Hyperliquid is taking a major step toward full decentralization with the launch of its latest update, HIP-3. The move comes in the wake of recent market turmoil that has raised concerns about the reliability and transparency of centralized exchanges, particularly during periods of high volatility. As the crypto trading landscape continues to evolve, Hyperliquid’s initiative aims to create a fairer, more transparent market structure by distributing power more evenly among participants.
The HIP-3 upgrade introduces a permissionless framework that allows third-party developers to deploy perpetual decentralized exchanges (DEXs) directly on the Hyperliquid network. At the core of this update lies a rule-based on-chain governance model connected to the HyperEVM. Builders must meet specific on-chain requirements, including staking 500,000 HYPE tokens worth around $21 million to qualify. This model eliminates centralized control, empowering users and developers to have greater influence over market operations.
HIP-3’s launch follows one of the most significant liquidation events in the crypto market, exposing the weaknesses of centralized reporting systems. According to Hyperliquid CEO Jeff Yan, these systems often underestimate liquidation volumes because they fail to account for simultaneous transactions recording only one even if thousands occur in the same second. This lack of precision, he argues, distorts real market conditions and hinders investors’ ability to make informed decisions.
By addressing these transparency gaps, HIP-3 seeks to enhance data accuracy and strengthen trust. The update introduces decentralized governance, validator slashing, and position limit mechanisms to ensure the integrity and balance of the ecosystem.
Ultimately, HIP-3 represents more than a technical upgrade it signals a broader industry shift toward transparent, user-driven financial systems. By aligning operational transparency with on-chain governance, Hyperliquid is positioning itself at the forefront of decentralized market innovation, offering a credible alternative to traditional centralized exchanges.