How HyperEVM becomes the key cornerstone of Hyperliquid

Author: Lucas Tcheyan Source: Galaxy Digital Translation: Shan Oppa, Bitchain Vision

HyperEVM is an EVM-compatible, universal Layer 1 blockchain launched by Hyperliquid. It has begun to show early growth momentum since its launch in February.

Although overall activity is still not as good as HyperCore, Hyperliquid’s flagship perpetual contract trading platform, HyperEVM has shown steady growth in trading volume, total locked value (TVL), and application development.What is even more rare is that this progress was achieved in the absence of perfect tools and direct incentive programs.Its source of power includes critical infrastructure upgrades, a mature DeFi ecosystem, and increasingly strong market expectations for future airdrops.

The recently released CoreWriter update is seen as an important turning point in the ecosystem.This update enables full write permissions for HyperCore, which can support a new type of applications that are natively integrated across two layers, thereby further blurring the boundaries between the two major platforms. It also means that HyperEVM is expected to develop from a “side car” role to the core engine of Hyperliquid’s vertically integrated on-chain financial stack.

Key Points

The launch of HyperEVM is a “step-by-step, controlled” strategy designed to avoid negative impacts on HyperCore.Although this strategy brought some friction to early on-chain teams, it still attracted more than 175 development teams to deploy applications on HyperEVM.
HyperEVM currently ranks 10th in TVL rankings for all L1 public chains.Leading applications are mainly DeFi products, especially lending protocols, which is highly consistent with HyperEVM’s goal – unlocking DeFi compositionality for HyperCore.
HYPE is a native Gas token for HyperEVM.The basic and priority fees of all transactions will be destroyed.So far, transaction fees have destroyed 0.006% of the total HYPE supply, and the destruction ratio is expected to increase further in the coming months if on-chain activity increases as expected.
User activity is still catching up with HyperCore’s maturity.As the on-chain infrastructure and development tools are improved, more unique use cases will be implemented, thereby accelerating the integration and adoption of HyperEVM and HyperCore.
The launch of CoreWriter is a major breakthrough, allowing smart contracts on HyperEVM to be written directly to HyperCore, which will bring huge unlocking effects to the application ecosystem and is expected to drive a surge in application deployment and user activity in the coming months.
Hyperliquid’s long-term vision is to position HyperEVM as the “complementary financial layer” of HyperCore.The ultimate goal is to build a vertically integrated DeFi stack so that transactions, lending, vaults and pledges can coexist natively and collaborate seamlessly on both chains.

HyperEVM architecture

Hyperliquid consists of two interconnected but independent platforms: HyperEVM and HyperCore.

HyperCore is the more well-known part of the two, and is Hyperliquid’s perpetual contract trading platform, including an on-chain order book, a margin system and a matching engine.Since its launch in 2023, HyperCore has dominated the perpetual contract market and has even begun to compete with the perpetual products of centralized exchanges.

HyperEVM is Hyperliquid’s EVM-compatible, universal L1 blockchain, launched on February 18, 2024.It is designed to unlock the composability of DeFi for HyperCore through integration with the universal smart contract platform.

An important difference is that HyperCore and HyperEVM are two independent chains, but both use the same HyperBFT consensus mechanism (combining proof-of-stake PoS and Byzantine fault-tolerant BFT, optimized for high-throughput, low-latency systems) and share the same set of validators.This architecture allows applications built on HyperEVM to interact directly with HyperCore’s spot and perpetual contract order books.

Consensus mechanism and execution layer design

HyperEVM adopts a “dual-block architecture” to balance the trade-offs between speed and capacity.A small fast block is generated every second on the chain with a Gas cap of 2 million for regular transfers and redemption transactions that are settled in almost instantly.Meanwhile, a large block is generated every minute, with a Gas cap of 30 million, leaving room for heavyweight tasks such as large smart contracts or batch minting NFTs.HyperEVM has block latency of less than 1 second and supports processing power of up to 200,000 orders per second.

Although HyperEVM has high throughput and low latency, its transaction fees are usually higher than Ethereum Layer 2 (L2), especially when there is congestion on the chain.Data shows that HyperEVM transaction fees will surge significantly during peak periods (even exceed $0.30 per transaction).

HyperEVM’s Gas token is HYPE, and uses the modified Ethereum EIP-1559 destruction mechanism, and all basic fees and priority fees will be destroyed.The chain is EVM compatibility, making it easier for development teams to redeploy existing EVM smart contracts on HyperEVM.Since its launch, HyperEVM has destroyed more than 55,000 HYPEs, accounting for about 0.006% of the total supply.In contrast, more than 367,000 HYPEs were destroyed on HyperCore through spot trading fees.Based on the current market price of $39.12/HYPE, HyperEVM has accumulated destruction of more than $2.15 million worth of HYPE.The peak of single-day destruction occurred on May 26, reaching 5,849 (approximately $226,000), as contract deployment and user activity surged.As the HyperEVM on-chain activity expands, its contribution to total HYPE destruction is expected to grow significantly, from edge consumers to an important driver of long-term supply shrinkage.

Since its launch in February, HyperEVM has processed more than 30 million transactions, with daily trading volume steadily climbing in the second quarter.The peak of single-day trading in June reached 411,120 transactions, and with multiple important technology upgrades, the on-chain NFT and memecoin transaction volumes also showed an upward trend.

Technology upgrade

HyperEVM was initially launched with very basic features, only supporting HYPE spot transfers between HyperCore and HyperEVM, as well as packaged HYPE contracts for DeFi applications.This is a “simplified” version that lacks many key features that will be used to distinguish them from other general-purpose L1s, especially deep integration with HyperCore.

In the launch announcement, the team explained the reason for this “unfinished state” to be launched: I hope everyone can “enter equally and start at the same starting line.”In addition, the strategy of gradually online in phased and phased strategies also allows them to upgrade the system more securely while collecting real-time user feedback.According to the team developing on HyperEVM, while the lack of a well-developed toolchain does bring some friction, it has not stopped them from continuing to build.

Since its launch, the team has made several technical upgrades to HyperEVM, including:

March 25: Open up HyperCore and HyperEVM, and users can freely trade any token between two chains.
April 30: The “Read Precompilation” feature is launched to enable HyperEVM smart contracts to read the on-chain state of HyperCore.
May 26: Shorten the block generation time of small blocks by half to 1 second, improving HyperEVM’s throughput capability.Expanding capacity is still the team’s primary technical task, and it is expected that the block generation time will continue to be shortened in the future.
June 26: Updated HyperEVM’s block sorting logic to make post-only orders priority before order withdrawal, thereby improving integration with HyperCore.
July 5: A new precompilation called CoreWriter is available.This function allows HyperEVM contracts to write data directly to HyperCore, including placing orders, transferring spot assets, managing vaults, pledging HYPE, etc.This marks that HyperEVM has been upgraded from “reading” the HyperCore state to “directly modifying” the HyperCore state, which is an important step in the development of HyperEVM’s unique functions (it will continue to be discussed in detail below).The team announced the initial version of CoreWriter on July 2 and will be officially launched three days later (the mainnet update is usually scheduled for Saturday).

Although CoreWriter is a major advancement in unifying HyperEVM with HyperCore, it also has some limitations.Most importantly, write operations through CoreWriter are not atomic, meaning that the smart contract cannot confirm whether an order or status change on HyperCore is successful in the same transaction.This asynchronous design is intentional and aims to reduce the risk of pre-trading, but also presents challenges to complex or precise control trading strategies.Therefore, while CoreWriter can support new application categories, its early implementations are more suitable for scenarios where asynchronous execution or can assume high success rates, such as staking, cash intakes, and simple programmatic interactions.Given the complexity of HyperEVM interaction with HyperCore, the Hyperliquid team will continue to iterate the release of features in a phased manner to ensure that it does not affect the stability of HyperCore.

HyperEVM application ecosystem

Since its launch, HyperEVM’s ecosystem has grown rapidly. More than 175 projects have been publicly built on the chain, and more teams are in the stealth development stage.Developers are the core driving force of any emerging ecosystem, and Hyperliquid’s ability to attract a large number of high-quality developers is inseparable from its unique architectural design and deep integration with HyperCore. HyperCore is one of the most liquid exchanges on the chain, with a huge user base and can easily cross-chain to HyperEVM.

Many of the teams we talked with whom we had previously developed on other chains generally stated that the decision to go to HyperEVM was mainly due to the ongoing demand of users or the need for more liquidity from applications.In addition, unlike many other L1 ecosystems, Hyperliquid has not launched special incentives or financial support programs for developers.On the contrary, the success of the HYPE token itself, and the expectation of future airdrops (42% of the remaining supply) are enough to form a strong construction momentum.

Since its launch, HyperEVM’s TVL has continued to climb and is currently ranked 10th among all L1s.This TVL growth is mainly concentrated in a few key protocols (in-depth introduction below).It is worth noting that this growth is achieved in the context of no liquidity mining activities or ecosystem funding.While most of Hyperliquid’s user and transaction activity is still focused on HyperCore, HyperEVM is working to position itself as the DeFi settlement layer of the entire stack.With CoreWriter coming to fully unlock write permissions to HyperCore, TVL will also transform from passive capital (idle lending) to active capital, which can interact with real-time perpetual contract markets, vaults and order books.

Data shows that Hyperliquid’s Eco Fund currently holds HYPE (about 25.79 million) more than the total deployed volume (about 25 million) on the entire HyperEVM chain.This imbalance suggests that HyperEVM is still in its early stages of development.As on-chain usage scenarios increase, we expect more idle capital to migrate to DeFi uses with real productivity.

Although HyperEVM was launched in February, the deployment of smart contracts really started to accelerate after mid-May.There are several reasons behind this: when it was first launched, HyperEVM did not support ERC-20, lacked a block browser or a reliable indexer, which brought many restrictions to developers.In addition, the Hyperliquid team has almost no advance notice on the launch time schedule of HyperEVM, resulting in many teams starting to fully develop and deploy contracts after the main network is online.With the introduction of infrastructure such as cross-VM asset bridges, contract indexing and verification tools in March and April, the deployment of smart contracts has begun to increase significantly.With the launch of CoreWriter, we expect to usher in a new wave of smart contract deployment peaks, and more applications and products will also enter the market.

Major protocols ranked by TVL

HyperLend is the largest project on TVL on HyperEVM, with a locked position of $487 million, and is the chain’s main lending agreement.It offers many standard lending features, including a core fund pool (supporting or borrowing multiple tokens in a single pool), an efficient mode (allowing users to obtain higher collateral rates on related assets), and a quarantine pool (limiting risks to specific token pairs).On June 10, HyperLend announced that it would shift its focus to integration with HyperCore.With this update, position clearing can now occur directly on HyperEVM or can be performed on HyperCore via cross-chain.This is one of HyperEVM’s first major integrations with HyperCore, and it is the direction the Hyperliquid founding team envisioned when they launched HyperEVM.Through integration with HyperCore, HyperLend currently provides liquidators with three different liquidation execution methods.For a complete overview of how HyperLend handles liquidation, please refer to their official post.The team also revealed that other products based on CoreWriter are being developed, but details have not been released yet.
Felix is second with $340 million TVL and also offers a complete set of on-chain lending products.The two core modules of the application are the collateralized debt warehouse (CDP) market and the “ordinary” lending market.Felix uses Hyperliquid’s EVM compatibility to deploy the Liquity v2 architecture on the backend to support its CDP stablecoin feUSD, and the Morph o technology stack to build its general lending market.In April, Felix announced the launch of USDhl, a fiat-backed stablecoin developed in collaboration with the stablecoin platform M0.According to on-chain public data, Felix’s stablecoin product has contributed more than $100 million in stablecoins to the HyperEVM ecosystem since its launch, with most ($75 million) coming from feUSD.With the release of CoreWriter, Felix plans to integrate liquidation capabilities into HyperCore.
HypurrFi is the third largest lending application on Hyperliquid, with TVL reaching $318 million and positioned as Hyperliquid’s “debt infrastructure provider.”In addition to lending services, HypurrFi also issues over-solidated stablecoin USDXL, with built-in decentralized exchanges (DEXs) and income vaults for users to deploy assets.After USXL had deaned in May, the team has lowered the stablecoin minting cap to $5 million in order to achieve a more robust anchoring mechanism.
HyperSwap and KittenSwap are the two main AMM DEXs on Hyperliquid, ranking fourth and fifth in TVL respectively.They draw on the common AMM designs on EVM, providing standard and centralized liquidity positions, similar to Uniswap, which also introduced Curve’s ve(3,3) model.The launch of CoreWriter will greatly upgrade the capabilities of these two DEXs, allowing them to integrate HyperCore order book to enable optimal path routing between the DEX and the order book.

Unit Protocol is the asset tokenization layer of the Hyperliquid ecosystem, supporting cross-chain access to major crypto assets (such as BTC, ETH and SOL) on HyperCore and HyperEVM.Unit runs a decentralized guardian network that issues native spot assets through locking and casting systems without relying on a centralized custodian.As of July 1, Unit has helped deploy more than $100 million in BTC and $13 million in ETH on HyperEVM.

In addition to the above examples, there are many teams working on product development based on CoreWriter integration. Here are some representative projects:

KinetiqIs a mobile staking protocol on Hyperliquid, running between HyperCore and HyperEVM.Users can pledge HYPE tokens natively pledged on HyperCore and obtain kHYPE, a liquid staking token that can be used for DeFi on HyperEVM.Kinetiq uses an autonomous oracle-based validator selection system to delegate HYPE dynamically to the best performing validators to optimize benefits and support cybersecurity.To simplify staking operations between HyperEVM and HyperCore, Kinetiq will leverage CoreWriter to achieve smooth integration and liquidity of staking assets.Just a few days after CoreWriter’s release, the team has announced plans to launch its products on July 15.
SentimentIt is a decentralized lending protocol on HyperEVM that allows users to use customizable leveraged lending assets.Users can collateralize assets (such as Kinetiq’s kHYPE or other HyperEVM tokens) to lend stablecoins (such as USDC) at competitive rates, supporting strategies such as leveraged income farming.Sentiment’s smart contracts will soon interact with HyperCore through CoreWriter to enable real-time access to the Hyperliquid on-chain order book for collateral valuation and liquidation management.
HyperDrive and HyperwaveProvides a tokenized version of HLP.HLP is a community-owned protocol vault focused on market making and clearing strategies.The launch of CoreWriter will make it easier for these projects to integrate HLP into the growing DeFi ecosystem of HyperEVM.
LiminalIt is a neutral income protocol built on HyperCore, leveraging Hyperliquid’s high-performance trading infrastructure to execute automated market neutral strategies to capture the capital rate gains in the perpetual contract market.Its non-custodial design ensures users’ control over funds, and institutional accounts use Hyperliquid’s native proxy system for secure transactions.With the release of CoreWriter, the team will eventually be able to deploy contracts on HyperEVM for users to manage positions on HyperCore.
RyskIt is a decentralized option trading protocol built on HyperEVM, which converts the covered call options into liquidable trading primitives.It allows users to get profits in advance and supports advanced options trading in Hyperliquid’s DeFi ecosystem.Rysk uses the HyperCore API to hedge the buyer traffic of options directly on-chain, but the team plans to update the technology stack to integrate CoreWriter, thereby reducing the risk of back-up options execution and bringing greater transparency to users.The team is also exploring the possibility of allowing users to customize their trading strategies through HyperEVM and CoreWriter combination options and perpetual contracts.

Outlook

Since its launch nearly half a year, HyperEVM has all the elements of becoming a successful universal L1, which can well complement a mature perpetual contract platform.Unlike other emerging L1s that need to rely on large-scale incentive programs or truly disruptive applications to attract users and developers, HyperEVM natively has two “entry portals”, allowing developers to focus on product development and innovation.

“HyperEVM is to the entire financial field, just like AMM is to the entire trading field,” Hyperliquid founder Jeff Yan recently said in a podcast. HyperCore is the core cornerstone of the Hyperliquid ecosystem, but it itself cannot bear all the potential use cases that can be built on a perpetual contract exchange.In the short term, HyperCore is likely to continue to be the main activity center, but as chain performance and development tools continue to improve and applications gradually mature, we expect HyperEVM activity to accelerate in the next year.By vertically integrating the two platforms, Hyperliquid’s goal is to create a comprehensive financial ecosystem that provides users with all the features they need in the same place and retain liquidity.

The recently released CoreWriter is an important catalyst that will accelerate the development of HyperEVM by enabling deep integration with HyperCore.This is the first time that applications on HyperEVM can be directly written to HyperCore, achieving seamless interaction between the two environments and unlocking more powerful and more coordinated on-chain applications.

In short, CoreWriter is an important milestone in the development of HyperEVM.Many developers have expressed interest in leveraging this integration to create products that are hard to find elsewhere.