degenpurr.hl @degenhl_ - Twitter Profile

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8 months ago

Haven’t seen enough discussion around HIP-5, so here’s why it actually matters for @HyperliquidX , $HYPE, and the whole builder ecosystem. Right now ~99% of protocol fees auto-buy HYPE via AF-1. HIP-5 adds AF-2: a staker-governed assistance fund that starts by redirecting 1% of fees (ramping to 5%) into continuous buybacks of Strict List tokens (HYPE, PURR, HFUN, etc.), allocated in real time by HYPE staker “gauge” votes. 95%+ of fees still go to $HYPE buys. The motivation: Hyperliquid isn’t just a perp exchange anymore. There’s Hypercore / HyperEVM and a growing set of native protocols that help the system (lending, LSDs, asset onboarding) but don’t always monetize directly. Their spot tokens can end up thin and illiquid even if the protocol is crucial. AF-2 uses a small slice of the same fee stream that powers $HYPE to bootstrap these ecosystem assets and make Hyperliquid a strictly better place to build. On the numbers: at roughly $91M in monthly fees, a 5% redirect would mean ~$55M/year of targeted buybacks, while the remaining 95% (the vast majority) keeps auto-buying $HYPE. Simulations with ~$100K/day redirected show almost no change in HYPE’s price trajectory (market depth absorbs it) but a meaningful uplift for smaller assets like $PURR. In other words, you trade a marginal reduction in HYPE buy pressure for much healthier liquidity and signaling across the Strict List. Governance is where it gets interesting. Voting power is proportional to staked HYPE. Stakers can split their votes across any eligible Strict List token (including HYPE itself), adjust them at any time, and their votes persist until updated—no epochs, no “missed this round”. There’s a 7-day warmup period on deployment so AF-2 only starts executing after preferences are in, rather than defaulting to some arbitrary allocation. LSDs are deliberately excluded from AF-2 voting by default. They only regain voting rights if they implement verifiable, holder-level governance where underlying stakers (not operators or separate governance token holders) decide how the HYPE is voted. That’s important: it stops a handful of intermediaries from quietly capturing a fee stream that’s supposed to represent the will of individual stakers. Risk design is fairly conservative: AF-2 is capped at 5% of fees and restricted to Strict List tokens that have already passed Hyperliquid’s vetting + builder auction. Buys are executed TWAP-style to minimize slippage and volatility. Even if only a minority of HYPE stakers vote, 100% of AF-2 still gets allocated via their preferences. And if the community ever feels HYPE needs more direct support, stakers can simply route AF-2 back to HYPE itself. Zooming out, HIP-5 turns $HYPE staking into a real coordination layer, not just a passive yield mechanism: builders compete for on-chain, programmatic buy pressure; stakers decide which projects deserve a slice of future Hyperliquid revenue; and the entire process is transparent and programmable instead of being handled via off-chain grants or validator backroom deals. HIP-5 was authored by @Ericonomic, @CalebAndersDev, @CFrugho, @0xHakai_, @FSobrini and @HansonBirringer, with input from long-time Hyperliquid community members.

degenhl_'s tweet photo. Haven’t seen enough discussion around HIP-5, so here’s why it actually matters for @HyperliquidX , $HYPE, and the whole builder ecosystem.

Right now ~99% of protocol fees auto-buy HYPE via AF-1. HIP-5 adds AF-2: a staker-governed assistance fund that starts by redirecting 1% of fees (ramping to 5%) into continuous buybacks of Strict List tokens (HYPE, PURR, HFUN, etc.), allocated in real time by HYPE staker “gauge” votes. 95%+ of fees still go to $HYPE buys.

The motivation: Hyperliquid isn’t just a perp exchange anymore. There’s Hypercore / HyperEVM and a growing set of native protocols that help the system (lending, LSDs, asset onboarding) but don’t always monetize directly. Their spot tokens can end up thin and illiquid even if the protocol is crucial. AF-2 uses a small slice of the same fee stream that powers $HYPE to bootstrap these ecosystem assets and make Hyperliquid a strictly better place to build.

On the numbers: at roughly $91M in monthly fees, a 5% redirect would mean ~$55M/year of targeted buybacks, while the remaining 95% (the vast majority) keeps auto-buying $HYPE. Simulations with ~$100K/day redirected show almost no change in HYPE’s price trajectory (market depth absorbs it) but a meaningful uplift for smaller assets like $PURR. In other words, you trade a marginal reduction in HYPE buy pressure for much healthier liquidity and signaling across the Strict List.

Governance is where it gets interesting. Voting power is proportional to staked HYPE. Stakers can split their votes across any eligible Strict List token (including HYPE itself), adjust them at any time, and their votes persist until updated—no epochs, no “missed this round”. There’s a 7-day warmup period on deployment so AF-2 only starts executing after preferences are in, rather than defaulting to some arbitrary allocation.

LSDs are deliberately excluded from AF-2 voting by default. They only regain voting rights if they implement verifiable, holder-level governance where underlying stakers (not operators or separate governance token holders) decide how the HYPE is voted. That’s important: it stops a handful of intermediaries from quietly capturing a fee stream that’s supposed to represent the will of individual stakers.

Risk design is fairly conservative: AF-2 is capped at 5% of fees and restricted to Strict List tokens that have already passed Hyperliquid’s vetting + builder auction. Buys are executed TWAP-style to minimize slippage and volatility. Even if only a minority of HYPE stakers vote, 100% of AF-2 still gets allocated via their preferences. And if the community ever feels HYPE needs more direct support, stakers can simply route AF-2 back to HYPE itself.

Zooming out, HIP-5 turns $HYPE staking into a real coordination layer, not just a passive yield mechanism: builders compete for on-chain, programmatic buy pressure; stakers decide which projects deserve a slice of future Hyperliquid revenue; and the entire process is transparent and programmable instead of being handled via off-chain grants or validator backroom deals.

HIP-5 was authored by @Ericonomic, @CalebAndersDev, @CFrugho, @0xHakai_, @FSobrini and @HansonBirringer, with input from long-time Hyperliquid community members.

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