Web3Factory @w3bfactory - Twitter Profile

Web3Factory @w3bfactory

about 1 year ago

From home rigs to industrial farms, mining is the backbone of crypto. Here’s why. https://t.co/pOMbbOiAlc

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Web3Factory @w3bfactory

about 1 year ago

Not all blockchains are built the same. Discover which type is powering your next move. https://t.co/Z2MUiWgE5i

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Web3Factory @w3bfactory

about 1 year ago

Spot the red flags before your crypto vanishes. Don’t let a rug pull catch you off guard. https://t.co/F3OfloZnv9

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Web3Factory @w3bfactory

about 1 year ago

Ever wonder who profits between the bid and ask? The answer is in the spread. https://t.co/XV5j5tt6g8

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Web3Factory @w3bfactory

about 1 year ago

w3bfactory's tweet photo. https://t.co/31RBBbgWIQ

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Web3Factory @w3bfactory

over 1 year ago

Curious about selling options ? Get to know more down below https://t.co/JaHrqYg4dX

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Web3Factory @w3bfactory

over 1 year ago

What happened on Hyperliquid ? A few weeks ago, a mysterious trader suspected to be linked to one or many of the biggest CEXs (notably Binance, OKX, Bybit, and MEXC) executed a coordinated strategy on Hyperliquid involving three accounts and around $7M in deposits. Research by @ZachXBT on X shows that the funds were directly linked to these exchanges, as seen here: His goal ? Exploit the HLP’s weaknesses on an illiquid coin called JELLY, that lacked volume despite still being listed on Hyperliquid. (HLP is the native vault of the AMM strategy of Hyperliquid. If you want to know more about HL and the HLP, don’t hesitate to check our latest article on the subject: https://t.co/GLYzZHc4Sp ) What was his strategy ? Within five minutes, the accounts opened conflicting leveraged positions on the low-liquidity JELLY token: - Two long positions: Account 1 (0x20e8fD36dcdEF8DfbB983B0bc06c658105b9a808) opened a $2.15M long position Account 2 (0x67fe6F372c2Bd7ce0AA660144568F80A7cD85CA2) opened a $1.9M long position - One short position: Account 3 (0xde9593Fe5cDC5Cb0917f5d5618A111F1174f5c91) opened a $4.1M short position This setup allowed the trader to artificially amplify volatility while hedging directional risk. This means he was not exposed to the changes in price from the coin, and exploited mainly its biggest counterpart, the HLP vault. As JELLY’s price surged +400%, the $4.1M short position entered liquidation. However, the size exceeded normal liquidation capacity, forcing Hyperliquid’s native Vault to absorb the position. For a few hours, HLP took the position with no directional hedge whatsoever, generating for itself and the people who had deposited in the vault to endure a large downside P&L. During the price spike, the attacker attempted to withdraw profits, but it came at a cost : All the 16 validators ultimately agreed to force-close the JELLY market order at $0.0095 (the short entry price), erasing all unrealized PnL for the attacker. The main problem is that the attacker had millions of $ in unrealized P&L, the oracle price visible on the green line did not nearly match the actual price of JELLY (in red). This decision from the HL validators proved that they care more about their users and the safety of the DEX than they do about decentralization. After overriding the oracle price to save its users, Hyperliquid basically chose to test the market on a much more important principal: Decentralization vs. Product Now, what’s next for HL and the ecosystem ? The decision to prioritize protecting HLP value sends a clear signal to depositors that the vault will capture full upside while being shielded from significant downside risks. This "validator put" mechanism is likely to attract more capital into HLP, driving yields lower as over-investment occurs. Even tough this may seem positive for the Hyperliquid ecosystem, it might induce more systemic risk, by shifting the risk from left-tailed to even further left-tailed risk. By bailing out HLP during those types of events, Hyperliquid may inadvertently suppress competition among active market makers (MMs). Other MMs lack access to the liquidation flow benefits and do not enjoy the guarantees provided by the validator put, making it less attractive for them to compete effectively on Hyperliquid. That could dry out the liquidity for some if not many pairs on HL. While these actions may stabilize HLP in the short term, they could have adverse consequences for Hyperliquid's broader ecosystem. Reduced MM competition and distorted risk-reward dynamics may harm both the exchange and its Layer 1 infrastructure in the long run. Stay tuned for more articles & explanation threads at https://t.co/XXlrdDXuEP

w3bfactory's tweet photo. What happened on Hyperliquid ?

A few weeks ago, a mysterious trader suspected to be linked to one or many of the biggest CEXs (notably Binance, OKX, Bybit, and MEXC) executed a coordinated strategy on Hyperliquid involving three accounts and around $7M in deposits. Research by @ZachXBT on X shows that the funds were directly linked to these exchanges, as seen here:

His goal ? Exploit the HLP’s weaknesses on an illiquid coin called JELLY, that lacked volume despite still being listed on Hyperliquid.

(HLP is the native vault of the AMM strategy of Hyperliquid. If you want to know more about HL and the HLP, don’t hesitate to check our latest article on the subject: https://t.co/GLYzZHc4Sp )

What was his strategy ?

Within five minutes, the accounts opened conflicting leveraged positions on the low-liquidity JELLY token:

- Two long positions:
Account 1 (0x20e8fD36dcdEF8DfbB983B0bc06c658105b9a808) opened a $2.15M long position

Account 2 (0x67fe6F372c2Bd7ce0AA660144568F80A7cD85CA2) opened a $1.9M long position

- One short position:
Account 3 (0xde9593Fe5cDC5Cb0917f5d5618A111F1174f5c91) opened a $4.1M short position

This setup allowed the trader to artificially amplify volatility while hedging directional risk. This means he was not exposed to the changes in price from the coin, and exploited mainly its biggest counterpart, the HLP vault.

As JELLY’s price surged +400%, the $4.1M short position entered liquidation. However, the size exceeded normal liquidation capacity, forcing Hyperliquid’s native Vault to absorb the position. For a few hours, HLP took the position with no directional hedge whatsoever, generating for itself and the people who had deposited in the vault to endure a large downside P&L.

During the price spike, the attacker attempted to withdraw profits, but it came at a cost :

All the 16 validators ultimately agreed to force-close the JELLY market order at $0.0095 (the short entry price), erasing all unrealized PnL for the attacker.

The main problem is that the attacker had millions of $ in unrealized P&L, the oracle price visible on the green line did not nearly match the actual price of JELLY (in red).

This decision from the HL validators proved that they care more about their users and the safety of the DEX than they do about decentralization.

After overriding the oracle price to save its users, Hyperliquid basically chose to test the market on a much more important principal:

Decentralization vs. Product

Now, what’s next for HL and the ecosystem ?

The decision to prioritize protecting HLP value sends a clear signal to depositors that the vault will capture full upside while being shielded from significant downside risks. This "validator put" mechanism is likely to attract more capital into HLP, driving yields lower as over-investment occurs. Even tough this may seem positive for the Hyperliquid ecosystem, it might induce more systemic risk, by shifting the risk from left-tailed to even further left-tailed risk.

By bailing out HLP during those types of events, Hyperliquid may inadvertently suppress competition among active market makers (MMs). Other MMs lack access to the liquidation flow benefits and do not enjoy the guarantees provided by the validator put, making it less attractive for them to compete effectively on Hyperliquid. That could dry out the liquidity for some if not many pairs on HL.

While these actions may stabilize HLP in the short term, they could have adverse consequences for Hyperliquid's broader ecosystem. Reduced MM competition and distorted risk-reward dynamics may harm both the exchange and its Layer 1 infrastructure in the long run.

Stay tuned for more articles & explanation threads at https://t.co/XXlrdDXuEP

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Web3Factory @w3bfactory

over 1 year ago

w3bfactory's tweet photo. https://t.co/3it8Crllpw

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Web3Factory @w3bfactory

over 1 year ago

Today is friday, you already know what that means We received @NotBearTeddy, dev in the Starknet ecosystem for a special interview, going through his first contact with development, to landing a job at Bountive https://t.co/0ZCqP5CbGs

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Web3Factory @w3bfactory

over 1 year ago

Understanding Options : a product that most people underestimate https://t.co/d76PUPT8wD

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Web3Factory @w3bfactory

over 1 year ago

Fridays will be dedicated to written interviews with a lot of interesting people from now on, hope you appreciate it Let us know who you would like to see on this format