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Market Share Plummets by 60% - Can Hyperliquid Stage a Comeback with HIP-3 and Builder Codes?
Original Article Title: Hyperliquid Growth Situation
Original Article Author: @esprisi0
Translation: Peggy, BlockBeats
Editor's Note: Hyperliquid once dominated the decentralized derivatives track, but in the second half of 2025, its market share plummeted rapidly, sparking industry attention: has it peaked, or is it positioning for the next stage? This article reviews Hyperliquid's three stages: from the ultimate dominance with a market share soaring to 80%, to strategic transformation and accelerated competition leading to a loss of momentum down to 20%, and then to a re-emergence centered around HIP-3 and Builder Codes.
The following is the original text:
Over the past few weeks, concerns about the future of Hyperliquid have escalated. The loss of market share, rapidly rising competitors, and increasingly crowded derivatives track have raised a key question: what exactly is happening beneath the surface? Has Hyperliquid already peaked, or is the current narrative overlooking deeper structural signals?
This article will dissect it one by one.
Stage One: Ultimate Dominance
From early 2023 to mid-2025, Hyperliquid consistently hit historical highs in key metrics and steadily increased its market share, thanks to several structural advantages:
A points-based incentive mechanism that attracted a large amount of liquidity; a first-mover advantage in launching new perpetual contracts (such as $TRUMP, $BERA), making Hyperliquid the most liquid venue for new trading pairs and the preferred platform for pre-listing trading (such as $PUMP, $WLFI, XPL). To not miss out on emerging trends, traders were compelled to flock to Hyperliquid, driving its competitive edge to its peak; best UI/UX experience among all perpetual contract DEXs; lower fees compared to centralized exchanges (CEXs); introduction of spot trading, unlocking new use cases; Builder Codes, HIP-2, and HyperEVM integration; achieving zero downtime even during major market crashes.
As a result, Hyperliquid's market share grew continuously for over a year, reaching a peak of 80% in May 2025.
Perpetual Contract Trading Volume Market Share data provided by @artemis
At that stage, the Hyperliquid team was significantly ahead of the entire market in innovation and execution speed, with no truly comparable products in the entire ecosystem.
The Rise of Liquidity-as-a-Service in the Second Stage and Accelerated Competition
Since May 2025, Hyperliquid's market share has plummeted sharply, dropping from around 80% to close to 20% of the trading volume by early December.
@HyperliquidX Market Share (Data Source: @artemis)
This relative loss of momentum against competitors can be attributed to several factors:
Strategic Shift from B2C to B2B
Hyperliquid did not double down on a pure B2C model, such as launching a proprietary mobile app or continually rolling out new perpetual contract products, but chose to pivot to a B2B strategy, positioning itself as the "AWS of Liquidity."
This strategy focused on building core infrastructure for external developers to use, such as Builder Codes for the front end and HIP-3 for launching new perpetual markets. However, this transformation essentially ceded the initiative for product deployment to third parties.
In the short term, this strategy did not perform ideally in attracting and retaining liquidity. The infrastructure was still in its early stages, adoption takes time, and external developers did not yet have the distribution capability and trust built up over the long term by the Hyperliquid core team.
Competitors Seizing the Opportunity of Hyperliquid's Transformation
Unlike Hyperliquid's new B2B model, competitors continued to maintain full vertical integration, allowing them to significantly accelerate their speed when launching new products.
Since they did not need to delegate execution, these platforms maintained full control over product releases while leveraging their established user trust to rapidly expand. As a result, they are more competitive than they were in the first stage.
This directly translates into market share growth. Competitors are now not only offering all products on Hyperliquid but also launching features on HL that have not yet gone live (such as Lighter launching spot markets, perpetual equities, and forex).
Incentives and "Hire-to-Liquidity"
Hyperliquid has gone over a year without running any official incentive programs, while its main competitors are still actively engaging. Lighter, currently leading in trading volume market share (about 25%), is still in its pre-TGE incentive season.
@Lighter_xyz Market Share (Source: @artemis)
In the DeFi space, liquidity is more “hire-to” than anywhere else. A significant portion of the volume flowing from Hyperliquid to Lighter (and other platforms) is likely incentive-driven, related to airdrop farming. Like most perpetual DEXs running incentive seasons, Lighter's market share is expected to decrease post-TGE.
Phase Three HIP-3 and the Rise of Builder Codes
As mentioned earlier, building the "AWS of liquidity" is not the short-term optimal strategy. However, in the long run, this model precisely positions Hyperliquid to potentially become the core hub of global finance.
While competitors have replicated most of Hyperliquid's current features, real innovation still stems from Hyperliquid. Developers building on Hyperliquid benefit from domain focus, allowing them to formulate more targeted product development strategies on an evolving infrastructure. On the other hand, protocols like Lighter that maintain complete vertical integration will face constraints when optimizing the development of multiple product lines simultaneously.
HIP-3 is still in its early stages, but its long-term impact has begun to materialize. Key participants include:
@tradexyz has launched perpetual equities
@hyenatrade recently deployed a trading terminal for USDe
More experimental markets are emerging, such as @ventuals offering pre-IPO exposure and @trovemarkets catering to niche speculative markets like Pokémon or CS:GO assets.
By 2026, it is expected that the HIP-3 market will capture a significant share of Hyperliquid's total trading volume.
HIP-3 Trading Volume (by Builder)
The key driver behind the eventual restoration of Hyperliquid's dominance is the synergistic effect between HIP-3 and Builder Codes. Any frontend integrated with Hyperliquid can instantly access the full HIP-3 market, providing users with unique products.
Therefore, developers have a strong incentive to list on the HIP-3 market as these markets can be distributed on any compatible frontend (such as Phantom, MetaMask, etc.) and tap into entirely new sources of liquidity. It's a perfect virtuous cycle.
The ongoing development of Builder Codes makes me more optimistic about the future, whether in terms of revenue growth or active user expansion.
Builder Codes Revenue (data source: @hydromancerxyz)
Builder Codes Daily Active Users (data source: @hydromancerxyz)
Currently, Builder Codes are primarily used by native crypto applications (such as Phantom, MetaMask, BasedApp, etc.). However, I anticipate a new class of super apps built on Hyperliquid to emerge in the future, aimed at attracting an entirely non-native crypto user base.
This is very likely to become the key path for Hyperliquid to enter the next stage of scaling, which will also be the focus of my next article.
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The X Chat will be available for download on the App Store this Friday. The media has already covered the feature list, including self-destructing messages, screenshot prevention, 481-person group chats, Grok integration, and registration without a phone number, positioning it as the "Western WeChat." However, there are three questions that have hardly been addressed in any reports.
There is a sentence on X's official help page that is still hanging there: "If malicious insiders or X itself cause encrypted conversations to be exposed through legal processes, both the sender and receiver will be completely unaware."
No. The difference lies in where the keys are stored.
In Signal's end-to-end encryption, the keys never leave your device. X, the court, or any external party does not hold your keys. Signal's servers have nothing to decrypt your messages; even if they were subpoenaed, they could only provide registration timestamps and last connection times, as evidenced by past subpoena records.
X Chat uses the Juicebox protocol. This solution divides the key into three parts, each stored on three servers operated by X. When recovering the key with a PIN code, the system retrieves these three shards from X's servers and recombines them. No matter how complex the PIN code is, X is the actual custodian of the key, not the user.
This is the technical background of the "help page sentence": because the key is on X's servers, X has the ability to respond to legal processes without the user's knowledge. Signal does not have this capability, not because of policy, but because it simply does not have the key.
The following illustration compares the security mechanisms of Signal, WhatsApp, Telegram, and X Chat along six dimensions. X Chat is the only one of the four where the platform holds the key and the only one without Forward Secrecy.
The significance of Forward Secrecy is that even if a key is compromised at a certain point in time, historical messages cannot be decrypted because each message has a unique key. Signal's Double Ratchet protocol automatically updates the key after each message, a mechanism lacking in X Chat.
After analyzing the X Chat architecture in June 2025, Johns Hopkins University cryptology professor Matthew Green commented, "If we judge XChat as an end-to-end encryption scheme, this seems like a pretty game-over type of vulnerability." He later added, "I would not trust this any more than I trust current unencrypted DMs."
From a September 2025 TechCrunch report to being live in April 2026, this architecture saw no changes.
In a February 9, 2026 tweet, Musk pledged to undergo rigorous security tests of X Chat before its launch on X Chat and to open source all the code.
As of the April 17 launch date, no independent third-party audit has been completed, there is no official code repository on GitHub, the App Store's privacy label reveals X Chat collects five or more categories of data including location, contact info, and search history, directly contradicting the marketing claim of "No Ads, No Trackers."
Not continuous monitoring, but a clear access point.
For every message on X Chat, users can long-press and select "Ask Grok." When this button is clicked, the message is delivered to Grok in plaintext, transitioning from encrypted to unencrypted at this stage.
This design is not a vulnerability but a feature. However, X Chat's privacy policy does not state whether this plaintext data will be used for Grok's model training or if Grok will store this conversation content. By actively clicking "Ask Grok," users are voluntarily removing the encryption protection of that message.
There is also a structural issue: How quickly will this button shift from an "optional feature" to a "default habit"? The higher the quality of Grok's replies, the more frequently users will rely on it, leading to an increase in the proportion of messages flowing out of encryption protection. The actual encryption strength of X Chat, in the long run, depends not only on the design of the Juicebox protocol but also on the frequency of user clicks on "Ask Grok."
X Chat's initial release only supports iOS, with the Android version simply stating "coming soon" without a timeline.
In the global smartphone market, Android holds about 73%, while iOS holds about 27% (IDC/Statista, 2025). Of WhatsApp's 3.14 billion monthly active users, 73% are on Android (according to Demand Sage). In India, WhatsApp covers 854 million users, with over 95% Android penetration. In Brazil, there are 148 million users, with 81% on Android, and in Indonesia, there are 112 million users, with 87% on Android.
WhatsApp's dominance in the global communication market is built on Android. Signal, with a monthly active user base of around 85 million, also relies mainly on privacy-conscious users in Android-dominant countries.
X Chat circumvented this battlefield, with two possible interpretations. One is technical debt; X Chat is built with Rust, and achieving cross-platform support is not easy, so prioritizing iOS may be an engineering constraint. The other is a strategic choice; with iOS holding a market share of nearly 55% in the U.S., X's core user base being in the U.S., prioritizing iOS means focusing on their core user base rather than engaging in direct competition with Android-dominated emerging markets and WhatsApp.
These two interpretations are not mutually exclusive, leading to the same result: X Chat's debut saw it willingly forfeit 73% of the global smartphone user base.
This matter has been described by some: X Chat, along with X Money and Grok, forms a trifecta creating a closed-loop data system parallel to the existing infrastructure, similar in concept to the WeChat ecosystem. This assessment is not new, but with X Chat's launch, it's worth revisiting the schematic.
X Chat generates communication metadata, including information on who is talking to whom, for how long, and how frequently. This data flows into X's identity system. Part of the message content goes through the Ask Grok feature and enters Grok's processing chain. Financial transactions are handled by X Money: external public testing was completed in March, opening to the public in April, enabling fiat peer-to-peer transfers via Visa Direct. A senior Fireblocks executive confirmed plans for cryptocurrency payments to go live by the end of the year, holding money transmitter licenses in over 40 U.S. states currently.
Every WeChat feature operates within China's regulatory framework. Musk's system operates within Western regulatory frameworks, but he also serves as the head of the Department of Government Efficiency (DOGE). This is not a WeChat replica; it is a reenactment of the same logic under different political conditions.
The difference is that WeChat has never explicitly claimed to be "end-to-end encrypted" on its main interface, whereas X Chat does. "End-to-end encryption" in user perception means that no one, not even the platform, can see your messages. X Chat's architectural design does not meet this user expectation, but it uses this term.
X Chat consolidates the three data lines of "who this person is, who they are talking to, and where their money comes from and goes to" in one company's hands.
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After the blockade of the Strait of Hormuz, when will the war end?
Before using Musk's "Western WeChat" X Chat, you need to understand these three questions
The X Chat will be available for download on the App Store this Friday. The media has already covered the feature list, including self-destructing messages, screenshot prevention, 481-person group chats, Grok integration, and registration without a phone number, positioning it as the "Western WeChat." However, there are three questions that have hardly been addressed in any reports.
There is a sentence on X's official help page that is still hanging there: "If malicious insiders or X itself cause encrypted conversations to be exposed through legal processes, both the sender and receiver will be completely unaware."
No. The difference lies in where the keys are stored.
In Signal's end-to-end encryption, the keys never leave your device. X, the court, or any external party does not hold your keys. Signal's servers have nothing to decrypt your messages; even if they were subpoenaed, they could only provide registration timestamps and last connection times, as evidenced by past subpoena records.
X Chat uses the Juicebox protocol. This solution divides the key into three parts, each stored on three servers operated by X. When recovering the key with a PIN code, the system retrieves these three shards from X's servers and recombines them. No matter how complex the PIN code is, X is the actual custodian of the key, not the user.
This is the technical background of the "help page sentence": because the key is on X's servers, X has the ability to respond to legal processes without the user's knowledge. Signal does not have this capability, not because of policy, but because it simply does not have the key.
The following illustration compares the security mechanisms of Signal, WhatsApp, Telegram, and X Chat along six dimensions. X Chat is the only one of the four where the platform holds the key and the only one without Forward Secrecy.
The significance of Forward Secrecy is that even if a key is compromised at a certain point in time, historical messages cannot be decrypted because each message has a unique key. Signal's Double Ratchet protocol automatically updates the key after each message, a mechanism lacking in X Chat.
After analyzing the X Chat architecture in June 2025, Johns Hopkins University cryptology professor Matthew Green commented, "If we judge XChat as an end-to-end encryption scheme, this seems like a pretty game-over type of vulnerability." He later added, "I would not trust this any more than I trust current unencrypted DMs."
From a September 2025 TechCrunch report to being live in April 2026, this architecture saw no changes.
In a February 9, 2026 tweet, Musk pledged to undergo rigorous security tests of X Chat before its launch on X Chat and to open source all the code.
As of the April 17 launch date, no independent third-party audit has been completed, there is no official code repository on GitHub, the App Store's privacy label reveals X Chat collects five or more categories of data including location, contact info, and search history, directly contradicting the marketing claim of "No Ads, No Trackers."
Not continuous monitoring, but a clear access point.
For every message on X Chat, users can long-press and select "Ask Grok." When this button is clicked, the message is delivered to Grok in plaintext, transitioning from encrypted to unencrypted at this stage.
This design is not a vulnerability but a feature. However, X Chat's privacy policy does not state whether this plaintext data will be used for Grok's model training or if Grok will store this conversation content. By actively clicking "Ask Grok," users are voluntarily removing the encryption protection of that message.
There is also a structural issue: How quickly will this button shift from an "optional feature" to a "default habit"? The higher the quality of Grok's replies, the more frequently users will rely on it, leading to an increase in the proportion of messages flowing out of encryption protection. The actual encryption strength of X Chat, in the long run, depends not only on the design of the Juicebox protocol but also on the frequency of user clicks on "Ask Grok."
X Chat's initial release only supports iOS, with the Android version simply stating "coming soon" without a timeline.
In the global smartphone market, Android holds about 73%, while iOS holds about 27% (IDC/Statista, 2025). Of WhatsApp's 3.14 billion monthly active users, 73% are on Android (according to Demand Sage). In India, WhatsApp covers 854 million users, with over 95% Android penetration. In Brazil, there are 148 million users, with 81% on Android, and in Indonesia, there are 112 million users, with 87% on Android.
WhatsApp's dominance in the global communication market is built on Android. Signal, with a monthly active user base of around 85 million, also relies mainly on privacy-conscious users in Android-dominant countries.
X Chat circumvented this battlefield, with two possible interpretations. One is technical debt; X Chat is built with Rust, and achieving cross-platform support is not easy, so prioritizing iOS may be an engineering constraint. The other is a strategic choice; with iOS holding a market share of nearly 55% in the U.S., X's core user base being in the U.S., prioritizing iOS means focusing on their core user base rather than engaging in direct competition with Android-dominated emerging markets and WhatsApp.
These two interpretations are not mutually exclusive, leading to the same result: X Chat's debut saw it willingly forfeit 73% of the global smartphone user base.
This matter has been described by some: X Chat, along with X Money and Grok, forms a trifecta creating a closed-loop data system parallel to the existing infrastructure, similar in concept to the WeChat ecosystem. This assessment is not new, but with X Chat's launch, it's worth revisiting the schematic.
X Chat generates communication metadata, including information on who is talking to whom, for how long, and how frequently. This data flows into X's identity system. Part of the message content goes through the Ask Grok feature and enters Grok's processing chain. Financial transactions are handled by X Money: external public testing was completed in March, opening to the public in April, enabling fiat peer-to-peer transfers via Visa Direct. A senior Fireblocks executive confirmed plans for cryptocurrency payments to go live by the end of the year, holding money transmitter licenses in over 40 U.S. states currently.
Every WeChat feature operates within China's regulatory framework. Musk's system operates within Western regulatory frameworks, but he also serves as the head of the Department of Government Efficiency (DOGE). This is not a WeChat replica; it is a reenactment of the same logic under different political conditions.
The difference is that WeChat has never explicitly claimed to be "end-to-end encrypted" on its main interface, whereas X Chat does. "End-to-end encryption" in user perception means that no one, not even the platform, can see your messages. X Chat's architectural design does not meet this user expectation, but it uses this term.
X Chat consolidates the three data lines of "who this person is, who they are talking to, and where their money comes from and goes to" in one company's hands.
The help page sentence has never been just technical instructions.
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