Ethena Labs Bids 95% Revenue Return for Hyperliquid’s USDH Stablecoin

Hyperliquid's latest price was $53.21, up 4.631% in the last 24 hours. Ethena Labs has officially entered the race to control Hyperliquid’s USDH stablecoin, becoming the sixth bidder in the competition. This contest, now open to various DeFi projects, will determine which team holds sway over billions in liquidity and revenue on Hyperliquid, a leading decentralized derivatives exchange. The outcome will significantly impact the future of USDH and its role in the broader DeFi ecosystem.

In its bid, Ethena Labs is proposing a version of USDH fully backed by USDtb, a stablecoin connected to BlackRock’s BUIDL fund. USDtb is set to be issued through Anchorage Digital Bank. This proposal aims to create a secure and transparent foundation for the USDH stablecoin, a crucial component of Hyperliquid’s liquidity operations. Ethena Labs has committed to returning 95% of reserve revenue to the Hyperliquid community if selected. The protocol also plans to implement safeguards by establishing an elected “guardian network” of Hyperliquid validators, which would oversee USDH’s stability and operations. This governance approach contrasts with models where the stablecoin issuer has full control.

Ethena’s plan includes covering the costs associated with migrating Hyperliquid’s markets from USDC to USDH. Additionally, the protocol has pledged at least $75 million in ecosystem incentives, a figure that could potentially rise to $150 million. These incentives are designed to support the Hyperliquid ecosystem and encourage growth after the switch to USDH. In terms of infrastructure, Ethena proposes partnerships with Securitize to introduce tokenized funds and equities to the HyperEVM platform. This partnership would facilitate the launch of hUSDe, a synthetic dollar designed for the Hyperliquid ecosystem. Ethena Labs also suggests offering instant liquidity through its established stablecoin infrastructure, aiming to enhance the liquidity flow on Hyperliquid.

Ethena’s bid follows proposals from several other key players in the DeFi space, including Paxos, Frax Finance, Agora, Native Markets, and Sky, formerly known as MakerDAO. The competition has become increasingly heated, with each bidder presenting unique proposals for controlling the USDH stablecoin. Hyperliquid has opened a community process to select the ultimate issuer for USDH. Native Markets, a venture led by Hyperliquid advocate Max Fiege, was the first to submit a proposal. However, this plan, which would see USDH issued via Stripe’s stablecoin payment processor, Bridge, has faced substantial opposition from the Hyperliquid community.

Hyperliquid is a decentralized perpetuals exchange built on a custom layer 1. Its chain is divided into two tightly connected components: HyperCore, which manages the onchain order book, margining, liquidations and clearing; and HyperEVM, a general-purpose smart contract layer that interacts directly with exchange state. Both are secured by HyperBFT, a HotStuff-style proof-of-stake (PoS) consensus that enforces a single transaction order without relying on offchain systems. HyperEVM launched on mainnet on Feb. 18, 2025, adding programmability around the exchange core. Hyperliquid achieves a median trade latency of just 0.2 seconds (with even 99th‑percentile delays under 0.9 seconds) and can handle up to 200,000 transactions per second, rivaling centralized exchanges on speed. Hyperliquid’s scale comes from a carefully split state machine operating under one consensus. HyperCore acts as the exchange engine, with central-limit order books, margin accounting, matching and liquidations all kept fully onchain. The documentation stresses that it avoids offchain order books. Each asset’s book exists onchain as part of the chain state, with price-time priority matching.

HyperEVM is an Ethereum Virtual Machine (EVM)-compatible environment on the same blockchain. Because it shares consensus and data availability with HyperCore, applications can build around the exchange without leaving the L1. Both components rely on HyperBFT, a HotStuff-inspired PoS consensus that delivers a consistent transaction order across the entire system. The design aims for low-latency finality while keeping custody and execution onchain. This structure differs from typical decentralized exchange (DEX) models: automated market makers (AMMs) that rely on liquidity pools or hybrid order-book DEXs that keep orders onchain but match them offchain. Hyperliquid instead runs its core exchange logic (order books, matching, margin and liquidations) entirely onchain while still enabling EVM-based apps to integrate natively.

Hyperliquid’s organizational design is deliberately lean. Founder Jeff Yan has said the core team consists of about 11 people, with hiring intentionally selective to maintain speed and cultural cohesion. The emphasis is on a small, coordinated group rather than rapid headcount expansion. The project is entirely self-funded and has declined venture capital. Yan frames this as aligning ownership with users and keeping priorities independent of investor timelines. This approach also explains the absence of major centralized-exchange listings — the focus remains on technology and community adoption. Execution follows a tight feedback loop. When an API outage on July 29 disrupted order execution for 37 minutes, the team reimbursed affected traders $1.99 million the next business day. For a DeFi venue, that speed of response stood out as an example of its “ship, fix, own it” mindset.

“Hiring the wrong person is worse than not hiring at all,” said Yan on staying lean. Together, selective hiring, independence from venture capital and rapid incident management help explain how a small team can operate at a centralized-exchange cadence while keeping custody and execution fully onchain. Protocol mechanisms align trader activity with liquidity provisioning. Hyperliquidity Provider (HLP) vault is a protocol-managed vault that handles market-making and liquidations on HyperCore. Anyone can deposit capital, with contributors sharing in the vault’s profit and loss (PnL) and a portion of trading fees. By making market-making infrastructure open and rules-based, HLP reduces reliance on the bilateral market-maker deals common elsewhere. According to DefiLlama dashboards, 93% of protocol fees flow to the Assistance Fund, which buys back and burns HYPE tokens, while 7% go to HLP. This creates a feedback loop: Higher organic volume funds larger buybacks, reducing token supply, while still allocating a portion to support the vault.

Perpetual funding on Hyperliquid is purely peer-to-peer, with no protocol take, paid hourly and capped at 4% per hour. Rates combine a fixed interest (0.01% per eight hours, prorated hourly) with a variable premium derived from an oracle that aggregates centralized exchange spot prices. This structure helps keep perpetual prices aligned with spot. Payments are made by both sides of the book, reinforcing risk sharing without embedding yield promises. Hyperliquid’s token distribution leaned heavily toward users. On Nov. 29, 2024, the project launched the HYPE genesis airdrop, distributing about 310 million tokens to early participants. The event coincided with the token’s trading debut, reinforcing a community-first approach. Hyperliquid (HYPE) is used for staking in HyperBFT and for gas payments onchain. Momentum accelerated in mid-2025 when Phantom Wallet integrated Hyperliquid perpetuals directly in-app. Analysts and media noted a clear boost in flow and adoption. VanEck’s July report attributed $2.66 billion in trading volume, $1.3 million in fees and roughly 20,900 new users to the Phantom rollout. Separate reporting tracked $1.8 billion in routed volume within the first 16 days. On the product side, HyperEVM went live on Feb. 18, 2025, enabling general-purpose smart contracts and creating pathways for wallets, vaults and listing processes to integrate around the exchange. That flexibility encouraged outside developers to plug into the ecosystem and supported a steady pipeline of new markets.

In early 2025, researchers and validators raised concerns over validator transparency and centralization. The team acknowledged the issue and said it would make the code open-source after strengthening its security. The team also outlined plans to expand validator participation. Hyperliquid’s market share (often estimated at 75%-80% of decentralized perpetuals trading) poses concentration challenges. Commentators highlighted the benefits of network effects but also noted the systemic risks if liquidity shifts or shocks occur at a single venue. A 37-minute API outage on July 29 temporarily halted trading. Hyperliquid reimbursed roughly $2 million to users the next day. While the swift refund reinforced its reputation for responsiveness, the event also highlighted the exposure leveraged traders face during outages. Observers sometimes scrutinize how protocol-managed vaults allocate capital offchain or across chains, as well as the design of buyback mechanisms. These remain areas of operational risk to watch as Hyperliquid scales. Hyperliquid depends on validator-maintained price oracles. If these oracles are manipulated, it may trigger premature or inaccurate liquidations. To counter this, Hyperliquid limits open interest levels and blocks orders more than 1% away from the oracle price, though the HLP vault is exempt from those restrictions.

Four factors help explain Hyperliquid’s outsized growth. First, its execution-first chain design: HyperCore handles onchain matching and margin, while HyperEVM provides composability, both ordered under HyperBFT. Together, this setup delivers near CEX-level latency while keeping custody and state fully onchain. Second, incentive alignment through fee-funded buybacks (via the Assistance Fund) and the open HLP vault created a reflexive liquidity loop as trading volumes expanded. Third, maintaining a lean core team of about 11 contributors minimized managerial overhead and kept product cycles fast. Fourth, distribution advantages (most notably Phantom Wallet’s integration) reduced onboarding friction and expanded reach during a favorable cycle for onchain derivatives. For those evaluating long-term durability, several watchpoints stand out: Whether validator decentralization and code open-sourcing progress as promised, how quickly spot markets, central limit order book activity and third-party apps build around HyperEVM, and whether revenue and volume remain resilient as competitors begin adopting similar models.

Institutional adoption of Hyperliquid gained notable traction with Nasdaq-listed company Lion Group Holding Ltd. announcing a strategic treasury reallocation. The firm disclosed plans to systematically transition portions of its cryptocurrency holdings from Solana (SOL) and Sui (SUI) into HYPE. This reallocation, described as a disciplined accumulation strategy aimed at managing risk and optimizing long-term portfolio efficiency, signifies a vote of confidence in Hyperliquid's infrastructure within decentralized finance, specifically highlighting the platform's on-chain order book technology. Simultaneously, infrastructure development progressed as BitGo Trust Company expanded its service offerings in the United States to include institutional-grade HYPE EVM custody solutions. This move directly addresses the growing need for secure storage options catering to larger investors seeking exposure to the Hyperliquid ecosystem.

Significant ecosystem expansion continues with multiple established protocols actively competing to become the issuer for Hyperliquid's native stablecoin, USDH. Ethena has formally submitted a proposal detailing its mechanism for a USDH stablecoin, promising to return a substantial 95% of generated revenue directly back into the Hyperliquid ecosystem. Concurrently, Sky, the protocol previously operating as Maker, has publicly confirmed its participation in this competitive process, intensifying the bidding war focused on launching and managing the anticipated USDH stablecoin. Performance metrics reinforce Hyperliquid's position in the market. By September 2025, Hyperliquid demonstrated dominant market share, commanding an estimated 73% of the total decentralized perpetual futures trading volume, solidifying its leadership position specifically within that DeFi subsector. The platform's operational strength is further evidenced by its revenue generation; reports indicate Hyperliquid accrued approximately $409 million in user fees over the preceding six-month period. This fee revenue reportedly exceeded figures generated during the same period by both Ethereum and Solana, despite the platform capturing a significant but minority share (nearly 10%) of the global perpetual futures volume for Bitcoin and Ethereum.

Within Hyperliquid's network activity, a notable shift occurred as an address identified as "0xa523" surpassed James Wynn to become the platform's largest losing trader based on accumulated realized losses, which reportedly exceeded $40 million in value.