The VC-Centric Crypto Model vs. Community-Driven Protocols: A New Investment Paradigm

The crypto landscape is undergoing a paradigm shift. For years, venture capital (VC)-backed projects dominated the narrative, leveraging institutional funding to scale rapidly. However, 2025 has seen a surge in community-driven protocols like Hyperliquid, which challenge traditional models by prioritizing decentralization, tokenomics innovation, and user-centric governance. This article evaluates Hyperliquid's self-funded, decentralized approach as a blueprint for sustainable crypto growth, contrasting it with VC-backed models like dYdX and Uniswap.

The VC-Backed Model: Scalability vs. Centralization

VC-backed projects, such as dYdX and Uniswap, have historically relied on institutional capital to accelerate development and adoption. For instance, dYdX secured significant funding from top-tier VCs, enabling it to build a robust derivatives platform. However, this model often centralizes control, with governance decisions influenced by investors rather than the community. While these projects excel in scalability and institutional alignment, they face criticism for prioritizing short-term growth over long-term decentralization.

In contrast, Hyperliquid's self-funded model eschews traditional VC backing. Instead, it distributes tokens directly to users via airdrops and buybacks, aligning incentives between the protocol and its community. As of October 2025, Hyperliquid reported $1.2B in annual profits, with $645 million spent on HYPE token repurchases-a deflationary strategy that signals confidence in its long-term value. This approach creates a feedback loop: higher trading volume drives more buybacks, which in turn increases token demand and price.

Hyperliquid's Governance: Permissionless Innovation and Centralized Risks

Hyperliquid's governance model is a hybrid of decentralization and centralization. The HIP-3 upgrade, activated in October 2025, allows developers to permissionlessly deploy perpetual futures markets by staking 500,000 HYPE tokens. This innovation democratizes market creation, fostering competition and diversity. However, the platform's validator set remains small (24 members), and the Hyper Foundation controls nearly two-thirds of staked tokens, and commentators warned it could attract regulatory scrutiny.

VC-backed projects like Uniswap, on the other hand, rely on decentralized governance tokens (e.g., UNI) to enable community voting. While this model promotes transparency, it often struggles with low voter turnout and governance gridlock. Hyperliquid's hybrid approach balances innovation with operational efficiency, but its centralized elements remain a risk.

Growth Metrics: Hyperliquid vs. VC-Backed Protocols

Hyperliquid's growth metrics outpace many VC-backed peers. In July 2025, it generated $86.6 million in protocol revenue, surpassing Ethereum and Solana in on-chain fee generation, according to DWF Labs research. Its daily trading volume reached $12.9 billion in late October 2025, with HYPE's price surging 32% in a week to $47.55, following 21Shares' ETF filing. This growth is driven by zero gas fees, high-performance infrastructure, and a buyback mechanism that allocates 97% of trading fees to token repurchases, according to the DWF Labs research.

VC-backed projects like dYdX, while successful, face sustainability challenges. For example, dYdX's tokenomics rely on liquidity incentives and staking rewards, but its VC-backed structure may prioritize investor returns over community-driven innovation. Hyperliquid's self-funded model, by contrast, creates a deflationary tailwind: 97% of fees are reinvested into the ecosystem, with over $1.3 billion spent on HYPE buybacks as of early 2025, per the DWF Labs analysis.

Sustainability: Tokenomics and Institutional Adoption

Sustainability in crypto hinges on tokenomics and institutional adoption. Hyperliquid's Assistance Fund, which allocates 97% of trading fees to buybacks, creates a deflationary mechanism. However, a 23.8% token unlock event in November 2025-releasing 237.8 million HYPE tokens-poses a bearish risk, potentially generating $500 million in monthly sell pressure, per CoinMarketCap's update. This unlock could offset the buyback program's $90 million monthly absorption, testing the protocol's resilience.

VC-backed projects often face similar challenges. For instance, dYdX's tokenomics rely on liquidity provider rewards, which can lead to inflationary pressures if not balanced. Hyperliquid's model, while innovative, must navigate the tension between token supply dynamics and demand.

Institutional adoption further strengthens Hyperliquid's case. 21Shares' filing for a Hyperliquid ETF with the SEC and the platform's CFTC engagement signal growing legitimacy. These developments position HYPE as a viable asset for institutional portfolios, a rarity for community-driven protocols.

Conclusion: A New Blueprint for Sustainable Growth

Hyperliquid's self-funded, decentralized model offers a compelling alternative to VC-backed projects. By prioritizing user-centric tokenomics, permissionless innovation, and institutional adoption, it addresses key pain points in the crypto space. However, risks like token unlocks and centralized governance elements cannot be ignored.

For investors, Hyperliquid represents a hybrid approach: the scalability of VC-backed models with the community-driven ethos of decentralized protocols. As the crypto market matures, projects that balance innovation with sustainability-like Hyperliquid-may emerge as the new standard.