Launch of HIP-6: Continuous Liquidation Auction System Based on Block Units in Hyperliquid

Hyperliquid platform proposes a new improvement proposal called HIP-6, introducing a revolutionary auction mechanism based on data processing within each block. This system aims to solve the issues of capital raising and price discovery for new projects, allowing teams to issue their tokens directly on-chain without relying on external exchanges or intermediary platforms.

The proposal draws inspiration from the continuous auction model (CCA) developed by Uniswap, but restructured to fit Hyperliquid’s centralized order book (CLOB) environment. This means each auction occurs concurrently with data processing at the block level, ensuring fair price discovery and equitable token distribution among participants.

How the Hy-CO system works at the block level

The large auction is divided into a series of smaller, sequential auctions, each processed within a single block. In each block, the protocol launches a fixed amount of tokens and calculates a unified clearing price that balances supply and demand.

Main advantages of block-level processing:

The continuous auction discovers the price gradually over thousands of blocks, not instantly. This encourages participants to enter early based on their genuine valuation of the project, rather than waiting until the last moment as in traditional auctions.

Processing at the block level prevents front-runners from observing pending bids and placing counter-bids within the same block. Each bid becomes effective in the next block, providing procedural protection against front-running.

The clearing price is calculated based on the accumulated supply and demand, with bids above the price receiving their full allocation, and bids exactly at the price receiving a proportional share of the remaining tokens.

Launch and settlement steps: from registration to receipt

Registration phase:

After completing the basic steps to deploy the token (HIP-1), the project team calls the registerAuction function to start the auction. Critical parameters are set: total token supply, auction duration in blocks (up to 3,024,000 blocks, about one week), minimum price, minimum raise, and reference asset (usually USDH).

The protocol locks all token transfers during the auction period, preventing insiders from selling their shares through other channels during the price discovery process.

Bidding and settlement phase:

Participants submit bids by specifying their total bid amount and the maximum price they are willing to pay. Their budgets are locked at submission and automatically distributed across subsequent blocks in the auction. In each block, the protocol computes a unified settlement price based on the supply-demand equation.

At auction end, the protocol evaluates its success. If the minimum raise is met (or not set), the auction proceeds to distribution. Protocol fees (500 basis points) are deducted, a portion of the proceeds is deposited into HIP-2 (liquidity system) at a volume-weighted average price, and the remainder is transferred to the project team. Unsold tokens are returned to the project, and transfer locks are lifted.

If the auction fails (minimum raise not achieved), all bidder funds are refunded via claimAuction without any loss.

Security protections and fees: guarantees for all

Anti-manipulation mechanisms:

This mechanism prevents the project team from manipulating its own price. If the team attempts to buy its tokens via a separate wallet to inflate the price, they lose the protocol fee (non-refundable) and part of their self-trading funds in the liquidity system. For example, bidding with 40% of the auction volume results in approximately 24% loss of that self-trading amount as inefficiency costs.

The seed price (initial liquidity price) is calculated based on the volume-weighted average over the last 5% of the auction duration, not just the last block’s price. This requires continuous spending across multiple blocks for any manipulation attempt, increasing costs linearly with the size of the manipulation.

Fee structure:

• Registration fee: 10 HYPE tokens at auction start.
• Bid fee: one unit of the reference asset per bid (non-refundable).
• Protocol fee: 500 basis points (5%) of total proceeds at settlement. All fees flow into the Environmental Assistance Fund.

Funds security:

The protocol holds bidder assets and tokens throughout the process. Funds are never held under the control of the project team or third parties. In case of failure, all participants can fully reclaim their funds.

Who benefits from HIP-6 and how

New project teams:

Gain a novel, secure on-chain fundraising method. Liquidity is automatically added at the discovered market price without manual management. The only trade-off is reduced control over the initial price.

Hyperliquid users:

Get a fair chance to participate directly in new project launches from day one. Instead of missing initial distributions or waiting to buy tokens at higher prices later, they can participate with a set capital at a known price, using the same interface as regular trading.

HYPE token holders:

Benefit in two ways. First, the native structure incentivizes new teams to build on Hyperliquid rather than competing chains, strengthening the ecosystem. Second, the growth of USDH-pegged auctions increases the utility and yield of the Help Fund, boosting HYPE’s long-term value.

Liquidity providers and market makers:

Start with a trusted initial price and genuine auction-backed depth (via HIP-2), not artificially low or fake liquidity. This provides a stronger foundation for arbitrage and liquidity operations during launch days.

Validator network and state:

Processing each auction within a single block remains computationally efficient. The maximum complexity is O(T), where T is the number of active price points (usually hundreds), comparable to current order matching costs. No new cryptographic operations or external calls are required.

Summary

HIP-6 represents a significant step toward making Hyperliquid a fully integrated financial asset chain. It addresses the longstanding challenge of launching new projects fairly and efficiently at the block level. Subsequent decisions (governance structures, value accrual mechanisms, token holder protections) are left to the community and teams to develop tailored solutions. The result: a stronger ecosystem, better projects, and protected users.