How Hyperliquid Succeeded by Going Against Crypto's Ideology First Approach - Unchained Recap

Podcast: Unchained

Published: 2026-03-12

Duration: 59 min

Guests: Luca Netz

Summary

Hyperliquid's success stems from prioritizing liquidity and functionality over strict adherence to decentralization. This pragmatic approach enabled them to build a highly liquid, competitive decentralized exchange and unlock new markets like permissionless trading.

What Happened

Hyperliquid has emerged as a standout decentralized exchange (DEX) by building its own Layer 1 chain, which enables a high-throughput, order-book-based trading system. Unlike many crypto projects that prioritize decentralization ideology, Hyperliquid focused on creating a liquid, functional platform, which has allowed it to succeed where others have failed. Its oil-linked perpetual contract, CLUSDC, recently recorded $1.2 billion in daily volume, highlighting the platform's growing appeal.

The hosts reflect on how earlier efforts to tokenize commodities, such as Synthetix's attempt to launch an oil asset in 2021, struggled due to inadequate infrastructure and liquidity. However, Hyperliquid's emphasis on creating a single, highly liquid venue has made previously unfeasible ideas, like NFT perps, potentially viable again. The platform's success demonstrates the importance of combining technical innovation with liquidity aggregation to unlock new possibilities in DeFi.

The conversation also delves into the broader implications of Hyperliquid's approach, with the hosts noting that the crypto industry is maturing. Teams are now increasingly prioritizing business fundamentals over ideological purity. Hyperliquid exemplifies this shift by starting with a more centralized approach to ensure functionality and later introducing permissionless markets to empower other builders.

The episode explores how the lack of standardized structures in crypto tokens has stymied the industry's growth. The hosts argue that the crypto market needs clearer disclosures, rights for token holders, and accountability to attract institutional capital and unlock long-term value. They see Hyperliquid as a potential model for this evolution, as its pragmatic approach has led to measurable success without abandoning the ideals of permissionless technology.

The discussion also highlights Pudgy Penguins' new browser-based game, Pudgy World, which integrates blockchain technology in a frictionless manner. The game allows users to create and interact with digital penguin characters tied to NFTs, but it avoids overwhelming users with crypto jargon. Pudgy Penguins' CEO, Luca Netz, explains the brand's philosophy of using crypto as a backend technology rather than a user-facing hook.

The episode concludes with a broader discussion about the future of Ethereum and tokenized equity. The hosts speculate that Ethereum's innovation pace might accelerate dramatically due to advancements in AI, potentially enabling its long-term roadmap to be completed much sooner. They also discuss the growing trend of tokens transitioning to equity-like structures and the importance of balancing decentralization with practical business needs.

Key Insights

• Hyperliquid built its own Layer 1 chain to support an order-book-based trading system, prioritizing liquidity over decentralization ideology. This approach enabled its oil-linked perpetual contract, CLUSDC, to hit $1.2 billion in daily volume, succeeding where earlier attempts like Synthetix's 2021 oil asset failed.
• By aggregating liquidity into a single venue, Hyperliquid made concepts like NFT perpetual contracts feasible again, solving the infrastructure and fragmentation issues that sunk previous commodity tokenization efforts.
• Crypto teams are increasingly trading ideological decentralization for practical functionality, as seen in Hyperliquid's decision to start centralized for usability before rolling out permissionless markets to support other builders.
• Pudgy Penguins’ browser game, Pudgy World, ties digital penguin characters to NFTs while hiding crypto jargon from users. CEO Luca Netz believes crypto is more effective as invisible backend technology than as a consumer-facing feature.

Key Questions Answered

What makes Hyperliquid's approach to decentralized exchanges unique?

Hyperliquid built its own Layer 1 chain to support a high-throughput, order-book-based trading system, prioritizing liquidity and functionality over strict decentralization. This strategy has enabled it to succeed in launching high-volume markets like oil-linked perpetuals.

How does Pudgy Penguins integrate blockchain technology into its new game?

Pudgy Penguins' Pudgy World game uses blockchain technology as a backend, allowing users to create NFT-based characters without overwhelming them with crypto jargon. The goal is to offer a seamless experience while gradually introducing users to crypto features.

Why are some crypto projects turning tokens into equity?

Projects like Across are exploring the idea of converting tokens into equity to provide clearer rights and disclosures for holders. This approach aims to enhance market efficiency and attract institutional capital by addressing the current lack of standardized token structures.