Jeff Yan on how Hyperliquid became the dominant on-chain perps venue with 11 people and zero VC funding

an idea of where Hyperlid is going in the next 6 to 12 months. So, so before we play this, let me tell you about numeralhq. com. Sales tax on autopilot. Spend less than 5 minutes per month on sales tax compliance. and I will kick it over to the production team to play our interview with Jeff from Welcome to the show.

Thank you so much for joining us. Um, our audience here already has a soundboard by the way, so do not let that uh, you know, you go alert. Yes. Yes. Yes. Um but uh I would love to get the introduction um from you for our audience which is technative but maybe a little bit less cryptonative.

And so if you could just kind of break down a little bit of like how you're describing yourself, your journey, your business at a high level and then we can go into a bunch of different directions. Sure. So maybe starting it might make sense to start with a bit of an origin story. So we'd love that.

Um yeah so I guess mid 2022 um we were a small team doing trading in crypto and we're looking at DeFi and CFI and had already kind of a sense that we wanted to build something in DeFi because of the very nent nature of the product at that time.

basically all the products were kind of bad and uh uh we were traders and we felt like we we could make it better and the basically the the sort of impetus for going all in and building Hyperloop was was when FTX collapsed.

It felt like suddenly the the previously very academic concerns in crypto around decentralization and self- custody. It felt like people wrote about it but didn't really care and all of a sudden it was very viscerally important.

uh you know it's like not your keys not your coins and uh we had strayed very far from the original ethos of um Satoshi and Bitcoin and so um yeah we thought we thought like the world was ready for to really like trade trade crypto in the way it it it's meant to be which is like peer-to-peer in a in a self-codial decentralized place and so I guess fast forward to this day Hyperlid is I think the primary onchain venue for price discovery um it's it's a fully onchain financial system and so our kind of motto always is we want to build something that can ultimately house all finance.

And so happy to go into that more later, but um yeah, it's a blockchain. It's not just not just an exchange, but the I guess it's best known as uh the place where people trade perpetuals on chain. It does more than a billion dollars in revenue a year and it it kind of has been the first in many ways.

And so happy to also get into like what's interesting about it.

It's it's fascinating to hear you saying like it most founders that come on say like we but it's clear that you see yourself as more of like a custodian of this thing that you're building and releasing is is that the correct frame of mind is that how you think about this? Yeah.

So I think we we took a lot of inspiration from Satoshi. I think he or you know that whoever whoever built Bitcoin they not sure but Satoshi we'll just say Satoshi uh was very unique.

I think Bitcoin was the first in so many ways, but what one of one of the main ways in which it was the first was that it was it's not a it's not a product like you said. It's not it's not a top- down company. It's it's a protocol.

And I think DeFi and crypto in general like a lot of it's kind of it was inspired obviously everything comes from Bitcoin and there will never be another Bitcoin.

But I think there's been a lot of kind of like top down like web to totally standard type approaches in crypto like if you look at centralized exchanges that's another great example. They're very good businesses, but they're like mega corporations. They're yeah, they're not very like cryptonative in that sense.

And so we we take a lot of inspiration from from Satoshi. And so we Hyperlood really is uh what we think like credibly neutral protocol which will ultimately be the rails that kind of all the finance kind of upgrades their tech stack to use. Yeah. So no VCs is at least the lore. Uh can you unpack that?

Is that just because like you're so capital efficient you don't need to raise or is there some sort of particular philosophy around the role of venture capital in crypto? Um how how are you thinking about that equation? Um so it it really does go back to Satoshi again.

I think the Bitcoin would not be Bitcoin if he had raised uh series A even if best investors in the world you know sickest cap table ever still still would I I would say that would not Bitcoin would not be Bitcoin and so the I think I think VC's actually provide a really important service to the world they allocate capital efficiently they help a lot of things would like the world would not be not always yeah as a whole I think they've done more good than than harm I think I would definitely agree with And uh in this particular case I think when you're when when the thing being built is a a neutral protocol on which on which something important as important as money like ought to live and transact I think it's the neutrality is more important than everything and I think the there's a path dependence to that right like if if there are insiders from day one it doesn't matter how much dispersion of supply mind share talent etc there is the the sort of like the big bang moment will always be there and will always sort of like a scar on the record of the thing and like this doesn't this doesn't matter for almost anything that is being built and I think raising capital and hyperscaling is is a very valuable strategy but I think when you're building something that needs to be incredibly neutral in the long term and the history matters I think we'd rather go slow and do it right than but wait so I want to stay on this like uh h like you can't keep VCs from just building a position in a public token right and so is it more about like the vibe around like insiders Because what if like a big tier one firm was just like we want a 20% stake and we're going to buy the token on the free market and build a position and it's going to feel and perform just like any other asset in our portfolio.

Um is has that happened? Would that be irrational? Is there something where like legally they can't do it because of the fund structure? Like be very expensive. Yeah. But I mean VCs don't shy away from expensive deals. Like we see it all the time. Yeah. But you can make that argument for Bitcoin as well, right?

Like they're very big holders of Bitcoin. And I think a lot of VCs were very early. Maybe not a lot, but I know I know several VCs were very early and own a lot of it. So I don't think it's it's not about who owns it. It's about the the genesis and the origin. It's it's more of a principle. Yeah.

Like it's you can't pre you can't on the one hand preach that this is going to be a platform that is neutral that like anyone can come and build on and on on another hand say like oh but like these people had a chance to build first.

Y um it's it's not perfect there will never be another Bitcoin like sure there there is a practical matter to it which is that you know like anything after Bitcoin needs to launch in a like very competitive market there needs to be innovation and something needs to fund that etc.

But to the extent that we can approximate the the ideals of of Satoshi, I think it's still worth striving for. No, no. How much did you know exactly what you wanted to build and then just executed against that plan versus iterate to get where you are today? Um I would say very little.

So, so the story there is we we just wanted to come and do something that we could do well and even doing one thing well is very very hard. So we were we were laser focused at first.

We just kind of looked around and thought like we kind of we weren't afraid to dream big but we were kind of practical about We just thought like okay like what's one really really big thing in crypto that we think could benefit from a fully permissionless platform and per trading was the obvious one I think it was probably doing more than 50% of the revenue in all of crypto back then sort of back of the envelope calculations and so we tackled that initially and I think we we one big thing is like we weren't willing to compromise even at the very beginning on how the thing ought to work.

So you didn't you you you learned uh the things not to do from FTX. Uh you learn you were inspired by Satoshi. Was there any company uh offchain uh that that was particularly inspiring? Yeah, a bunch. I mean I think every big company, every big tech company I think is like uh very inspirational to me.

Uh I I I grew up in the Bay Area so it's it's it's hard to not kind of be sort of motivated by that. I think Amazon was a really big one that what inspired me was that they they basically like their their very first principles and like driven but al and also very practical.

And I think when sort of I I assume it was Bezos but maybe someone else in the or realized that they had built so much of the internet stack that they it would be a shame if they if that just went to this like retail business like why not sort of abstract it a bit and create the right API so that anyone can leverage this like amazing infrastructure they've built and you know that kind of being the birth of AWS and cloud computing.

I think that's like such an amazing story and that's inspired. I think like that's kind of like how we think of Hyperlquid was that like it started as you know a blockchain optimized just to be able to do on train purpose trading because no other infrastructure could do that. Yeah.

and sort of realizing at some point that a lot of other things in finance ultimately all of finance we think can benefit from this high performance decentralized ledger and yeah so I I like liquid infrastructure like for liquidity is one way to think about like what what do you think about Bezos's backs uh background at de Shaw he was a trader uh that probably informs a little bit of the shape of Amazon I imagine versus say Google where they come out of research, PhDs.

Uh what what were you working on beforehand? Do you feel like you brought a trader mindset into the you know entrepreneurial journey that you went on? Yeah. Not just the product layer. Yeah. Yeah. I think so.

I think trading well I don't really know what kind of trading Bezos was doing but at least with more like automated trading I think there's a lot of it it feels a bit like doing physics kind of it's like you do a lot of approximations you don't you can't get anything exactly right because markets are are basically there there there's a lot of randomness right there's more there's more noise than there is signal and that that's kind of what makes it beautiful it's like trying to sift through the the noise and it's it's very different from like supervised learning setups in AI where you kind of have like in roughly infinite data and um it's it's very high quality.

So I do think the real world is like building hyperl has felt kind of like that in the sense that you you often it feels like we we we're actually like not very data driven at all. It's basically all intuition.

It's just like we just think really hard about how the world should be and we just try to do the best thing there. We'll obviously like adapt to data.

Like if something happens and it's like obviously bad like we will we we aren't like delusional and we'll like incorporate it readily but we won't like go out of our way to try to create data where it doesn't make sense to uh if that makes sense. So like AB testing is like something that we just kind of like never do.

Oh yeah, that's funny. Uh you you've mentioned it a few times but uh can we just get uh like a firm backstory definition on pers uh for our audience? Why? What what are they? Why are they so exciting? Yeah. Um let's see.

So for for someone who really has no finance like you you want like a sort of very very like from zero explanation. Yeah. Yeah. That'd be great. Okay. So if you think about what is traded today by people that are kind of like you can trade the like thing itself which is like an Amazon stock, right? Yeah.

Um, if you want some sort of like leverage, which is to say like make more bang for your buck, then the two ways people go about doing it is one they trade futures, which are these are traded mostly on indices. So the big like the S&P 500. Yep.

And these things basically say like two people put up cash and they just agree to pay each kind of like um they kind of like a long and a short kind of create a contract and then if moves by $1, then the long side say makes $20 and the short side loses $20. That's a future.

And then they're they're often also settled in some like underlying thing. So, it's like we're trading on uh the like what the price of S&P is 3 months from now or like 3 months from now like you'll deliver one cow. Yeah. Yeah. Yeah. Yeah.

I think of it as like the the seabbot like if I'm trading corn futures and I let the contract run out like at some point I have to actually take delivery of all the corn. But all most of the Wall Street traders have figured out like to never do that.

But you hear about these weird scenarios where it's like, oh, the price of oil was negative, so someone bought it for negative money and then like wound up having to get all this oil and stuff. Um, but obviously in in a purely financial context, uh, that's not that that's not the outcome.

But, uh, has this just unlocked higher frequency trading, more leverage, uh, a different shape of trader, something more quantitative, something more, uh, algorithmic driven? Who are the who are the customers or who are the traders and and and why are they excited about the product? Yeah.

So, they're excited because so so basically like futures like you said like futures kind of suck because of all these like yeah random things like they're kind of subtle. Sometimes you don't want to get delivery. They're like all these weird things. You have to like keep rolling your position if you want it open.

Um so like if you look at Robin Hood for example like that's actually much more popular with retail users than futures are. Um, and they they they primarily trade options on Robin Hood when you know when leverage is concerned. And options are super cool because it's kind of like a lottery ticket.

You can like as retail, you can buy a lottery ticket and feel really good about it. You're downsize limited. Um, but the the trade-off there is like it's actually really hard to price an option, especially if you're retail and especially if you're using like an app that doesn't give you the information that you need.

Yeah. And so you're you're kind of getting fleeced because there's like very complicated um structures. It sounds simple. It's like a strike price expiry, but uh in practice it's very hard to price. And so herbs are basically like marrying these two assets into one thing.

So there's you want to trade something you want you want to trade something that's just like the price of the underlying. You want there to be leverage and you want there to be like one thing that never expires. And that's what a per is. Got it. So let's all the liquidity in the world concentrate on one asset.

So like if you want to if like you look at Bitcoin for example on any one exchange there's like usually one very liquid Bitcoin per and that's the liquid asset forever never expires and like that's where the price discovery happens like billions and billions of dollars will trade on these bitcoin ps and this actually leads the underlying instrument and it's useful for professionals because they can trade it and it's the most liquid instrument there is uh on bitcoin it's useful for retail because it's a clearly understandable price that you cannot get screwed over on because there's there's only one market and it's extremely liquid.

So like buy or sell like the spread is tiny and um so it's kind of like a win-win for for many many participants. There are there'll always be participants who want options or who want traditional futures but per by and large are attractive. Yeah. What what are the biggest uh bottlenecks to scaling a network like this?

Um is certainly not talent because you've you've reached insane scale. I'm more thinking about like uh are the tokconomics such that there are people that are setting up whole data centers? Are there AS6 being built right now to run the network?

Like I I'm familiar with kind of the how Bitcoin went where people were just mining it on their laptop and then it turned into a data center and then it turned like hunt for the cheapest energy possible with the ASIC uh because the algorithm was so stable.

um like what uh what does it actually take to scale a network like this over time and where are you in that scaling curve? Yeah. So, Bitcoin is a bit unique in that I think it's the only major network left that does proof of work.

So, AS6 stuff you're mentioning, you know, like all the crazy things like volcanoes, mining bitcoins and stuff like that's all really just participating in the consensus mechanism.

the all the other high performance blockchains today that I know of at least are powered by proof of stake which is a much more energy efficient way to do things and it's economic security not like computational security. So on hyperlquid there's not much innovation being done on how the network stays secure.

It's like the it's a relatively solved problem economically which is that basically people people put up the native token like it's very important for the network to have its own token which on Hyperliquid is called hype and people put it up and they basically say I'm like vouching for the usually it's kind of like delegated.

It's kind of like um you know you vote for your congressman kind of thing. So it's like you delegate to a validator and the validator says anything I do the stake that is staked to me is at risk.

Um, and you can do some math and then the basically the economics work out such that if like most of the stake in the network is honest then it's fine.

And if you want to acquire enough stake to do something bad on the network where bad here is like the canonical bad thing you can do is like spend the same dollar twice is called like double spending. Y which is basically like like forking the the truth state of the network.

Um you need to acquire a lot of stake to do that. So it's economically inable. So it's the the security is in the economics not in like you know create creating crazy AS6 and like that makes sense. Energy. How important is brand to hyperlquid success?

Because I think you have uh I I don't know that you've uh you haven't necessarily focused on brand in the traditional sense of like hiring advertising agencies and you know putting together strategy decks and things like that that that uh I'm sure many of your competitors do.

Um, but you have one of the most powerful brands in the world, which is like when you think of the value of anyone on earth being able to just type Hyperlquid and hit post and and get this like, you know, massive influx of excitement and uh attention. Uh, it's it's truly remarkable.

But I'm curious like what that, you know, how much that's contributed to uh your success versus, you know, scale and and some of these other product decisions.

Yeah, I think the brand we're very fortunate that the community is so I don't know many adjectives like so so strong, so like tight-knit, so uh you know combative at times, but like just like like I think I think it's very inspiring for us because we we as a team are pretty introverted. We're super small.

We're we're only 11 people and we don't have we don't have we have no one working on marketing. Um and I think we even if we did, we would suck at it. So it's always been the product is the marketing. Yeah. It's not the it's not just the product, it's the product and the community I would say in the ecosystem.

And so it kind of there's there there are like many pockets, right? There are people who are just like on Twitter like like you said kind of like [ __ ] posting. And I think that's like super cool and uh you know I I love it. And uh there also people just like you know building on the platform.

I think that's another form of like viral marketing, right? Like they build products on top of the the protocol that synergize with what it is or like offer something new or like extended in some ways. And um the sort of like pillars of finance on hyperlquid are by and large built by community members.

Uh and we hope that that trend continues like anything that can be built by the community are built by the community. And I think that just like yeah that kind of decentralized marketing sort of embodying decentralization not just at the technical layer but also at the social layer I think is really important to us.

And I think that's kind of the the brand that Hyperlid has. It's like, you know, framed negatively, you could say that it's kind of standoffish and maybe we're kind of we're we're too focused on tech and not focused on marketing.

But in this case, I think it it what comes out of it is like something much stronger, which is that people feel ownership in the network in in a way that's not possible with a web 2 company. Yeah.

Is that is that part of why uh you know the the companies that want to eat your lunch are some of the most you know well- capitalized large business you know businesses in finance and yet it seems like you know they're struggling to to really compete is is is the is the army of people that just want Hyperlid to win like just h how you know how how do you think about that kind of advantage and what are some of the other reasons why your guys' kind of counterpositioning makes it difficult to compete.

Uh well, we honestly don't think that much about competition dayto-day. I think there's just like too much to build and I think you're right. Yeah, a lot of a lot of people want to do what Hyperlid does or like take market share if you will.

Um and we don't Yeah, we don't really think about what You're like I don't think about you at all. No, no, there's just too much. There really is just like too much to build. Like I think the if Hyp succeeds in the good case, it's it's something that doesn't exist yet in the world. And I think it's hard.

It's easy to get bogged down by people trying to kind of chip away at something that Hyperlid has already built or whatever. And I think that's like it's it's a bit stressful sometimes, but also it kind of detracts from the big picture, which is like we're still so far away from where we we need to be. Yeah.

How big can Hyperlid get? like what's your ambition? I think of it as in the good case basically finance as a whole which when I say finance I mean like the coordination of human behavior.

That's not it's not like it's not like you're like you're basically saying like if if I don't uh assume you know 100% of the global TAM of finance I will have failed. That's amazing. Well no I mean you ask how big it could get. Yeah. No good. I like it. It's true. Yeah. Yeah.

But but I I don't think it's like an it's coming in and kind of like displacing finance. It's really like in my mind it's sort of like the internet did to find sort of like like electronic trading happened in early 2000s. It's been like more than 20 years.

It's about time the tech stack gets updated and I think DeFi is kind of is that tech stack. Okay. I have a lightning round for you. Uh asked a bunch of uh cryptonative friends uh what they wanted to ask you.

So, I'll go through a bunch of them and hopefully you can answer quickly since some of them are are uh pretty specific. Uh when do you expect to see the first centralized exchange shut down their per decks and simply run a front end on top of hype uh through HIP 3? Um when will they when will they capitulate? One year.

Okay. Okay. We'll track it. Uh any specific views on the market structure bill in the US and under what circumstances would you bring hyperlquid onshore? That's a good question.

So we we we think the US is a super important market obviously it's like the financial center of the world and the dollar is the reserve currency capital Yeah. Yeah.

I mean we we would nothing more than uh love nothing more than to sort of like have regulation in the US sort of evolve to to sort of really embrace DeFi and I think strides are being made in that direction. I I can't comment on the bill specifically just because I I feel like I'm a little ignorant on it.

It's I feel like it's changing a lot and honestly like I think there are really smart people working on it and the things I've heard such as like you know carveouts for decentralized front ends and things like that I think are like really cool. Yeah. Um yeah.

Why do some centralized exchanges uh say that hype doesn't want to get listed? Uh do they say that? I don't know. I don't know. No, we don't have a want here. I think it's like a we're building we're building.

I think the you know exchanges several exchanges have listed hype and I think it's cool and other ones you know for other exchanges it doesn't align with their priorities and I think that's also cool. Yeah. We're not we're very like ar we just like don't really talk of these. Yeah, institutions.

Uh, any plans to enable multiasset margin natively? I think it will happen and I don't exactly know the path to where that happens. So, uh, it could be built like natively is a bit like not well defined here, but I think it will happen.

I think you know if it's going to house all the finance surely you should be able to use different types of collateral to trade. Makes sense. when pers on commodities and US equities. There are already some pers on.

So there there are gold ps uh tokenized gold and there I think the answer to when is probably in the next year because HIPP3 I think is unlocking a lot of this. So basically letting it lets anyone kind of come and deploy their own. What do you think is most misunderstood about Hyperlid today?

Oh man, there's so many things. Uh most misunderstood. One thing I would say is that it's well the it is a network. I think people think it's like a purpose exchange. Some people think it's like a centralized thing. It's really not. It's a blockchain. The validator says permission list. They're currently 24 validators.

You know, anyone can spin one up. It's like top top 24 by stake. Uh the the validator set, you know, every validator executes every transaction including all the orders.

So like like this kind of like base layer of like just like what it is I think is kind of lost because people are so they're they're focused on the product basically which which maybe is good. Maybe it's nice that the tech is abstracted from users. Do you miss the bay? Um I miss some things about it. Yeah.

What do you miss? Um what do I miss? I miss I miss Chick-fil-A. Let's go. That's a great one. That's a great answer. That's a great answer. I love it. I miss I miss mountains actually. I mean, that's not like literally in the bay, but like Singapore is very flat. So, it's it's a very nice place.

It's a great place to build, but uh I miss kind of like Yoseite and that kind of vibe, you know, Pacific Northwest. When I was in Singapore, uh a lot of people I interacted with said that Singapore doesn't have like a strong local culture.

And maybe that's just because it's small or maybe that's uh because it doesn't have like an underground like punk scene because of different rules and regulations. Do you feel like you found uh like a great community in Singapore? Do you feel like you found a great culture there?

Do you like the where the where the country is going like culturally? Uh I'm honestly a bit too busy to just locked in. Okay. No. Yeah. It's a great place to build. I think it's it's super safe. It's very modern. Yep. You know, good food. Yep. Air conditioning, like that kind of stuff.

So, uh I'm honestly not a c at this point in my uh trajectory. I'm not really attuned to the culture. I feel like if I were in New York City, it would be kind of wasted on me. Totally. Totally. Yeah. Yeah. Yeah. You're not looking for like the underground art collective that will define the Yeah.

You're you're you're locked in. It's great. Love it. What What is the specific framework you use for building the team? because I imagine the level of talent that is trying to join you know the the core team today is is insane.

Uh but clearly you have some kind of framework for it otherwise you would have just been you know 100 thousand people by now. Well I think we actually are like just not very good at recruiting. So I will say that here we are recruiting. We're always recruiting.

Um, we're looking I know there a lot of super smart listeners uh on this on this um podcast show and we would love we would love for you guys if someone's interested in you know like systems engineering like high performance um building the rails of the future of finance.

I I really think this is like there's no better place to work and uh would love for you guys to join. I we we're a super small team of 11 people. The the bar is very high. I do think it might be one of the highest bars.

Um I think we are one of the most efficient organizations, engineering organizations that I know of and that has ever that has ever existed. Could I say that? I can say I feel like I can say that. I think you might be right. Yep. It sounds right.

But but but we are trying to grow and I think it's uh you know it's yeah it's it's uh there's a there's a lot to build and um yeah we just we we just have a very high bar in many in many directions like you know competence also just like integrity I think we we just care a lot about many things and uh you know if if someone listening meets all those bars we'd love we'd love for you to join us.

Is it is it uh in person only or do you guys have remote teammates? Uh new for for new recruits we're we're trying to do in person only. Um there yeah initially it was it was remote when we found that it doesn't work super well with our work style. Last question. Are people that uh that brag about doing 996 soft?

Well, this is the like 9 to9 six days a week thing. Yeah. Yeah. Uh cuz I imagine you're doing quite a bit more than that. So that feels like part of the part of the criteria is like somebody comes in, they're like, "Jeff, like I like I'm your guy. I'm I'm 996.

" And you're like, "Sorry, like that's not We don't do half days here. Yeah. I mean, it's I I do think it's uh it the quality of work is the most important thing. " So I think different people, you know, burn out at different points and that is, you know, obviously the most important.

I personally work more than that, but it's because I feel like I don't really have a cap like personally, but you know, everyone's Yeah, makes no sense. Well, thank you so much for taking really enjoyed this.

Thank you for uh fantastic sharing the origin, explaining per for our audience and uh yeah, really just incredibly impressed with with what you've built and excited to follow, you know, continue to follow your journey over the next uh years and uh decades. Congratulations. We'll talk to you soon. really appreciate it.

Thanks for having me on. Have a good one. Bye. And that concludes our recorded interview with Jeff from Hyperlquid. I hope you enjoyed that. Uh if you're new here, please subscribe to the show. Leave us five stars on Apple Podcast, Spotify. Uh we have more crypto coverage later in the show. We're talking Chad in