Analyzing the Most Successful Airdrop of the Year: Why did Hyperliquid Become a Narration and Token Economy Textbook?

Hyperliquid, a project with both an EVM public chain and DEX identity, recently distributed its airdrop tokens. This project, which focuses on not having a VC background, distributed 31% of its tokens during the airdrop, and since then, the token has been soaring. In the year 2024, when many airdrops were being criticized, Hyperliquid’s airdrop distribution can be seen as a successful case. Currently, the market value of the token has surpassed the well-established derivative exchange on-chain, dydx, and the Solana chain’s Jupiter.

On November 28th, Hyperliquid officially announced the details of the airdrop. The TGE (Token Generation Event) for HYPE tokens took place on November 29th at 07:30 UTC. Hyperliquid itself is the only trading venue and does not provide any chips for listing on exchanges.

Regarding the token economics:
– 38.888% is allocated for community rewards.
– 31.0% is allocated for the genesis airdrop.
– 23.8% is allocated for core contributors.
– 6.0% is allocated for the Hyper Foundation budget.
– 0.3% is allocated for community grants.
– 0.012% is allocated for HIP-2 (which can be understood as providing liquidity for Hyperliquid).

Hyperliquid is a high-performance Layer 1 blockchain with its own proof-of-stake consensus algorithm called HyperBFT. It can process 200,000 transactions per second, with a final confirmation time of approximately 0.2 seconds. HYPE tokens will be used for paying gas fees and PoS staking on the chain.

The announcement emphasizes that there is no allocation for private investors, centralized exchanges, or market makers, which aligns with the narrative since the second half of this year against VC and centralized exchanges charging listing fees. The tokens allocated to core contributors will be locked for one year. Most of the unlocks will occur between 2027 and 2028, with some continuing after 2028. It is worth mentioning that Jeff Yan, co-founder of Hyperliquid, previously worked at Hudson River Trading, so he is quite familiar with high-frequency market making.

“I love places with fewer people.” HYPE’s point system benefits early users.

We will review the details of Hyperliquid’s airdrop plan. The first phase of Hyperliquid’s point system started on November 1st, 2023, and one million points were distributed weekly to active users. The allocation was determined based on trading volume. The points from the first phase snapshot were distributed on April 15th, 2024. Initially, Hyperliquid didn’t receive much attention from the Chinese community, so the points in the first few weeks were relatively less competitive. If one missed this phase, retail investors might not be able to compete with large holders and market makers.

The second phase involved distributing 700,000 points weekly for four months. In an announcement on May 29th, the official stated that points would be doubled during the period from May 1st to May 28th. The first snapshot of the second phase covered May 29th to June 4th. Additionally, Hyperliquid also had a referral code system, and the official announcement before the airdrop stated that witch addresses would be severely punished.

With a staggering distribution of 1.8 billion HYPE tokens, it has become the largest airdrop this year. As of now, the token price is approximately $8.24, with a fully diluted valuation of $8.24 billion and a circulating market cap of $2.79 billion, all from the airdrop. In comparison, dydX’s fully diluted valuation is approximately $1.28 billion, and Jupiter’s is $11.66 billion. However, some believe that the token’s trading is limited to Hyperliquid itself, so the price may be somewhat inflated.

Looking at the TVL (Total Value Locked) of the Hyperliquid chain, it is $1.43 billion, ranking tenth among all public chains. For a public chain that emerged within a year without institutional funding, this is quite remarkable. In addition to declaring no VC participation from the beginning and not leaving any chips for market makers or exchange listing fees, these features are appealing to retail investors. By distributing 31% of the tokens to airdrop participants, a good relationship is established with the community, creating buzz for the protocol. However, the considerable future selling pressure from the 31% airdrop cannot be overlooked.

The Daily Coin Research team also pointed out that Hyperliquid has become the project with the largest airdrop allocation after TGE, distributing tokens worth $1.8 billion. In comparison, Starknet’s was $1.6 billion, Arbitrum’s was $1.5 billion, dYdX’s was $1 billion, Wormhole’s was $1 billion, and Eigenlayer’s was $850 million.

The Hyperliquid ecosystem is also taking off, with PURR and the founder’s meme coin, both named Jeff, receiving significant attention.

Recently, Movement, which announced its token economics, stated that it would allocate 10% of its tokens for airdrops. The extent of the wealth creation effect that will result from this remains to be seen. However, a former Scroll researcher implied that Movement would provide a large number of chips to exchanges as listing fees. Although this has not been confirmed, it raises a warning.

(Crypto 8 o’clock: From technical disputes to macro L2 value issues, what are Rushi and the former Scroll researcher arguing about?)