At the end of November 2024, decentralized exchange (DEX) Hyperliquid held a genesis-airdrop of the HYPE native token. About 31% of the entire offering went to community members equivalent to the points earned in the early stage. The giveaway became the largest in history and at the peak of the asset’s value was valued at ~$10.8 billion. Since then, the platform has been steadily updating records in terms of user acquisition and trading volume.
In this article we will tell you how the landscape of airdrops has changed in the industry, analyze the phenomenon of Hyperliquid’s generosity, the L1 blockchain device with HyperBFT consensus and the platform’s functionality for spot and futures trading.
From life-changing money to empty hopes
The free distribution of tokens to users is one of the most important factors in the development of the blockchain industry, allowing projects to quickly grow their community while creating demand for their digital asset. In addition, these promotions have helped many newcomers who came for the “easy money” to learn the basics of Web3 interactions and learn the fundamentals of DeFi and NFT.
Until recently, token accruals from DEX Uniswap were considered the largest in history. At the end of the DeFi summer, in September 2020, the protocol team unexpectedly gave away 400 UNIs each to everyone who had interacted with the exchange at least once. At the time, the value of the asset was ~$7, and hundreds of thousands of people became instant owners of several thousand dollars. Airdrop reached its peak at a UNI value of $42.88 and was valued at ~$6.43 billion.
According to CoinGecko, the second line in a kind of generosity ranking was long occupied by the distribution of ApeCoin (APE) tokens for ~$3.54 billion in 2022. Holders of elite NFTs from the Bored Ape and Mutant Ape collections received up to 10,950 tokens with a maximum price of ~$258,737. At the time, the amount covered the purchase of a collectible “monkey” with an average value of ~$200,000.
In third place was the ~$2 billion Airdrop 2021 from DEX dYdX with a peak price of ~$26.80 for the DYDX token. Users did not manage to get very rich – the project team set a payout limit with vesting for five years.
The golden age of Airdrop ended on March 23, 2023 with an ARB retrodrop from Arbitrum’s L2 solutions team. The ~$1.97 billion financial backing was the fourth largest event at the time and the largest for 2023. At that time, users were able to get ~$1000 for simply interacting with multiple dapps from the ecosystem, using crosschain bridges, and about 30 transactions in a year.
As the number of projects replicating common airdrop models grew, the process evolved into a mechanical money-making process using multi-account farms. Organizers inevitably lost their audience immediately after the distribution: users, having received a quick profit, left the ecosystem in search of new opportunities.
Some venture capitalists, having provided capital for new projects, chose an unscrupulous model of behavior after TGE. Projects in tokenomics allocated a large percentage of assets to investors who realized profits, creating a sales cascade. In 2024, there was even a narrative in the “hamster trader” communities to short all newly issued tokens as the probability of appreciation fell with an increasingly “inflated” FDV.
This situation no longer satisfied many market participants. Venture capital (VC) began to be openly criticized for draining the market, and developers began to introduce new approaches to airdrop campaigns: a points system, anti-sibilance measures, and strict requirements for award accrual. The entry threshold for Airdrop-hunters was raised, and to get a reward now required a long lock-in of significant funds in the project’s ecosystem.
The magic charm of life-changing money finally evaporated with the release of tokens from Starknet and zkSync. Not only were the projects losing new users before they were even distributed, but the teams could hardly withstand the barrage of criticism. Social media exploded with outrage from the crowd that had been waiting several years for a giveaway from these L2s. People believed that it would be about like the last big airdrop from Arbitrum, but the objective reality didn’t live up to their expectations.
Good timing for the hype
Toward the end of 2024, the long-awaited material incentive was “dumped” on the DePIN farmers of the Grass protocol. Participants of the test network for 17 months shared their unspent Internet traffic and received points for it. A browser extension and later a desktop application collected data in the background for later sale to AI companies engaged in LLM training. The developers plan to release a mobile version of the app in the future. As of this writing, the second stage of the point accumulation program, Stage 2: Capturing The Web, is ongoing.
The acquired habit of selling the token immediately after release has played against users this time. On October 28, the largest Solana-based airdrop by the number of participants took place and GRASS was listed on major exchanges at a price of about $0.65. About 1.5 million wallets brandishing relatively small rewards could earn ~480% in 10 days, with the token reaching a value of $3.77 at its peak.
The Wynd Labs team needed to satisfy an audience of ~2.5 million users. Since the number of tokens issued simply could not be large, the only way out seemed to be intensive growth of their value. The timing was perfect – shortly before the US presidential election and bitcoin’s future assault on the $100,000 mark. In addition, the product is tied to three key themes of 2024: artificial intelligence, DePIN and the Solana ecosystem, which may have played a role.
For drophunters, the giveaway was the first positive wake-up call, but the main event that changed the sentiment in the “free money” market happened a month later.
On November 29, 2024, the Hyperliquid Labs project team, the main developer of L1-net and DEX Hyperliquid, held a giveaway of the HYPE native token. 310 million coins out of a maximum offering of 1 billion were intended for more than 94,000 users who interacted with the platform.
According to analytics platform ASXN Data, the majority of participants (56.6%) received up to 100 coins (~$3500 at the time of writing). The maximum giveaway category of 10,000 or more (~$350,000 at the time of writing) HYPE tokens went to ~4,000 users. On average, participants received 2881.73 tokens each, which at the time of writing is equivalent to ~$100,000, and the median giveaway value is close to $2250.
According to CryptoRank, 76.2% of the total is allocated to the community, with 23.8% of the team’s tokens being vested until 2028 with the first unlocking one year after launch.
The significant distribution of the asset in favor of the community rather than private investors and VCs is the main feature of Hyperliquid’s airdrop. The initial refusal to list on centralized exchanges is also a very unorthodox move: the first announcements on BingX, Bitget and KuCoin appeared only two weeks after the distribution.
The airdrop itself was arranged in a simple and straightforward manner. Users who pre-registered for the Genesis Event received tokens directly to the exchange’s spot account. And the joyful posts in social networks with screenshots that followed were as follows:
As of December 22, 2024, the HYPE token paired with USDC on the platform was worth $35, starting at $2. The price increase in 24 days was ~1700%.
What keeps users on Hyperliquid
The behavior of users after getting HYPE airdrop appears to be unclear. In most earlier cases, tokens were sold and mass exodus of users from the dapp was commonplace. Hyperliquid’s metrics for number of active users, total blocked asset value (TVL), and trading volume continue to break records.
On December 16, 2024, the daily inflow of new users to the decentralized exchange peaked at 7,000 wallets, and the cumulative number of new addresses at the time of writing has reached ~280,000.
Hyperliquid’s Layer 1 network is based on an optimized version of Cosmos SDK’s Tendermint consensus engine, enabling spot and futures trading with up to 50x leverage. L1 does not charge a gas fee and supports high-speed transactions. According to the team, the protocol’s throughput reaches 200,000 TPS with a block finalization time of 0.2 seconds. At this stage, the blockchain is capable of processing up to 100,000 trade orders per second.
The HyperBFT consensus algorithm used is inspired by the Hotstuff protocol, whose implementations utilize high-speed blockchains like Aptos and Sui. The native HYPE token acts as a payment for processing transactions on HyperEVM’s proprietary network.
The user experience is similar to centralized exchanges like Binance and differs for the better from DEX with open-ended futures like GMX. In Hyperliquid, all data is stored in the platform’s database and trading transaction records are implemented onchain. At this stage, the platform’s crosschain bridge only supports USDC transfers on the Arbitrum network. According to the developers, the security of the bridge is ensured by a set of validators.
Hyperliquid uses blockchain oracles like Chainlink to get timely price data on trading pairs. For open-ended contracts, the oracle updates the price of the underlying asset every three seconds; these are then used to determine funding rates. For spot trading, median asset values from multiple exchanges such as Binance, OKX, Bybit, Kraken, KuCoin, Gate.io and MEXC are taken into account.
The platform features copy-trading via vaults (Vaults). Experienced traders can create their own vaults, and users, in turn, can deposit funds to them and automatically reproduce the trading strategies of the leader, who receives 10% of the profit. HLP vaults are responsible for providing liquidity and a liquidation fund for the platform, as well as allowing you to become a liquidity provider.
According to DeFi Llama, at the time of writing, Hyperliquid is ranked 11th in the protocol rankings by TVL. The figure is ~$2.43 billion.
Conclusions
The Hyperliquid Labs team broadcasts an open position, faithful to the ideals of cypherpunk, with a high level of decentralization and user power. The project has demonstrated in practice that it is possible to build an efficient economic model without venture capital. What is important for the whole industry – this airdrop has planted hope for a reboot of the token distribution model.
It’s been a little over a month since Airdrop’s launch, and that’s not enough time to validate the strategy and sustainability of the platform. While the giveaway went smoothly and at a good time, it’s hard to envision something like this in a weak market cycle. Users are holding on to quite a lot of money for an unusually long time, as if reflecting the fear and greed index phase with a large bias towards the latter factor.
Decentralized exchanges with open-ended futures are a relatively new market trend, and so far Hyperliquid is leading this segment by a wide margin. But no less important: this project is simply interesting to watch.
This article was originally Posted on Coinpaper.com
