E159: Jeff Yan, Hyperliquid CEO: Why Crypto Must Fix Finance Before AI Takes Over

31:00I just think there's like a, there's a line to draw. And I think the line is at personal privacy. I think everything should be very transparent on how the protocol works. Every dollar needs to be accounted for. Everything in the system that belongs to a person needs to actually belong to that person. I think that level of transparency is non-negotiable in a transparent financial system. When you don't have that, you have all these things that happen with centralized exchanges. but like what any contributor chooses to do with their tokens it's their tokens it's none of my business you guys have a pretty interesting way to handle FUD and criticism at Hyperliquid, you ignore and stay quiet that's not true we used to do that my instincts on this PR stuff I've noticed have not always been naturally good and i think i'm happy to defer to people who are much more well-versed in this stuff but one thing we've been consciously trying to do is when there's fud and my instinct is to say well this is clearly false like that's the truth will come to light like i've learned that that is not always the right mentality and to be practical about it we do we do address address things that come up that are false and need to be corrected.

32:27How do you personally get affected by FUD, honestly?

32:35It depends on the category of FUD, I guess. I guess it's been a relatively volatile, in the bad direction, I would say last half year in crypto and so i think i think 1010 was a good example where there was a lot of damage caused and because hyperliquid was the only transparent venue people kind of like latched onto it and i think that i took that very you know like i felt very important like i was basically on the um on a mission i think that that week at least to basically educate people on this on a topic which is very at the same time they you know they take it very it's a very personal thing because people like you know could have lost a lot of money but i think many competitors from all different angles were sort of mispainting hyperliquid it's been mispainting its virtues and what it did well with with negativity in a way to like deflect from real problems on other platforms i think that to me feels like it's like very obvious that they know what they're doing and to me that i you know can feel a bit angry about it but also it's it just drives me to like you know get better at you know explaining clearly to users like why hyperliquid is built the way it is and why transparency you know for example centralized exchanges will say hey like look look at this list that some analytic site pushed like hyperliquid had more liquidations than us and then we were it feels so stupid because if you just look at their docs which no one does it's like oh like we only push the first liquidation in every second like no explanation why and well of course if you add those numbers out versus hyperliquid where you can see every order every cancel and every liquidation everything that happens is on chain of course you add up you add up two different numbers you get you get different you know you see like hyperliquids total liquidations is more than whatever it is like one percent of another exchange's liquidations um and so that kind of thing is just it's literally just misinformation and when that's when the when some of the biggest voices with the most followers in the space do push that kind of narrative i think it's you know we maybe have a smaller reach and smaller voices but I think we need to be very loud and um before it kind of gets out of hand.

35:02There's a lot of love from people in the ecosystem but there's also criticism and third some pretty smart people in crypto have openly criticized Hyperliquid for buying back the tokens every day and said that you guys should stop the buybacks when the price is high, buy back more when the price is low. What's the main problem with this? well the main problem is that hyperliquid does not have a discretionary buyback program and i think that is that is something that people have run with as a story but it isn't an analogy at best uh hyperliquid is a protocol it has it's a rules-based protocol so there is in the same way that ethereum burns its priority fees you know it used to go to the miners and now it's burned.

35:53In that same way, Hyperliquid burns its protocol fees. You would not ask Ethereum developers to say, hey, when ETH's price is high, really Vitalik should take all the priority fees. He could probably spend it in a better way than Bernie. That's not a question that anyone asks Ethereum. And so I think there's a fundamental misunderstanding of the mechanism here. And in particular, I think the reason here that many exchanges, mostly like relatively more centralized operations, whether they're sort of CeFi, DeFi hybrids or like purely centralized exchanges, they will have tokens and they will buy their tokens back.

36:33And that is like maybe a fair piece of feedback to them. But on Hyperliquid, the fees are converted in an automated way to hype and then burn. And this conversion itself, this strategy is also not discretionary. It is in fact baked into the execution logic of the chain itself. So in the same way that when you place an on-chain TWOP, there is no one sitting there deciding when to split your order, when to split out the next slice of your TWOP and send it to the book. That is part of the execution, that's part of the state machine itself. In the same way the execution by which the fees are converted to hype and then burned is purely on-chain logic.

37:19Why is it so important that there is no discretionary element in what Hyperliquid does? Because Hyperliquid is not a company. I think that is another kind of misunderstanding. So when I say we and I say Hyperliquid Labs, we're a group of people. We're, like you said, we're very small. We build. We're small because we build a small, we are responsible for building a small but critical component of the larger Hyperliquid ecosystem. yeah so hyperliquid is not a hyperliquid itself is not like a thing that has an analogy in the traditional finance world and people like to people don't like to learn new concepts they like to fit something into something they already understand and when you try to do that you can there are some parallels but there are other things that are just you know they just don't fit and so the vision at least is that the financial system should be on-chain.

38:19I think it's great that it is producing so much value and sort of driving so much value to the native token. I think that is a positive thing, but I think it's important to remember that this is not the same way that any company drives value to its shareholders. That is one structure. Hyperliquid is a neutral platform on which finance is built. and I think in that way it is not a perfect analogy either but maybe looking at it from another angle it looks a lot more like like the internet like what the internet did for information Hyperliquid as an ecosystem as a network as a protocol is trying to do for finance last time we were on we discussed your vision of becoming the Amazon web services of liquidity let's discuss what happened since that time let's start with the Hyper EVM What is the Hyper-EVM?

39:16Explain simply, no jargon. So the Hyper-EVM itself is simply a way for people to deploy contracts that they are used to deploying on chains such as Ethereum. They can port it over the Hyper-Liquid and it will work. So it is, at a very basic level, it is a blank slate on which smart contracts can execute. So at surface level, it looks a lot just like what Ethereum, all the innovation Ethereum had. It's basically taking that and allowing that to live on the hyperliquid L1 state. Thank you to our friends at Paradex for supporting this show. Paradex is the leading perpetual decentralized exchange with zero fees, deep liquidity, and privacy.

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40:40what's your honest take on the success of the hyper evm so far i think the i think that's kind of a tricky question i think well one is i think it's misunderstood that it has not succeeded so i'm happy to give many examples of things that's done well but maybe maybe i'll also say that if you drill down one layer deeper than the basic explanation the hyper evm is actually a way for these smart contracts for the first time to tap into native primitives that are built on chain and i think that is maybe something which was a bit you know hasn't been caught up i think i think this needs to be kind of packaged a bit more as a digestible narrative and and i think when people evaluate the evm they should be evaluating it from this angle that it is a sort of a portal into hyperliquid which is not which doesn't have an analogy with other evm chains i think people can realize that the Hyper-EVM is not really that comparable to other fully self-contained EVM ecosystems.

42:01So in a nutshell, people don't understand yet this thing fully. I think some people understand it, but I think it hasn't really seeped into the public narrative about it. So maybe one good example is like the, like USCC for a long time, a criticism was that, you know, Circle hasn't integrated. And I think it's because it's very hard to integrate with HyperCore. It's like a completely native implementation of primitives, such as ledgers of balances. And I think it's very hard for any company that has existing infrastructure to interface with general purpose chains to adopt something like that. but but the EVM is like this kind of allows a way for native USCC to be minted you know fully through fully within circles like first class network you know hub and spoke kind of network of supported minting environments like you can burn on any chain mint on any other chain like Hyper EVM is one of those chains and I think that requires a very deep understanding of the point of the whole thing.

43:23And so I think there are definitely people who understand that. And I think the thing is these integrations actually are, when done right, are so seamless that the user doesn't realize that this is only made possible because of this unique interaction between HyperCore and HyperEVM. and so in some sense it's harder to kind of get the narrative out there that like a hyper EVM is this like unique thing people just say like well I don't hear about any of these like these EVM success stories like you said like you know like what's going on it's like well the success stories are kind of like well one is I think most of them are yet to be built but two is like the ones that are built well I think feel native another thing that you guys implemented last year that might not have been necessarily easy to understand for most people, but we're seeing concrete results now with this hype HIP3, the Hyperliquid Improvement Proposal 3.

44:30Permissionless perps. What does that mean? Explain simply. As simple as possible. Yeah. The simple idea is that perps are one of the great innovations to come out of crypto they actually i think they were academic in academic literature before crypto but it was it was really bitmex that made them that demonstrated the practical application of perps as a means a more efficient means for price discovery and concentrating liquidity in one instrument that never expires and the idea of HIP3 is simple it is it's that there is nothing unique about crypto when it comes to perps so there should be perps on most liquid instruments for which there are futures and options and not saying that perps are a strict improvement over anything but that there should be perps because people should have the users should have the option to use perps and i still think today that if perps were widely adopted in traditional finance across many asset classes i think a large percentage of the flow would migrate to perps because perps are the allow those users to best express their views on the views that they want to express and hip3 is basically just a simply it's just like letting anyone deploy perps on Hyperliquid but behind that sentence there is a lot of work because again like this is kind of never been built so before HIP3 so it was I think there were many open questions like can a protocol really really sort of seed over Oracle such important things as Oracle updates in real time to a permissionless deployer system and there are just many many things to think about there deeply intertwining this is like permissionless nature with how purpose and margining and things work you have all of a sudden have all these different edge cases and thinking through all those and just building something relatively robust around that and also just you know having the builders do the hard work of actually integrating it and putting in the time and the effort to learn something completely new for the first time and so commit to building on it i think that just all of that takes time and so like you said it was it was probably i think most people probably thought it just like wouldn't work and honestly we couldn't say for sure that it was going to be a success either but it felt like it felt like you know it should work this way and hyperliquid's in a unique place where there's such a strong concentration of talent building and users who are bought into the ecosystem who want to support and bootstrap new network effects.

47:38So it felt like if it was going to succeed, it should succeed on Hyperliquid. Can you explain the difference between what you guys are doing and what everyone else is doing? I don't know about everyone else, but every sort of non-crypto effort at Perps that I've seen is an exchange that runs a perps operation, basically saying, well, now we'll get feeds in these other assets and we'll just offer them in the same way that we offer crypto perps. So I think you see that across many centralized exchanges and you see that across various decentralized exchanges as well. Why does it matter so much? What you guys are doing versus what these other players are doing?

48:24why should people care? Well, end users should not care about how it works necessarily. But I think if you really want to move the financial system on chain, then you need deployers who are domain experts at what they do, doing that. So,

48:50like if you look at traditional finance, there are many different countries, right? And each country has its own setup for exchanges. And there are like many different idiosyncrasies. And then you drill down further, there are different asset classes. These asset classes are traded on different exchanges, different rules. And then there are different interfaces to these different asset classes within all the different countries. And you just keep subdividing. And you find there's actually a lot of specialization in finance. and I do think some of that is some of that probably is due to the inherent inefficiencies in the legacy financial system and I do think crypto saw some of that but I also think a lot of it is just because finance is just too big for one team to build and and you can structure it as I think like probably many of many of the biggest financial companies will adopt this kind of still centralized sort of one place for all of finance unifying the user's financial life but they will try to accomplish that through a more top-down approach where whether through acquisitions or partnerships or things like that or just literally building something in-house they will try to they will try to house all of finance in that way but I think that's a very brittle setup and I think when things blow up they often they blow up because there's too much power in the hands of one entity and it's tough because that model does just move faster and it inherently has less fragmentation and maybe initially offers a better user experience but I think users should ultimately ultimately users will use the financial system that gives them sovereignty over their own finances and is globally accessible and has liquidity or whatever other features they need and I guess I just I strongly believe that to build such a system that can really serve all the users globally plugged into one system that system needs to be decentralized on many axes one of which is ownership, which is a big principle of Hyperliquid, but also decentralized in terms of who is building the core primitives that users interact with.

51:32In one sentence, why is it so important to bring all of finance on chain? It's important because

51:42if you don't, then the financial system is going to fall behind what like the pace of technological development. It's not going to keep up basically. The world is changing too quickly. I think the legacy financial system is not going to be adequate to serve users' needs in a rapidly developing world. Why is the hyperliquid approach better?

52:13It's not really the hyperliquid approach. I think hyperliquid is really just espousing the values that DeFi has always had. And we are just, as a community, trying to execute on them in a way that we think has a greater chance of actually succeeding and achieving mass adoption. And so these values are that the financial system should not be controlled by corporations. They should be a neutral layer like the internet. You mentioned the example of AWS. I think that's another example. AWS is controlled by a corporation, but in some sense, it's very neutral. Nobody says, hey, why are you building on AWS?

52:58That's such an opinionated choice. It is just infrastructure. And so the financial system should have those properties because it should not be a... You should not have to jump through hoops and be citizens of specific well-to-do countries just to access the financial system. And the financial system should be programmable in a very deep sense. Like not like a system that's not programmable with programmable bells and whistles packed onto it, which is more of the fintech approach, but it should be built programmably from the ground up. Like the primitives should be code that smart contracts, humans, agents can all interact with.

53:46If the approach is better, the numbers should be better. Can you give us some key numbers that show that Hyperliquid is doing perpetual markets the right way? So I'm still going to say that it is early. I think the future is never certain. And I think the numbers today don't necessarily reflect whether long-term it is going to be successful or not. That being said, I do think the numbers justify somewhat already the power of a permissionless protocol that allows deployers to really express, creatively express their abilities and sort of execute on their visions. So, I mean, one key example that's very topical is that silver, along with other metals, has really taken the sort of retail and general mindshare among trading folks.

54:52I think it's a mix of institutional retail, I guess. And something like doing 10 Sigma moves many days in a row, it's pretty wild. And I think the HIP3 markets on Hyperliquid, predominantly TradeXYZ, which was the first deployer, have, I believe, reached approximately 2 % of global volume on silver. Which is a small number, but if you think about it in the grand scheme of things, it's not that small of a number. and just given the fact that these HIP3 markets really launched a few months ago I think it's quite astonishing and I mean I think credit where credit's due this has nothing to do with the core team we are focused on building the primitives a lot of work goes in HIP3 but how that primitive, how that liquidity infrastructure is used is entirely up to the builders who choose to use it And so I think it really is a testament to the quality of builders who are choosing Hyperliquid because it's the only platform that lets them accomplish what they're setting out to build.

56:15Tell me a bit more about what you said before. You said the number is starting to be interesting, but it's still early and therefore things might not go into that direction. What makes you say that? I think it's just very dangerous to assume that because you have a belief about something that and there's like some evidence that it's correct that that it's unassailable I think the I think the world just changes too quickly and I think it's important to have unassailable principles like the financial system should be accessible to everyone in the world and finance and information should be sort of on the same level of sort of yeah, should be treated similarly in these open systems.

57:12These principles I don't think change, but I think anything concrete, it's very dangerous to fixate on. And I think that's a big motivation behind what core primitives are built into the blockchain. I think a lot of what goes into that is a bunch of builders and users from different angles saying that, hey, I want to do this thing and it doesn't really work today. and when a bunch of different people say that and and you notice like some pattern between what they're saying there's like some intersection and like that intersection is like is like some nugget of like functionality that doesn't exist then I think I think you can have a lot more confidence that this kind of primitive is the right thing to build to build into the into a native implementation And when you're very, very selective about what the protocol does versus like what is just done on the EVM general purpose, I think you can get a much more elegant system that is resilient to what specific businesses, you know, like you basically create something where builders can adapt to what markets actually are doing without being too, you know, basically like, like moving the opinionated decisions out of the primitives themselves.

58:53So I think this HIP, all the HIP3s, all the HIPs, including HIP3, have this kind of backstory. We talked about spot training briefly before and that it was not built by the core team. It was built by a team called Unit. What has the Unit team demonstrated in 2025 the spot trading on Hyperliquid? There was actually, there were a few very important launches in 2025 where Hyperliquid was the leading source of spot price discovery. And I think this was the first time that this happened on a decentralized venue. So I think the, I think XPL was one of them. And, I think that basically the idea behind, in some sense, spot trading is the closest to Satoshi's original peer-to-peer vision.

59:57Because really, when you're trading spot, you are essentially transferring funds on a ledger. Like someone is transferring the quote asset to another person, and that same person is transferring the base asset to the first person. And so the protocol, the order book, the on-chain order book, all of that is just a mechanism to intermediate these transfers. And so if you were to ask Satoshi, how should Bitcoin be traded? I'm very confident that they would have said that it should be done in a fully on-chain way. And that maybe Bitcoin is not necessarily the right network to do it, but it should be done peer-to-peer.

1:00:41And, you know, Hyperliquid does a lot of stuff. And this is like very core to the DNA. But I think with spot trading, you can really see that when all the pieces really are there, that users do prefer to transact in a way that is coherent with crypto itself. Like they are trading spot crypto usually because they're believers in the vision of crypto and DeFi. And to be able to finally, after so many years, transact in a way without sacrificing UX that is still consistent with the technological underpinnings of the asset you're holding itself feels a bit like going full circle. And I think it's very cool to see.

1:01:32there is some videos circulating on X about baby Jeff or younger Jeff in 2018 launching prediction markets at the same time as Calchi but it didn't work out why? there are many reasons the best answer is probably just that it like we the people building it we're not we weren't ready and it was the idea was really cool i think we i think we had gotten many things right on the infrastructure side off-chain matching at that time was the right way to go on-chain settlement but there's a lot more that goes into building something successful than simply having the right ideas and the ideas are actually a very very small part of it so So I think that it was not obvious to me, at least at that time, that anyone actually wanted to use on-chain products.

1:02:36Towards the end of, you know, when the idea first started, it was everyone was super happy and prices were up. And then towards the end of that year, prices were way down. And I think we've seen this many times, time and time again in crypto, but if it's your first time seeing it, and you talk to users and you can't, literally no one will try your product, I think it can be very disheartening. And so, yeah, I think. But still, learned a lot about what it takes to build. And I think in some sense, the idea kind of lives on. And I'm really glad to see all these other companies who started around the same time.

1:03:11I think they did have what it takes and are continuing to... They're finally starting to see the fruits of their years of hard work and sort of general mass adoption. I think that's super cool to see. I'm really happy for all of them. Eight years later, you're back with prediction markets, more precisely outcome markets. What's the difference? Yeah, so this goes back to the point earlier where I think primitives on hyperliquid are meant to be as small and self-contained as possible, to be simple and performant, but also as broadly useful as possible. And so the thinking behind, so basically outcome markets are what I think will be a core way that people express nonlinear beliefs on hyperliquid.

1:04:07So yeah, so spot and perps are very different, right? Spot is the fundamental asset that you hold. And when you trade it, you are transferring things on the ledger. Like that is a primitive that obviously should exist on any financial system. No controversy about that. Perps, more controversy, but people are starting to realize that this is an important enough of an idea that really kind of ought to exist generally for price discovery. And so I think HIP3 was an early crystallization of that idea and a lot of effort there. But if you look at spot and perps, while they're very different on many, many aspects, the perps allow leverage, more capital efficiency, spot represents tokenization of an actual asset.

1:04:51Spot and perps are similar in the sense that you can only express them in your beliefs. Like if you hold perps, no matter whether you're at 1x or 100x leverage, you're still, like when the price moves one unit, you make N units of profit or loss. And for a wide variety of use cases, that is what the user wants. And often people who want leverage to trade perps actually achieve a leverage because perps are not available through things like options, which are not actually doing what they want to do. But on the flip side, I think there are people who actually do want convexity, like nonlinear outcomes.

1:05:24For example, they want something that is either worth one or zero dollars, depending on something that happens. Or they want something that is bounded. So like you might hold some Bitcoin and you might say, I'm generally pretty happy holding this, but if it drops below some price, then I would like to be protected to the downside. These are nonlinear beliefs and you cannot express these beliefs through any combination of spot and perps. And so this is where outcome markets come in. And once you have a nonlinear payout structure that outcomes give you, and just like in case people haven't deduced already, the outcome markets are basically, they're basically fully collateralized contracts where both sides put up some capital and then the thing kind of settles somewhere in between.

1:06:17So there was some exchange of collateral settlement, and it could be binary and it could be continuous. So for example, options, prediction markets. Prediction markets, yes. Do you have another few examples? They are very concrete that people can think of, even though it's not completely extensive. Yeah, basically anything where you don't want there to be liquidation risk. so people who want to like people want to express an opinion where they roughly put up some capital and check back later and they like kind of have more or less and yeah there's no complicated thing about like oh like depending on how the price moved I might have been liquidated or like something more complicated like also like funding is a complicated mechanism with perps I think perps are just like a relatively advanced feature that I think will continue to drive a lot of prices going.

1:07:19But like you said, these more, yeah, these basically different applications. I think options and prediction markets are kind of the obvious ones that come to my mind. I think they're also like derivatives of these ideas that are very popular these days. Like, can we have markets that aggregate opinions in a way where there's no objective outcome, but rather the opinions are aggregated towards some goal, like maybe like bubbling up the important issues, right? Like, can we use markets to kind of solve these ideas? I think these all fit naturally into this outcome framework.

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1:08:57You often talk about housing all of finance. What does that mean?

1:09:05it basically means that the financial system should not be fragmented that's the all it should you should not have to plug into a bank account and then like you know but if you want to if you want to buy something you need to like transfer the funds to this other account where you then will maybe end other accounts appearing what you want to buy i think like composability like having a user's financial life in one place is a huge unlock and then but that is not unique to crypto the the crypto part of housing all the finance is that the the platform on which people do this should also not be sort of controlled by a like a central corporation or something of that sort there should be many teams building and when someone builds something that should automatically plug in and compose with other teams building other things and these kind of network effects really make it a financial system.

1:10:11So there's always this trade off between fragmentation and efficiency and so I guess like fragmentation fragmentation but composability is like one end of the spectrum and then like inefficient but like sort of more limited system that's like centrally operated is on the other end of the spectrum and there's kind of like always this, they feel like there's this like constant tension but I think done right you can kind of get the prose of both sides and that's yeah that kind of that drives a lot of the design philosophy behind what we do you told me the other day that Hyperliquid is not a crypto company.

1:10:56It's a finance company using crypto rails. I mean, company might not be the right word, right? Can you explain? Well, I think it is a... I think we genuinely believe in DeFi's values. So in that sense, I think it is a... It is like crypto, DeFi are in our DNA. but i don't think we identify with being for example like a building a crypto the best crypto exchange or something like that um that's yeah that's just not really the vision i think the So I think finance is finance. And crypto has the potential to upgrade the rails on which people conduct their financial lives. And so that is the goal to which we are building.

1:11:58And so if Hyperliquid as an ecosystem is to succeed, then some people might say, hey, this is great. Like crypto was vindicated. and I think that's a fine interpretation but then other people will say well there's this new thing that happened and they like use some ideas but ultimately it's like it's like a thing of its own and I think that's also an okay interpretation Hyperliquid has 11 core team members but also has an ecosystem of some of the smartest people and builders out there let's talk about a few of them Hyperliquid has a stablecoin called USDH why? Yeah, basically about half a year or a year ago, there was a big stablecoin interest broadly across multiple blockchains.

1:12:52The Genius Act passed. There was general great excitement about stablecoins being the way that the institutions get first introduced to DeFi rails. And Hyperliquid has a protocolized concept called an alliance stablecoin. And this came after much back and forth with many of the different ecosystem participants. And ultimately, the protocol settled on this way by which yield can flow from the treasuries to a mixture of the protocol. and the deployer of the stablecoin. And USCH is run by Native Markets. They're a team of a mix of well-established institutional founders as well as some very strong ecosystem community members.

1:13:56And so I think they're a really good group of people and excited to see them build out the premier aligned stablecoin on HyperLiquid. And these stablecoins basically, they're a very symbiotic relationship with the builders and apps and users that use the stablecoin. For example, the protocol earns yield and in that way, the holders of Hype are aligned with the stablecoin. And then the traders who use the stablecoin also pay lower fees. And this is all encoded at the protocol level, so there's no, it's a purely objective system. But we think it's a great synergy and it's going to unlock an entirely new set of use cases that way.

1:14:39What is Kinetic and why does it matter for the hyperliquid ecosystem? Kinetic is the biggest liquid staking token. And they highlight one of the key parts of the hyper-EVM vision, which is that there are these mechanisms. We talked earlier about how HyperEVM sort of has windows into HyperCore and can use it as tools for the smart contracts. And this allows liquid staking to be built in a completely on-chain way. So usually staking is built at a layer deeper than the application layer. So the premier liquid staking token, like staked ETH on Ethereum, is tokenized, but there's an off-chain component to the tokenization.

1:15:26On Hyperliquid, the staking itself, these actions and sort of the read and the write operations required for staking can be conducted via precompiles and the core writer primitives that allow a smart contract to tokenize a pool of staked hype in the same way that vaults are tokenized on EVMs usually. but also do the staking and unstaking and accounting entirely closed loop in that system. And so it's very cool because it's the first fully on-chain mechanism by which liquid staking tokens can be created. And so it eliminates all sort of bridging and trust risk that way. Why is what HyperLend is building important for HyperLiquid?

1:16:17So HyperLend is the premier borrow lending protocol on the EVM. they they've had a they've had a quite a spike in tvl since launch i think it's a function of just you know constant iteration and hard work on their part and currently it is fully on the evm so the you know suppliers supply collateral and borrowers come and borrow and there's a there's basically supply and demand marketplace for that determines the the uh rate basically that the that the borrowers pay the suppliers. And this is a common idea, but I think it will become very important when portfolio margin on HyperCore leaves the free office stage because I guess we never talked about portfolio margin.

1:17:06But the basic idea there is that traders want to be able to use any asset that they own or certainly any of their very liquid assets that they own, such as Bitcoin, as collateral. And they want to be able to trade anything with that, not just a specific market. So basically reduce fragmentation and also increase the set of assets which help onboard to purpose trading or other types of spot trading. And so for portfolio margin to work in a DeFi setting, the only safe way to really build it and the kind of reason that it hasn't been built at scale with great success in a DeFi setting is that it requires is a robust borrow land backdrop to it.

1:17:51Because on a centralized venue, when an exchange allows a user to use portfolio margin, they have the power to mint balances out of nothing. So a user can put Bitcoin up and the exchange can just extend them a free line of credit to trade. Stablecoin denominated perps, for example. And this is a, it's usually okay because the exchange just knows that because there's collateral sitting there, the fake balance can ultimately be covered by the collateral. But in the Black Swan events, I think this is what leads to bad debt on the platform. And I think to give the exchanges credit, it's an extremely complicated problem and they've managed it generally pretty well.

1:18:32I think these exchanges are serious businesses and they take these things seriously. And the portfolio margin is a very important feature they offer the users. But this solution is simply not acceptable for a DeFi platform. like a user because if a DeFi platform were to follow this kind of model then the protocol is basically taking risk like anyone who has any funds on the protocol sort of has solvency risk for portfolio margin collateral gone bad and that undermines the core principles of the system which is that every dollar is accounted for or in some sense if you don't you don't want to you don't want to say if there's a dollar on hyperliquid that dollar actually you know has all these other like asterisks and like um that's just not not a not a trade-off to be made in defi and so when there's portfolio margin hyperliquid is a novel system where the lending markets fully back the bar the borrowing and lending mechanisms of a lending market fully back the portfolio margin operations.

1:19:37And this is similar to HIP3. This is a much more challenging way to build the same feature that users may not even realize is happening behind the scenes, but ultimately is a more robust and scalable way to responsibly have a protocol allow this kind of alternative collateral. And any spike in demand is not met with increased platform risk, but rather met with a brief increase in borrow rates, which is then met with, you know, just met with efficient markets, suppliers coming in and capturing that and basically competing the spread back, competing the yield rates back down to the market rates.

1:20:20And so I see HyperLend and other amending protocols plugging into this in a very, very symbiotic way. So the basically portfolio marginal hypercore will drive demand out to the evm and the evm will be the hyper evm will be the tokenization mechanism by which borrow land is um achieves uh distribution outside of hypercore i saw you say on a panel last year we have no competition i also lost i think many people did are you in denial or is there something that most people still don't understand about Hyperliquid? Well, I think the question was probably like who is exactly competing with you or something like that.

1:21:05I think my point was not that. I think there are many competitors in some sense because Hyperliquid is something unique at the intersection of many things. There are just so many players in finance. I think many people view Hyperliquid as competitors where I don't think it's actually correct to do so. I think there's actually a lot of synergy between many different protocols. And I think slowly you see this happening where different protocols don't add hyperlipro as a chain. And like just the other day, I hear from different builders saying, hey, like we launched this thing, like we're multi-chain, like, but we launched this structured product on hype.

1:21:36And like, we're really shocked because this is like the number one product that we've launched in the past year or something like that. So like these stories, I think will continue to unfold. And so I really think it is, there's a general sense of like competition when in fact there should be cooperation and competition. But it's not delusional. I also do just think that Hyperliquid is building something that no one else is really precisely trying to build. And I think part of that is just because what Hyperliquid is building is largely a function of where the ecosystem is and how it's gotten to this point today.

1:22:13It hasn't all been fun and games, right? I've been working on this for more than three years. I think many of the community members have been here for just as long from day one. And there have been many, many ups and downs. And I think the trajectory of any ecosystem is ultimately path dependent. And I think the fact that Hyperliquid got here with a no insider principle from day one. And this general principle of fairness and welcoming for builders and users. And I think just like, no matter how much it grows, I hope we hold on to that because I think that is ultimately what drives Hyperliquid to build something that is not really being attempted by anyone else.

1:22:58I don't see when people launch perps, like you said, no one says like, hey, we trust the community. We trust builders to come in and execute just as well. And there'll be fragmentation. There'll be competition between them. But ultimately, what's going to come out of that is a more robust system. I think that story's unfolded many, many times. Hyperliquid, and I think will continue unfolding. And each time there will be a doubt about whether the community can come together and build something better than a centralized alternative. But we're just going to keep fighting that fight. And I think that is the unique thing that we're building.

1:23:34I can't point to an exact competitor on that front. You talk a lot about integrity and fairness. Fairness is cheap to tweet, but expensive to implement. where did it cost you the most? It probably cost us in many ways that I don't because I don't ever it's not a decision to me ever where it's like should we do the thing that's fair or the thing that's not fair and let's do a cost-benefit now so that's not how we think and so I don't know concretely what the trade-off is but I don't doubt that there is like if you are willing to compromise on integrity and fairness and you cut the corners then you can grow a lot faster I think that's just undeniable.

1:24:15And you see it and like sometimes like you see, you saw it with FTX. I think they hyperscaled and they, maybe if they weren't caught, they would have gotten away with it all. So I think for some people it is a, it is a cost benefit analysis, but I think for us, at least it's not, it's not that like the cost could be infinite in some sense. and we still, the principle itself is unalienable. What do you want Hyperliquid to be remembered for? I don't want it to be remembered for anything. I just want it to be used forever. I think the best. I think Bitcoin will hopefully have this state where it becomes a store of value that is forever in the hands of, this is not in the hands of any one power that controls it.

1:25:11And I think, I'm not sure anything else in crypto is going to stand the test of time, but I hope Hyperliquid becomes the internet for money. Many founders and investors are burnt out. Crypto markets have been pretty disappointing for a lot of people. Not much has come out in terms of innovation from the space in many years. So I figured some words from one of the most admired and respected builders in the space could help keep some talent in the space and give us all some hope. Why should people stay in crypto when there is an AI brain drain?

1:25:56Yeah, well, my answer to that question is at least from Hyperliquid's perspective. we have one very important job as a species and it's there's a ticking time bomb because ai is going to come and basically supplant human intelligence in the near future and i think it's it's actually not as close as people think i think ai cannot write good code yet uh the code the code that is very important should not be should not be written by ai maybe i'm a bit of a holdout there But it's going to happen. And before that happens, I think before AI hits a escape velocity and is self-improving and basically renders human intelligence obsolete, I think there needs to be a financial system to which they can plug in.

1:26:45because once intelligence is largely machine-driven, the necessarily value transfer will largely be machine-driven as well. And there is no way that AI will plug into the existing financial system, which is, I'm talking about the legacy one. It's just not possible. Like, it's not, like, code and value are not on the same, like, information and value, and therefore code and value are not on the same playing field the legacy financial system. And so one very important job for us as humans is to build a financial system in which humans have a stake and that is programmable and accessible. Because if not, then humans will be cut out of the financial system that replaces it.

1:27:33And Hyperliquid is, in my opinion, our best shot. And as an extension, all builders in crypto. Hyperliquid is not built by one team. I think it really should be viewed as a collective effort to build a family of primitives, companies, etc. that interact and when the AI overlords come, they will adopt it because it's been built well and is autonomous and fair and open and permissionless. Thank you so much, Jeff, for doing this. thank you for giving hope to the entire industry by doing it the right way and setting the standards for an entire new crypto generation of builders a standard that was truly needed I and probably the entire crypto space can't wait to see what Hyperliquid does next well there's still a lot to do so thanks for having me on

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