways to do it. The first is to trade futures, which typically trade indices like the S&P 500. The basic concept of futures is that two parties agree through a contract, similar to contracts for going long and short. If the price of the S&P 500 changes by $1, the long party makes $20, while the short party loses $20. Futures contracts are usually settled through some underlying asset, for example, you are trading the price of the S&P 500 for the next three months or delivering a cow at expiration.

John: I understand that if it's a trade like corn futures, if I let the contract expire, I would have to physically deliver all the corn in the end. But most Wall Street traders have long known how to avoid this situation. You've also heard of some strange cases, like oil prices turning negative, resulting in someone buying oil at a negative price and ultimately having to take all the oil. Of course, in a purely financial context, this is clearly not the expected outcome. So, do perpetual contracts unlock higher-frequency trading, higher leverage, or a different type of trader, more quantitatively or algorithmically driven trading? Who are the customers of these products? Why are they interested in such products?

Jeff: Yes, the reason they are interested is mainly because, as you said, there are actually many issues with futures trading, such as the potential for delivery problems. Sometimes you need to deliver, but most traders avoid delivery by continuously rolling their positions.

Taking Robinhood as an example, the popularity of futures is far less than that of its options trading. For retail users, the appeal of options is significant because it is similar to buying a lottery ticket; you can purchase a ticket and feel very good, as the maximum loss is limited. However, the pricing of options is very complex, especially for retail users, particularly those using applications that do not provide sufficient information. You may be “cutting leeks” because the structure of options is very complicated. It looks simple, with only the strike price and expiration date, but in reality, it is difficult to price.

Perpetual contracts combine futures and options into a single asset. If you only want to trade the price of the underlying asset, desire leverage, and do not want to worry about expiration, this is the significance of perpetual contracts.

Taking Bitcoin as an example, almost every exchange has a very liquid Bitcoin perpetual contract, which is the only liquid asset that never expires. All price discovery happens on these perpetual contracts, with billions of dollars traded within these Bitcoin contracts. It actually leads the price of the underlying Bitcoin asset. This is very useful for professional traders because they can trade it, and it is the most liquid Bitcoin trading tool. For retail users, it provides a clear and understandable price, making it hard to get scammed, as there is only one market, and it is very liquid with very small bid-ask spreads. Therefore, for many participants, this is a win-win situation.

Of course, there will always be some people who prefer options or are more fond of traditional futures contracts, but overall, perpetual contracts are undoubtedly more attractive.

Network Expansion Bottlenecks and Decentralized Security

John: So, what are the biggest bottlenecks for network expansion like this? If the scale is very large, I'm more concerned about whether there are some token economics structures that encourage people to build entire data centers? Are there currently ASIC miners being built to run this network? I know Bitcoin was initially mined using personal computers, then evolved into data centers, and ultimately ASIC miners were developed in pursuit of the cheapest energy because the algorithm is very stable. So, how does a network like Hyperliquid scale over time? What stage of expansion are you currently in?

Jeff: Yes, the situation with Bitcoin is a bit special; it might be the only mainstream network still using Proof of Work (PoW). The ASIC miners you mentioned, all those crazy things like mining Bitcoin with volcanoes, are actually part of the consensus mechanism. Today, all other high-performance blockchains (at least the ones I know of) use Proof of Stake (PoS), which is a more energy-efficient way. Its security is based on an economic model rather than computational power. So, on Hyperliquid, there isn't much innovation in how the network maintains its security. This question is relatively simple; basically, everyone stakes local tokens. For Hyperliquid, this token is called “Hype.” People stake it to show they endorse the network. Usually, this is similar to how you vote for representatives in an election; essentially, you are choosing the validators you trust. Therefore, if the validator does something bad, the tokens staked with them will be at risk.

From an economic perspective, the system ensures network security through certain mathematical models. If the majority of the stakes in the network are honest, then the system can operate normally. If you want to acquire enough stakes to do bad things (like double spending — spending the same dollar twice), you need to control a large amount of stakes. In simple terms, the security of Hyperliquid does not rely on creating crazy ASIC miners, but rather on economic models.

Brand and Community: The Power of Decentralized Marketing

Jordi: How important is brand to the success of Hyperliquid? Because I feel that you haven't focused on brand building like traditional companies do, such as hiring advertising agencies and developing strategic plans. I believe many of your competitors engage in these practices, yet you have one of the strongest brands in the world. Just by entering “Hyperliquid” anywhere globally and publishing it, you can generate immense attention and excitement, which is truly remarkable. But I'm curious, how much of a role does this brand effect play in your success compared to scale and other product decisions?

Jeff: Yes, I feel we are very lucky; the power of the community is very strong. I don't know how to describe this community; it might be tight-knit, intense, but also very inspiring. Our team is actually very introverted, and we are quite small, with only 11 people. We don't even have a dedicated marketing person. If we did, I think we might not do well either.

In fact, it is not just about the product itself, but more about the product and the community, the entire ecosystem. It is composed of many different parts. For example, some people just post some tweets on Twitter, which I think is really cool, and I really like it. On the other hand, some people build products on the platform, and I believe this is also a form of viral marketing. They build products on the protocol, which create synergies with Hyperliquid itself, offering something new or expanding in certain ways. Most of the financial pillars on Hyperliquid are built by community members, and we hope this trend continues. Anything that can be built by the community will be completed by the community. I think this decentralized marketing approach is a reflection of decentralization, not only on a technical level but also on a social level, which is very important to us. This is the brand of Hyperliquid — if one has to interpret it negatively, some may feel that we are somewhat indifferent, or that we are too focused on technology at the expense of marketing. But from this perspective, the ultimate result is something stronger, which is that people feel a sense of ownership in this network, a feeling that Web2 companies cannot achieve.

Competition and Focus: Hyperliquid's Strategic Advantages

Jordi: This is also why those companies that want to seize your market share are often large financial enterprises with strong capital, but they seem to be struggling with real competition. Is it because there is a large community that all hopes for Hyperliquid to win? How do you view this advantage? Besides that, what other reasons make your reverse positioning make competition difficult?

Jeff: To be honest, we haven't really focused much on the daily competition. I feel like there are too many things to do right now. You're right, many companies indeed want to do things similar to Hyperliquid or want to capture market share, but we don't think too much about that. There are too many things to do. If I can succeed, it would mean doing something that no one in the world has done before. I think, many times, we can get a bit anxious because of competitors trying to undermine the established advantages of Hyperliquid, but it also makes us overlook the bigger picture. After all, we still have a long way to go to reach our true goals.

Hyperliquid's Vision: The Future of Finance and the Rise of DeFi

Jordi: How great is the potential of Hyperliquid? What are your ambitions?

Jeff: I see it as something that, if all goes well, will ultimately encompass the entire financial sector. You could say it is the coordination of finance, which is the coordination of human behavior, not just finance itself.

Jordi: Are you basically saying that if you don't cover 100% of the total addressable market (TAM) of the global financial market, it will still have a huge impact?

Jeff: Yes, you ask how big it can get? I think that's correct, but I don't believe it will change everything as directly as replacing finance. My thoughts are more like the impact of the internet on finance, or the rise of electronic trading in the early 2000s. This has been over 20 years in the making, and it's time to update the tech stack. I believe DeFi is that technological update.

Quick Q&A Session

The Future of Hyperliquid and Market Expansion

Jordi: I have a quick Q&A session. I asked some friends in the crypto space what questions they would like to ask you. I will ask a few questions quickly, and I hope you can answer them briefly, as some questions are quite specific.

First, when will we see the first centralized exchange shut down their perpetual contract trading and only run a front end on Hyperliquid? When will they surrender?

Jeff: Within a year.

How to view the US market?

Jordi: What are your views on the market structure in the United States? Under what circumstances would you consider bringing Hyperliquid to the US?

Jeff: That's a good question. We believe that the United States is a very important market; obviously, it is a global financial center, and the US dollar is the reserve currency of capital. We really hope, of course, that US regulations can develop and truly embrace DeFi. I think steps have already been taken in that direction. I can't comment specifically, but I feel like I'm a bit out of the loop on this because changes are happening very quickly. To be honest, I think there are a lot of very smart people working on this. I've heard of some initiatives like setting up exemptions for decentralized front ends, and I think those are really cool.

Why do some centralized exchanges say Hyperliquid does not want to go public?

Jordi: Why do some centralized exchanges say Hyperliquid does not want to be listed?

Jeff: Have they said such things? I don't know. I'm not really concerned about this issue. It's not that we want anything; I think we are more focused on continuous building. Some exchanges have already listed Hype, which I think is cool. And some other exchanges might feel it's not aligned with their priorities, and I think that's cool too. We actually don't deal much with these institutions.

Are there plans to support native multi-asset margin?

Jordi: Are there plans to support native multi-asset margin?

Jeff: I think this will definitely happen, but I don't fully know the specific implementation path. The concept of native multi-asset margin has not yet been clearly defined, but I believe it will occur. If we are to accommodate all finance, we should definitely be able to trade using different types of collateral.

When will the perpetual contracts for commodities and US stocks be launched?

Jordi: When will perpetual contracts for commodities and US stocks be launched?

Jeff: There are already some perpetual contracts, such as the perpetual contract for gold. As for when other commodity and stock perpetual contracts will be launched, I expect it to be next year, as HIP 3 will unlock many features, essentially allowing anyone to deploy their own perpetual contracts.

What is the most commonly misunderstood aspect of Hyperliquid?

Jordi: What do you think is the most commonly misunderstood thing about Hyperliquid today?

Jeff: There are many misunderstandings. The most common misunderstanding is that many people think Hyperliquid is just a perpetual contract exchange or that it is a centralized entity. In fact, it is not; it is a Blockchain network, and the validating nodes are permissionless. Currently, there are 24 validating nodes, and anyone can join. The top 24 nodes ranked by staking amount will form the validation set. Each validating node executes all transactions, including all orders. This means that the underlying structure of Hyperliquid is actually decentralized, which is often overlooked. People tend to focus more on its products, which may be a good thing because it means the technology is abstracted for users.

Does Jeff miss the Bay Area?

Jordi: Do you miss the Bay Area? What do you miss?

Jeff: I miss Chick-fil-A (laughs). Actually, I miss the mountains more. Although it’s not the mountains in the Bay Area, Singapore is very flat. It’s a great place to live, with a good environment suitable for work, but I really miss natural scenery like Yosemite.

John: When I was in Singapore, many people said that Singapore lacks a strong local culture, perhaps because there is no underground cultural atmosphere like punk culture. Do you think you have found a good community in Singapore? Do you like the culture here? Do you like the direction this country is heading?

Jeff: To be honest, I'm too busy right now to delve into culture. Singapore is a great place, safe, modern, with delicious food, and the air conditioning is great. Overall, it's quite suitable for living. Honestly, at this stage of my career, I don't pay much attention to culture. If I were in New York right now, I probably wouldn't care much about these things.

What are the standards for team building and talent recruitment?

Jeff: To be honest, we are not particularly good at recruiting. I have to say, we have been hiring all the time, constantly looking for talent. I know many people listening to this podcast are very smart. If anyone is interested in systems engineering and high-performance computing, and wants to build infrastructure for the future of finance, I sincerely believe this is the best workplace, and you are very welcome to join our team.

Our team is very small, only 11 people, and the requirements are very high. I believe our standards may be among the highest in the industry. I think we are one of the most efficient engineering teams.

But we are striving to expand, and there are indeed many things to do. We maintain very high standards in many areas, including capability and integrity, which we value highly. If there are audience members who meet these standards, we warmly welcome you to join us.

Are there job positions that support remote work?

Jeff: For new members joining, we currently only support face-to-face work. Initially, we supported remote work, but we found that this approach did not align well with our work style.

What do you think about the 996 work culture?

Jeff: I believe the most important thing is the quality of work. I think everyone's work intensity is different, and people feel fatigued at different times, which is also very important. Personally, I work more than the 996 schedule, but that's because I feel like I have no limits; I personally feel there are no restrictions, but everyone's situation is different.