E95: Hyperliquid Founder - How to Win in Crypto (by Building for Users, Not VCs)

31:02high-frequency traders and tradfire people, which is what you wear, right? You might be seen as guys who come into crypto just to make money, which is totally fine, which is what you did. Why do you care about crypto so much?

31:21I don't think there's... Yeah, it's basically what I said with the previous answer. I think it's coming in... I think there's nothing wrong with coming in to make money. I think by and large the nice thing about markets is that they they let a bunch of selfish people or entities come together act selfishly but within the rules of the system and create value for everyone else in the system I mean that's kind of economics in a nutshell as well and so I think there's nothing wrong with that and yeah that's that's what that's how we came in. That's how a lot of people got introduced to crypto. It's a very raw form of converting your quantitative talent into some financial edge.

32:13But yeah, I think just being in this space, you know, probably for years, I had no idea what was, what these things even were. Like I knew how Bitcoin and Ethereum roughly worked, but all these, all these other tickers, like they were just, they were just numbers on a screen. but then at some point you start you start to just become more invested in this thing that you've been interacting with on a day-to-day basis and yeah and kind of get invested in it like you you start to meet people in the space I think once you know people like you start hearing about real problems and it becomes a lot more personal than when you're just looking at numbers behind a screen yeah like I actually didn't know about crypto Twitter for a super long time.

32:58Like I just didn't know about, oh, I knew about Twitter, but I just like had never bothered to make an account. And you actually don't tweet much. I checked. Yeah, but now I know about Twitter. So I like read it sometimes. Yeah, I don't tweet much. Don't do many podcasts. I think it's just, I think it's like very diminishing returns there. I think some founders probably over index on the value of like the follower count or I don't really know what metrics they're optimizing. It means like, hey man, I'm doing my thing. like all this stuff is cool but I don't really care about it there's one podcast a quarter isn't that what I said yeah you said once every now and then right quarter yeah I think now I think it's good because if you do too many podcasts you're saying the same thing on like multiple podcasts that feels like a waste of time absolutely what is hyperliquid if you had to explain it to your mother never tried that's a good idea she never asked if I were to explain to my mother like throughout the course of human history there's been a trend towards individualism and every iteration towards individualism human rights etc.

34:09has been positive by and large in terms of results however you measure results GDP whatever happiness and I think this is just kind of another step in that direction which is like going from I need to protect my farm with weapons to like, oh, I can put my money in a bank to Hyperliquid, which is I control my money, it's cryptographically secured. That's just crypto broadly. But Hyperliquid is building it in a way that people can use this system it meets your expectations of Web2 finance or legacy finance and does more. It's cheap. You can transfer it. It's instantly settled. I can exchange value with the liquidity, with liquidity that rivals that on a centralized exchange.

35:05Rivals, definitely rivals that on, you know, a traditional crypto exchange. I can integrate this with apps that other people are building in a trustless way. borrow money against my collateral, do whatever I want to do with my money, basically. And that would be the pitch to my mom. So, you know, right now, if you want to transfer money to another country, it's a very, very painful process. Even in the best case, you got to get on the phone and call someone or they just rip you off on the exchange rate. The whole thing is owned by these people whose job it is to make as much money as they can owning the system that they've been privileged to inherit so let's get rid of that you launched Hyperliquid and did so without taking a single cent as you already mentioned before right you tweeted I the Hyperliquid DF team does not profit from increased activity as it does not collect trading fees on the contrary it is entirely self-funded with exponentially increasing burn there is not a single private investor more than 25 million dollar in revenue has gone back to the community another project could have easily pocketed some or all of these profits and this was like half a year ago yeah exactly it was a couple of months ago yeah why are you doing this

36:45it's so contrary to popular belief it's not a it's not it's not literally like a charity it it's but it's not a business either in the conventional sense so

37:00it's not but it's not that revolutionary I think it's the only time it's really been done in in DeFi for sure maybe in crypto but but if you look at Amazon it's Jeff Bezos famously didn't profit, didn't take profits when he could have for at least a decade. And it's just long-term thinking. For Amazon, it was, you know, it's like your margin is my opportunity, right? And it was growing revenue over, at all costs and growing market share at all costs. And so there's that mindset for Hyperliquid. But there's more to it for Hyperliquid in that I think crypto is just so extractive as an industry that it's like at every, crypto at every level is just a machine to extract value from retail.

38:04And like by and large. And so like we're trying very much to make a statement almost. It's like, this is not what's happening here. And because if you look at these very extractive schemes and they get more and more clever. Do you want to give some example? Yeah, so like the whole process where money is extracted, maybe an example, and then maybe explain how did we get here when crypto ethos is supposed to be very different? Yeah, so examples, initially it's very obvious, right? Like this is before my time, but in 2017, ICO, initial ICO craze, it's, let's just, let's just put out some hype and people buy the token and we have a bunch of token and we dump it and then we, we leave, right?

38:54Like very, very simple scam. And in some sense, that's almost like more excusable because no trickery there. People bought it. Like you didn't, maybe you didn't know them anything. obviously that people quickly wisened up to that and securities laws etc like formed around this it was just like a very it was very blatant fraud then people I think the like VC thing is an evolution of the same thing and in a way that is much harder to pin down from a like it's hard to say that any specific person is doing something wrong But a project will, you know, instead of just doing an ICO, because that's very illegal, they will go raise multiple rounds from VCs, get a bunch of people on Twitter talking about it, you know, under the table deals, like basically get as many influential people in at a low price as you can.

39:54and then get as many suckers as you can at a launch on all the big centralized exchanges to come and buy in at this high price. But it's the same thing. It plays out the same way, right? Like dump it and there's no obligation to continue building after that. And yeah, like no one really, no one's going to jail as far as I know, but like, I think it's quite unethical and it's definitely net. you're definitely like destroying value in the world when you do that. You're lining the pockets of a few people, but you're completely tarnishing the name of crypto and what good it can be used for. And then when a regulator now looks at the industry, they can point to these examples and say like, clearly it doesn't work.

40:39Clearly it's just this cesspool of scams. And I think to some extent they're right. And it's sad. And then the reason we get here, despite the ethos you're talking about, is that it's sort of a double-edged sword. Like having the freedom and power and flexibility of programmable money, I think, can be used for great good. It can really revolutionize how people do things with finance because it just, it tears down these walls that really don't need to be there in most cases. but also makes it much easier to create these scams and sort of take advantage of, um, of less informed participants. So, so yeah, the motivation behind building Hyperliquid the way, the way we've chosen to do it, which is very like community first and, um, anti-establishment, I guess, like anti-VCs, anti-market makers, maybe.

41:42We're not anti-MarketMakers. It's not like... Because users are the first-class citizens and everyone else... If you're a user, great. MarketMakers, you're a very big user. That's great. You're not in a class of your own, like some enshrined entity in the protocol. It's just a bunch of users. And it's a bunch of users coming together in a peer-to-peer way to do things according to their original vision of crypto. And that's a very big reason we're doing it the way we are. And I think that narrative really clicked with a bunch of users. I think it clicked with a bunch of people who are disillusioned by other projects going down the standard route.

42:28Yeah. And at the end of the day, though, it's like not, it's not that different from anyone else in the world just trying to build a long-term project that creates real value. You mentioned Amazon a couple of times. Your name is Jeff. Coincidence. So we have to talk about Amazon, obviously, and Hyperliquid. Bezos emphasizes a lot about aligning the business with customers and being customer-centric. And in crypto, it would mean aligning the business or the protocol with users and community. Why is almost no one following the Bezos and user-centric model in crypto? I think it's because it's super hard to get users in crypto.

43:22because the main product in crypto is, to this day and age, this is relatively controversial, but I think the main product that people have found product market fit with is launching scam tokens, basically. And yeah, it's hard to find users if that's what you're doing. I think it's becoming more and more, you say it's controversial, less and less controversial. this opinion. I even heard, I mean, Jordi is talking about that. He actually, he was talking the other day about understanding the game, very different fashion. And there was another dude, MemeCoin dude, Murad Mahmoudov, was talking about crypto is an asset, is a token production industry.

44:11You create a token and then you sell it, right? That's the whole game. Yeah. So it's becoming more and more, accepted. It doesn't mean it's the right thing, right? But that it's, your view is basically correct, right? Yeah, and if that's your model then, in some sense people have really optimized this. Like the users are, like I think the users are like the VCs, the KOLs, and the team maybe, and the other like who they might think are their users are just the exit liquidity. And so, yeah, like why has no one else done the right thing or like what I think is the right thing. I'm not, you know, the, the conventional thing, which is the thing that we're doing and building something that is a lasting kind of product, um, is that it's really hard.

45:00And I think with Hyperliquid, at least that we had to innovate so much on the tech. We had to base, you know, build the whole L1. We basically built like three businesses in one in, in hard mode because it's like on chain. And, um, that's, So that's the L1, that's, you know, it's like general purpose chain. And then it's like an exchange element, kind of like a Binance or BiBit, but like fully on chain and performant. And then like optimizing the full stack of user experience. Like this is like super hard stuff. And unless you do this stuff, users will try your product and just not stick. and so like when you don't have that when you can't do that the hard way then I guess you have to resort to these more gimmicky short term plays but you like the hard stuff yeah I mean I think the all the gimmicky stuff is I don't think producing any real value it's extracting value from the world and yeah I mean hopefully I think I think I think once there are good products, good protocols, like that actually do things that are 10x improvement over what people can do outside of crypto, then I think the users will move over.

46:16And then I think people, optimistically, I think people will have some moral compass at the end of the day and build these things that need to get built to add real value on this new system. I think the finances will also align there scams are a repeated game and get harder and harder as people get smarter whereas building things there's no catch you build a good product and you did great and you should make a lot of money and people should be super happy and I think we're moving in that direction

46:59i have to ask something about you know you said before i kind of just i mean i discovered crypto twitter i didn't really know it we kind of talked about the meme coins which are at one extreme and then we talk about hyper liquid which is sort of the other extreme right we're trying to build long-term value and what's happening there's a lot of builders in the space i mean it's very hard you said, right? But there's a lot of crypto builders in the space who are trying to do the right thing but are so disillusioned or basically they're not able to get any attention and because they're not able to get any attention, the value of what's being created is not reflected properly versus a meme coin or another protocol that would just have more attention.

47:49How do you think we get to a world or a place where protocols that are creating the most value for the users actually have that value reflected in the value of the protocol? Or is that not even the goal?

48:12I think it should be a goal. I think if you do a lot of hard work, don't capture any of the value, I think the incentives are wrong. People will stop doing the hard work and they will just go and launch game coins. So I think it's important, but I think the problem is not that crypto doesn't reward hard work in real products. It's that people just kind of suck. They haven't built these things. And I think Hyperliquid is kind of an exception here. Not to toot my own horn too much, but I think that it's hard to imagine a world in which Hyperliquid doesn't capture a lot of value. Like Hyperliquid as a protocol, right?

49:03I mean, it is kind of like the only two things that have proven long-term value in crypto thus far, which is like, you know, in exchange and in L1. I do think sort of like no one has really successfully merged those two in a composable way and I do think that is a multiplicative effect not an additive effect but but yeah even taking either of those two things like Ethereum viewed as through the lens of a cash flow business is a very successful business a lot of ETH is burned every year not saying from a legal perspective just like just if you look at the economics of the token, I think it's very successful.

49:47And then you look at Coinbase, Binance, it's like very successful business. And Hyperlogo is not a business in that sense, but it's doing these things that just like inherently must capture value. And I think people kind of, yeah, I don't think people need to overthink it that much. It's like, yeah, you can look at all these meme coins around you and be kind of upset that they don't deserve the success that they've gotten. But I mean, the market's kind of efficient, right? Like if you try to launch a meme coin, it's actually pretty hard to get it to the state. Maybe they got lucky, maybe they're early, whatever.

50:23But like, I think people should be free to do whatever they want. And if you're trying to build something good and you succeed, then yeah, I think you will capture the value, whether it's in crypto or not.

50:36As I said before, your name is Jeff. So it's sort of in your destiny to have to apply the Jeff Bezos principles into crypto how are you concretely doing this

50:50I don't actually think that much about Amazon I think it's kind of a meme but it's a good one but yeah I think the long term I obviously did a lot of things super well I think like like I have a lot of respect for AWS um and I obviously wasn't in the room when those decisions were made back in the 2000s. But I imagine it went something like Jeff Bezos was like, hey guys, I had an epiphany. We're using this infrastructure to scale our online retail business. We're pushing the frontier on product. And to do that, the infrastructure needs to catch up and no one can do this infrastructure for us. So we're building it ourselves.

51:38like this clearly doesn't only apply to our business. This applies like much more broadly. And there's a bet that tech itself will continue eating the world. Let's commit now and orient, abstract, engineer AWS in a way that people can build on it. And yeah, I think it's like obvious in retrospect, probably not as obvious back then, but probably obvious to Jeff Bezos because he's like thinking about this day in, day out. and um clearly he was right and it wasn't really the idea it was execution um and i see like a sort of parallel with hyperliquid which is like we set out very much with the mindset of we see this thing that's broken in the space which is exchanges particular order book derivative exchanges which users love and there's none out there that they can really trust at this moment.

52:38On-chain decentralized is the way to go. Let's go build that. And then while doing that, we're like, oh, the infrastructure sucks. We looked at a bunch of chains, looked at running it in a DYDX V3 style, kind of looked at V4, looked at Cosmos, looked at Ethel 2s, looked at Solana. Nothing even remotely comes close to providing what you need to actually build this very simple product. and the epiphany there is like, like, yeah, let's focus on the product, but there's also so much infrastructure being built. It would be such a shame if this were like somehow pigeonholed into being the infrastructure for this product.

53:23Whereas it's actually quite, it's quite a general problem. It's like, why can't the world just agree on some state? Like that is the whole, that's like literally all an L1 is doing. And it's very simple when you think about it that way. And like, why can't we just, you know, build it from kind of like, we know how computers work. We know how the internet works. Like, why can't we just solve this problem? And it's definitely standing on the shoulders of giants in terms of all the research has gone to it, all the production implementations, Bitcoin, Ethereum. But yeah, none of them really like, I think, did it in a way that lets you build an exchange on top.

53:57So now that we're building this, like, why not? you know i guess going back to the amazon thing it's like when they were talking about aws i assumed the internet was a lot smaller and to be able to to be able to see that the internet was going to grow and make a bet on that i think the analogy here is like uh crypto will grow and like yeah we're kind of in like a valley like maybe like a 10-year valley or whatever but it is going to grow and it's going to overtake how finance currently happens and the way to make a bet on that is to say like open up the infrastructure on which the flagship product is built so that everything can be built on top and maybe the slight difference here is like maybe for AWS it was like kind of obvious what the infrastructure was but I think for Hyperliquid we're also kind of redefining what infrastructure means so a lot of other chains sort of take for granted that infrastructure should be a general purpose smart contract platform and just make that really efficient.

54:59But in building Hyperliquid, we very much realized that that's not the right abstraction and that the thing that will unlock through DeFi applications we built is that general purpose infrastructure plus some performant native implementations of financial primitives. And I think once you have the right umbrella around infrastructure, it makes a lot of sense to abstract it and orient it in a way that people can build. And yeah, I think that's the long-winded answer to how we're sort of inspired by AWS. So one of the things you are building is what we would call the AWS of liquidity. AWS transformed the cloud, abstracting away the messy details of hardware to let builders focus on software and business logic, Hyperliquid is transforming liquidity, abstracting away the messy details of the exchange platform to let builders focus on product and user acquisition.

56:05With the launch of builder codes, Hyperliquid supports a new wave of builders who are excited about lasting proportional upside. Like AWS, the Hyperliquid L1 is a solid foundation that stays out of your way. What is builder's codes and why does it matter? It's a very simple idea in principle.

56:31It's letting anyone who builds a financial application on the Hyperliquid order book side, which is just one part of the Hyperliquid L1 as a whole, but just focusing on the order book, which is like, let's just say I want to build a mobile app. Like I have a cool new wallet experience or I have a social trading experience or I have a regional exchange, you know, it's gives fiat on-ramp and some local currency, lets you seamlessly trade perps. All these ideas, it lets you basically build an exchange style business while using a backend that is neutral. And what I mean there is you can charge users fees in a way that they trustlessly approve you to do so.

57:23The fees are built into the protocol instead of some behind-the-scenes deal between you and a centralized exchange where you might be doing this. And at the end of the day, this just bridges the gap between all of these user-facing applications, like finance, sort of like Robin Hoods of the world, and giving them a way to plug directly into what is simultaneously like a Binance level of liquidity, but also like an Ethereum level of neutrality. And I think this will unlock just an entire, just new way of building businesses in DeFi where I think specialization is super good. and people who know their users in a region very well, I think they should go do that.

58:17And Hyperliquid just like, yeah, like stays out of your way. And I think another like sort of set of users would be people building DeFi protocols. And these protocols are built in a general purpose way on the Hyperliquid chain, but they too can tap into the liquidity on the L1, sort of enshrined native L1 order book liquidity. And in some sense, it doesn't really matter, right? Like, are you a smart contract? Are you building smart contracts where people can plug and play these more automated programmatic integrations? Or are you literally just the front end, but a very smooth front end that users derive joy from using?

59:00It almost doesn't matter. And Hyperliquid sort of supports both.

59:08you refer to exchange size empires right that could be built on the top of the AWS of liquidity you mentioned sort of like Robinhood can you give me two examples of exchange size empires that can be built using builder's code that you would have in mind Yeah, I think there are just thousands of examples in the form of regional exchanges. So right now, DeFi, it does a lot of volume. Like Hyperliquid does more volume than most tier three and probably comparable volume to many tier two exchanges, centralized exchanges. and yet DeFi itself is still so nascent. I think Hyperliquid has literally brought new users into DeFi just to use Hyperliquid.

1:00:09Users who were on a centralized exchange probably just had a bad experience with something there. Say, you know what? I'm going to try this DeFi thing for a spin and just loving that they can then build on top of it. I've seen people trading and then transition to building and creating all these cool apps, tapping into the liquidity. I think it's like, so it's so interesting to see, but we're still so early because this set of users in the grand scheme of humanity is, is minuscule. And, and I think to unlock, to really get it to the masses so that, like we're talking about earlier, like crypto is, is finance.

1:00:47It's not this like alt scammy finance. I think a large part will be more regional focused applications. So instead of trying to just say, hey, if you use finance, you should consider using crypto, that clearly hasn't worked. You should be like, hey, are you, like, are you, are you, are you, do you have the misfortune of living in some way where your currency is destabilizing and hyperinflating and maybe you want an alternative? there are many localized reasons like here's an application that speaks your language both literally and sort of like in terms of the ui you expect uh here's a way to convert your debasing interest um currency into into this like on-chain store value here's how you can transact uh i think that story will just like happen over and over again uh and the right way to get that story to happen is not for us to do it, but it's for anyone to do it.

1:01:51And whoever does it best makes the most money doing it in the most direct way possible, which is like you can monetize on the volume you bring onto the platform. I think that's a very powerful idea. And I think it incentivizes the right kind of builders who basically see that exchanges are the best business in crypto at least. What's your long-term view for crypto and what role does Hyperliquid play in that future?

1:02:25Talked about the long-term game before. Yeah, we don't, or at least I personally, I find it hard to be super confident on how things will look like in the super long term, but... I think I've always kind of lived life with the principle that you can be very confident that you're going in the right direction and execute very well on the one step you are taking at this moment without knowing exactly where you're going. it's kind of like the difference between playing Go and playing chess which like I sort of when I found Go I was like super happy because it was like finally a game that like actually clicked with my like what I liked to think about and so in chess I think the better you get at chess the like more moves you read ahead as far as I know about chess because the board is super small and like yeah so maybe that's the question is like how is the game gonna end in 20 moves it's kind of like, yeah, I see the checkmate.

1:03:40It's like, I've, I've read out the entire like tree and all the branches and this is what it's going to be like. Uh, and, and that's kind of the answer that people often want with questions like this, but, but in go, they're just like, as a human playing go, they're just like way too many possibilities. The, the branching factor is like way larger. And so in go, the focus is on building intuition around maybe the next one move you're going to play or maybe like some moves after that. But unless you're like really focused on a local situation, you need to resolve and like read everything out. It's very much more like vibes based.

1:04:13And I really resonate with that. And so with Hyperliquid, it's like, yeah, crypto is going to change how finance works and like finance is going to move on to crypto. And like the thesis is like Hyperliquid is going to be the platform onto which all the finance moves. but how exactly it's going to happen, what are the apps people are going to build, which regions will come first, super hard to say, and it doesn't really matter because for us, we're just focused on building the stuff that will be important no matter what the trajectory is. So things like the builder code or having an EVM that integrates with on-chain native components, so having like, just having a good liquidity period These are all things that are necessary, super hard to do well in a sustainable way and will be foundational no matter how crypto looks in 10 years.

1:05:18What's something you believe in that most people would not agree with?

1:05:27well like when I think when we decided not to raise certainly no one agreed with that but I was it's also a bit of a skewed sample because I was talking to the people who were trying to throw money at the thing so maybe it's a bit of a skewed sample but there also tends to be this thing where like we do something that's controversial. And then I look back in a few months and it's like everyone's kind of doing it in DeFi at least. It's like a super small space and I guess it's promising. It means that we're like doing the right things, but it makes it hard to have these like really long-term contrarian takes because it almost seems like as far as like the narrow niche of like on-chain performance DeFi or whatever, if Hypergog does something and everyone kind of just like copies it.

1:06:24So kind of hard to think about. Yeah, I mean, like when HLP launched, everyone was like, oh, there's like no way this thing works. Like every single other project was fighting it in the Discord and in Twitter. And yeah, it was pretty early. So I was still taking a lot of things very personally. you know like what do you mean it's not gonna work and just like argue with them like here's how it's gonna work and then I guess ultimately like the results kind of speak for themselves how did you learn to take things less personally oh I just I actually just read the stuff less I think I think I'm just like naturally not I think I do take I think I care so much about what we're doing that if someone's like this thing sucks, I will, my like instinct is to like argue with them.

1:07:18It's like, you know, here's why it doesn't suck. And like, so, so I think I do take it personally because it's like a manifest, it is the manifestation of like what we're trying to do in this world. And like, it's, it's like our baby, you know? But yeah, I just, I just kind of like, don't really read social media and that helps. Have a good, like people on the team are much better at handling this stuff anyway. So it's, it's a good, it's a good, a good thing to disassociate myself from. Thank you so much, Jeff, for doing this. Thank you for getting out of your basement. I feel very privileged once a quarter.

1:07:53I listened to some of your other podcasts, little snippets, and I thought they were, they were good. So thanks for having me on. And thank you for, I would say like giving hope to the builders in the crypto space and to, I think everyone was kind of like tired of what's happening right now, seeing people who are too short-term minded. So it's very refreshing to see someone called Jeff. There's a lot to do. Who is trying to do something with a long-term approach, which is so rare in this industry. So thank you so much for doing that, man. That was awesome. Thank you.

1:08:39I hope to see you soon.