Hyperliquid on quota erosion and recourse: the crucial role of HIP-3 and Builder Codes

In recent months, the decentralized derivatives platform Hyperliquid has attracted increasing industry concerns. Its market share has experienced a drastic erosion, and the competitive landscape has intensified significantly. But what is really happening behind these numbers? This article, a professional reinterpretation of @esprisi0’s analysis with contributions from Peggy’s translation on BlockBeats, examines the three critical phases of Hyperliquid: from near-total dominance with 80% market share in 2025, to a collapse toward 20% due to strategic transformation and competitor acceleration, up to the potential comeback driven by infrastructural innovation.

Phase One: Uncontested Liquidity Domination

From its founding in 2023 until 2025, Hyperliquid established near-total control over the decentralized perpetual contracts segment, reaching an 80% market share peak in May 2025. This dominance was built on solid foundations:

Incentive systems and first-mover advantage. A points-based reward model attracted massive liquidity, while being the first to launch new perpetual contracts (such as $TRUMP and $BERA) positioned Hyperliquid as an indispensable ecosystem for traders. To avoid missing opportunities on new pairs, operators were almost forced to flow into the platform, creating a liquidity concentration effect.

User experience and structural advantages. Among all perpetual contract DEXs, Hyperliquid offered the best UI/UX, lower fees than centralized exchanges (CEXs), and zero downtime even during major market crashes. The addition of spot trading and the launch of HyperEVM further expanded usage scenarios, consolidating its dominant position.

During this period, Hyperliquid’s team was technically unmatched in innovation speed, and no comparable products existed in the market.

The Strategic Challenge: From B2C Growth to B2B Transformation

Starting in May 2025, the landscape changed dramatically. Hyperliquid’s market share experienced a sudden decline, dropping from around 80% to nearly 20% by early December 2025. The reasons for this decline are multiple and structural.

From a direct platform to infrastructure. Hyperliquid opted for a radical strategic transformation: instead of strengthening the B2C model (for example, launching a native mobile app or accelerating new perpetual contracts), it chose to position itself as the “AWS of liquidity.” This new strategy shifts product deployment initiatives to external developers via Builder Codes for frontends and HIP-3 for new markets.

In the short term, this choice proved detrimental to liquidity attraction. The infrastructure was still immature, developer adoption required time, and external developers had not yet achieved the distribution capacity or the trust established by Hyperliquid’s core team.

The Opportunity Exploited by Competitors During the Transition

While Hyperliquid was executing this profound transformation, competitors maintained fully vertical integration, accelerating the launch of new products continuously.

Innovation speed and user trust. Platforms like Lighter seized the opportunity, maintaining full control over product releases and leveraging established user trust to expand. Competitors now not only replicate all features available on Hyperliquid but also introduce innovations that HL has not yet implemented—such as spot markets, perpetuals on stocks and forex in the case of Lighter.

The decisive role of incentives. Hyperliquid has not activated any official incentive programs for over a year, while competitors remain aggressive. Lighter, currently leading the market with about 25%, is still in the pre-TGE points season. In DeFi, liquidity is more “rented” than locked: a significant portion of volumes migrated from Hyperliquid was driven by incentives and farming for airdrops.

HIP-3 and Builder Codes: Foundations for a Potential Comeback

Although Hyperliquid’s position has been eroded in the short term, the “AWS of liquidity” model could prove strategically successful in the medium to long term. This is not merely tactical retreat but a recalibration that could allow Hyperliquid to become the hub of decentralized global finance.

Continuous innovation as a lasting advantage. While competitors have copied most of Hyperliquid’s current features, genuine innovation continues to originate from the platform itself. Developers building on Hyperliquid benefit from domain specialization and can adopt more sophisticated product development strategies on an evolving infrastructure. Conversely, protocols like Lighter, despite maintaining vertical control, will face increasing limits in simultaneously optimizing multiple product lines.

The explosive growth of the HIP-3 ecosystem. HIP-3—the protocol enabling third-party developers to launch new perpetual markets—is still in its early stages, but its impact is already tangible. Applications like Trade.xyz have launched perpetuals on stocks, Hyena Trade has implemented trading terminals for USDe, and more sophisticated experimental markets are emerging: Ventuals offers pre-IPO exposure, and Trove Markets focuses on niche speculative segments (e.g., Pokémon assets, CS:GO).

HIP-3 volume growth is exponential: data shows a trajectory indicating it will represent a significant share of Hyperliquid’s total volumes by 2026.

The Synergy Between HIP-3 and Builder Codes

The true transformative element lies in the synergy between these two tools:

Any frontend integrating Hyperliquid automatically gains access to the entire HIP-3 market, offering users unique and differentiated products. Developers are thus strongly incentivized to launch new markets via HIP-3 because these markets can be distributed across any compatible frontend (Phantom, MetaMask, BasedApp, etc.) and access new liquidity sources.

It’s a self-reinforcing cycle: more HIP-3 markets → increased frontend attractiveness → more available liquidity → more developers motivated to innovate.

Data shows an encouraging trajectory. Builder Codes revenue is steadily increasing, as are daily active users, although currently dominated by crypto-native applications.

The Next Chapter: Super-Apps and Mass Adoption

The catalyst for Hyperliquid’s next exponential growth phase will be the emergence of super-apps built directly on this infrastructure, designed to attract a completely “non-crypto-native” audience.

These applications will offer seamless trading, wealth management, and derivatives experiences, all integrated into user-friendly interfaces and distributed through the global frontend network. They represent the pathway toward mass penetration that Hyperliquid is structurally preparing.

Transition Evaluation: From 2025 to 2026

Current data reflect the ongoing transition. While market share has further compressed—down to about 1.27% in March 2026—this quantitative erosion does not invalidate the strategic thesis. It rather represents the cost of infrastructural investment in shifting from a direct B2C model to a scalable B2B ecosystem.

Competitors maintaining dominance with vertical strategies may retain control in the short to medium term but will inevitably face the limits of vertical integration. Hyperliquid, on the other hand, is building the foundations of an open infrastructure on which thousands of applications can differentiate and innovate without constraints.

Hyperliquid’s comeback will not be a rapid return to the 2025 market share but a gradual reintegration as the backbone of decentralized finance—less visible to the end consumer but omnipresent in the infrastructural layers upon which the next billions of users will rely.