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As the leading player in the crypto exchange market, Binance currently dominates in trading volume, user visits, and average liquidity. However, the upcoming HIP-3 upgrade for Hyperliquid is being touted as a catalyst that could propel the decentralized exchange (DEX) into a competitive position, potentially even surpassing Binance.
How HIP-3 Expands Hyperliquid’s Reach Into TradFi
The significance of HIP-3 lies in its ability to decentralize market creation, fostering an environment ripe for permissionless innovation. Traditional perpetual DEXs and centralized exchanges (CEXs) like Binance have historically relied on opaque listing processes, which restrict growth to a limited selection of assets.
HIP-3 aims to transform this approach by allowing anyone to launch a full perpetual DEX on HyperCore, the CEX’s custom-built layer-1 (L1) blockchain.
This includes customizable features such as order books, oracles, leverage limits (up to 20x), and various collateral types, contingent upon staking HYPE and successfully participating in Dutch auctions for new assets.
In addition to decentralizing asset creation, HIP-3 expands Hyperliquid’s scope beyond the realm of crypto. The upgrade encompasses traditional financial assets, including stocks, forex, and commodities, effectively blurring the lines between decentralized finance (DeFi) and traditional finance (TradFi).
According to analysts, this could potentially attract millions of retail stock traders and potential trillions in inflows by those who are seeking 24/7 access to zero-middleman perpetual trading with substantial liquidity.
Binance May Lose Its Top Spot
Moreover, HIP-3 is set to create a “virtuous economic flywheel” for the HYPE token. By requiring the staking of 500,000 HYPE tokens per DEX, the upgrade would lock approximately 20% of the circulating supply if 100 projects are deployed.
This staking mechanism, along with validator-voted slashing for misconduct, ensures that only quality projects are launched. Deployers stand to earn up to 50% of trading fees, incentivizing high-volume markets that not only boost protocol revenue but also contribute to HYPE buybacks.
Industry analysts, including social media commentator Andy, predict that Binance’s top position is at risk of being supplanted by a combination of “well-regulated” centralized exchanges and Hyperliquid.
This narrative is gaining traction, particularly in light of the recent October 10 crypto market crash, which caused billions in losses for traders. While Binance struggled with technical difficulties, Hyperliquid reportedly maintained 100% uptime with no bad debt, as highlighted by founder Jeff Yan.
Concerns Over Liquidation Transparency
As reported earlier this week by NewsBTC, Yan raised concerns over a troubling trend among certain centralized exchanges, claiming that many underreport user liquidations.
Using Binance as an example, Yan pointed out that even when thousands of liquidation orders occur simultaneously, only one is typically reported due to limitations in their data stream.
Despite Hyperliquid’s ambitious vision and the promising features of HIP-3, significant gaps remain in trading volume and user engagement compared to Binance.
However, the recent technical challenges faced by Binance could shift investor sentiment, prompting a search for more innovative alternatives in the crypto exchange sector.
At the time of writing, the DEX’s native token, HYPE, is trading at $38.78, having recorded losses of 15% over the past week. Similarly, Binance Coin (BNB) is trading at $1,160, representing a loss of 10% over the same period.
Featured image from Shutterstock, chart from TradingView.com
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