Disclaimer: The content presented in this article, along with others, is based on opinions developed by the analysts at Dewhales and does not constitute sponsored content. At Dewhales, we firmly adhere to a transparency-first philosophy, making our wallets openly available to the public through our website or DeBank , and our articles serve as vehicles for self-expression, education, and contribution to the ecosystem.

Dewhales Capital does not provide investment advisory services to the public. Any information should not be taken as investment, accounting, tax or legal advice or as a recommendation to purchase, sell or hold or to pursue any investment style or strategy. The accuracy and appropriateness of the information is not guaranteed by Dewhales Capital.

1. Overview
2. Architecture, components, and features
3. Team
4. Tokenomics
5. Partners and backers
6. Development, roadmap, and future steps
7. Potential competitors
8. Community
9. Final thoughts
10. References

1. Overview

HyperLend is the heart of the Hyperliquid ecosystem. Much like the heart pumps blood into the human body, this lending-borrowing protocol provides the ecosystem with liquidity.

HyperLend is a money-market platform that makes lending and borrowing digital assets efficiently and securely easy. They aim to become the first and main lending platform on Hyperliquid's EVM blockchain.

HyperLend’s platform revolves around three distinct pool types, each serving a unique purpose in their ecosystem. Interest rates are set based on supply and demand, ensuring competitive rates. They also offer flash-loans, allowing users to borrow without collateral.

Hyperliquid is a new actor in the L1 sector, optimized for permissionless financial applications. Their flagship product is a native built-in DEX, the Hyperliquid DEX, which serves as a fully on-chain order book perpetuals exchange. Hyperliquid is optimized for fast order execution, aiming to match the performance of centralized exchanges, while maintaining the self-custody and transparency of DEXs. Since its mainnet launch and TGE on November 29, 2024, Hyperliquid attracted a huge amount of hype and massive money inflows. As of Jan 22, it ranks 1st and 4th among the DEXes, based on market cap and 24h trading volume, respectively.

Regarding TVL, Hyperliquid sits at the 10th position, surpassing likes of Aptos, Polygon, and Optimism. As the number of protocols on this L1 increases and its ecosystem grows, the possibility of challenging high-ranked networks and owning a bigger share of the cake looks closer to us.

Hyperlend plans to provide users with different options for investment and boosting their capital:

• Lending and Borrowing: Effortlessly supply liquidity and secure funds while enjoying attractive interest rates.

• Smart Vaults: Leverage automated yield strategies for consistent capital growth and hassle-free withdrawals.

• Leverage Positions: Enhance returns by reinvesting borrowed funds into new assets for compounding gains.

• Isolated Pools: Control risk by operating within isolated markets, ensuring exposure is limited to specific assets.

These investing channels are offered to Hyperlend’s users through a dApp:

The user interface is straightforward and easily accessible, allowing both novice and experienced users navigate the platform with ease. Charts and indicators are used as visual aids to improve user experience by presenting complex financial data in a more easily digestible style.

2. Architecture, components, and features

Hyperlend combines three distinct pool types, each serving a unique purpose in their ecosystem:

1. Core Pools:

Built on Aave V3.0.2, they allow the supplying or borrowing of multiple tokens in a single pool. This increases the capital efficiency, but also the level of risk, since if one of the assets in the pool fails (e.g. market manipulation, infinite mint exploits...), the entire pool could be compromised.

2. Isolated Pools:

Forked from FraxLend, these pools isolate the risk since each market only consists of 2 tokens, one that can be used as collateral and one that can be borrowed. These pools leverage customizable LTV ratios and flexible interest rate models.

3. P2P Pools:

Users can create tailored lending requests that get fulfilled by other market participants, enabling truly personalized lending. Below you can see a general view of Hyperlend’s architecture:

That’s not where Hyperlend stops, as they plan to offer other paths to users who aim to grow their capital by engaging with the protocol. These paths and methods are:

1. Flash Loans:

HyperLend offers flash loans, enabling users to instantly borrow unsecured assets for activities such as arbitrage or liquidation. These loans must be fully repaid within the same transaction.

2. Liquid Perpetual Positions:

Liquid Perpetual Futures positions enable users to have a more efficient leveraged exposure to the desired asset while increasing capital efficiency.

They are a type of ERC-4626 vaults that allow users to use their Hyperliquid perpetual futures positions as collateral on HyperLend. (In the future)

In essence, ERC-4626 is a tokenized vault standard in Ethereum and other EVM-compatible blockchains. It provides a unified and standardized framework for building vaults that manage yield-bearing tokens, allowing for greater composability and interoperability across the DeFi ecosystem.

Users deposit USDC into the vault, which then transfers it to Hyperliquid L1 exchange, where it's used as a margin to open a futures position. Profits (or losses) + funding fees are accrued to the vault. Vault shares (represented as ERC20 tokens) can then be used as collateral in Isolated Pairs.

To redeem the underlying USDC, shares are burned, a proportional portion of the position is closed and USDC is transferred back to the vault where it can be claimed. If the futures position is losing money, the share price declines (and if the position is profitable, the share price increases).

3. Liquid Hyperliquidity Provider (HLP):

Liquid HLP allows users to use their HLP (Hyperliquidity Provider Vault) deposits as collateral on HyperLend.

Users deposit USDC into the vault, which then transfers it to Hyperliquid L1 exchange, where it's deposited into the HLP vault. Vault shares (represented as ERC20 tokens) can then be used as collateral in Isolated Pairs.

To redeem the underlying USDC, shares are burned, a proportional portion of the vault position is withdrawn and USDC is transferred back to the Liquid HLP vault where it can be claimed.

4. Tokenization:

• hToken: hToken represents a tokenized supply position, functioning as a yield-bearing ERC-20 token, so its value increases as interest accumulates. These tokens are minted when assets are deposited into the Isolated Pools and are burned when the underlying assets are redeemed.

• DebtToken: DebtTokens are non-transferrable interest-accruing tokenized debt positions. These tokens represent the debt incurred by users and accumulate interest over time.

Hyperlend team has also developed a Telegram bot to assist the LPs and investors with the management of their positions. This alert bot, called HyperTrack, is designed to keep users updated on critical activities within their HyperLend account. With customizable alerts for health factors, borrow rates, and liquidations, they can track specific addresses and receive timely notifications straight to their Telegram.

Next topic to discuss is the flow of money in Hyperlend, including protocol fees, how lenders earn money, and of course the costs paid by the borrowers.

1. Protocol fees:

• Reserve factor: Part of the interest paid by borrowers goes to the insurance fund and treasury.

• Liquidation fees: When a position is liquidated, a portion of the liquidation bonus is paid to the treasury.

• Flash-loan fees: A small 0.05% fee for utilizing flash loans.

• Deposits Withdrawals: ZERO FEES, the team claims that by deploying on chains with low transaction costs, usage of external libraries, packing user config into a single uint256 and using bitwise operations to manipulate it, and other methods, they’re going to keep this type of fees at zero level.

2. Earnings Potential for lenders:

• Interest Rate Payments: Earnings are derived from the interest paid by borrowers. Suppliers receive a share of these payments based on the average borrow rate multiplied by the utilization rate. Higher reserve utilization results in higher yields for suppliers.

• Flash Loan Fees: Suppliers also earn a portion of the Flash Loan fees, which are currently set at 0.05% of the Flash Loan volume.

Each asset on HyperLend has its own market dynamics, influencing its Annual Percentage Yield (APY). The average annual rate over the past 30 days is available for evaluating rate trends, and additional data can be accessed in the reserve overview section of the platform.

Regarding the accepted amount of lending, there is no minimum amount required to supply. This is not applied in case of maximum supply, as HyperLend employs a supply cap parameter, which is governed by HyperLend Governance (to be launched.) Another matter worth saying is that lenders can use their supplied assets as liquidity without withdrawing.

3. Borrowing cost:

• Stable Rate: Acts as a fixed rate in the short term but can be rebalanced in the long term. It provides more predictable interest costs.

• Variable Rate: Fluctuates based on market conditions and the supply-demand ratio for the asset. This rate can change over time.

Interest rates are calculated dynamically using models like Time-Weighted Variable Rate and Linear Rate Calculators. These rates vary depending on the asset utilization in each pool. Based on their needs and preferences, borrowers may choose stable or variable rates. They can switch between these two anytime.

Last but not least, is the security challenges Hyperlend may face and how it’s getting ready to deal with them. The main risks include:

1. Smart contract (code):

The first and most obvious risk is the smart contract risk, code could always contain errors. They are working with multiple auditors to ensure both their contracts and deployment configurations/parameters will be audited before the launch.

2. Oracles:

They integrate with different oracle providers, the main one being Hyperliquid’s built-in oracle (price provided by Hyperliquid L1 nodes). Additionally, they are integrating with Pyth and Redstone as oracle providers.

3. Market and Volatility:

One significant risk specific to lending markets is the rapid devaluation of collateral assets. If the protocol is unable to liquidate unhealthy loans, it may accumulate bad debt, potentially leading to insolvency of Hyperlend. To address this, the protocol carefully selects which assets to list, considering both on-chain liquidity (via DEXs) and off-chain liquidity (through CEXs and OTC platforms).

The protocol offers multiple types of pools, Core Pools where multiple assets are available in a single market, Isolated Pools where each market consists of only 2 assets, and P2P Pools, where loans are completely isolated to the lender and borrower.

Given the rapid changes in the liquidity and volatility of cryptocurrency tokens, there is a need for constant re-evaluation of listed assets. They assess volatility risk by measuring the normalized fluctuations in token prices, calculated as the standard deviation of the logarithmic returns. This method involves evaluating the volatility in a way which conforms to industry standards adopted by platforms like Bitmex and Gauntlet. Volatility and liquidity are assessed weekly, but they also have automated notification systems that monitor market conditions 24/7.

Finally, the protocol allows for the configuration of specific supply and borrow caps for each asset. This allows the governance risk admins to have better control over the exposure to certain assets and reduce the risk associated with them.

3. Team

There’s no LinkedIn profile attributed to Hyperlend yet, nor is there any information about the team on the website. However, they’ve shared information about their background and experiences through other ways. For example you can find details about F.B. on his personal website (fbslo.net), X and Github profile. They claim that the team currently consists of five full-time members and multiple part-time contractors. These positions are as follows:

B.S., co-founder and CEO (@0xNessus): The only background existing on his LinkedIn profile is that he’s from Slovenia, currently studying MBA at a Slovenian university. They claim that he’s experienced in managing DeFi projects and teams. Responsibilities include day-to-day operations, ensuring smooth processes and efficiency within the team.

F.B., co-founder and CTO (@fbsloXBT): With eight years of blockchain and four years of Solidity experience, he is responsible for the technical side of the project, such as managing other developers, writing, testing, and deploying smart contracts and other systems.

Marketing manager (@maiviuss): Ensuring their social media marketing runs well and smoothly.

UI/UX designer (probably @meowdesigner): Designs and makes sure all designs are up to date and running smoothly.

Partnership manager: The main contact point with outside parties.

UI/web developer

4. Tokenomics

For now, the only planned use case for Hyperlend’s native token ($HPL) will be revenue sharing. When staking HPL tokens, users will receive a portion of the protocol's profits according to the size of their stake.

HPL tokens will be distributed according to the following allocations:

• Fundraising – 15%

• Community – 55%

• Core contributors – 27%:

• Liquidity – 3%

Like any other tokenomics design, this one has its own positives and negatives which are discussed below:

1. Positives:

• Allocating more than half of the token supply to the community signals a focus on user incentives. This will encourage user participation and attract new users to the protocol.

• 15% for treasury safety module ensures there’s a strong support for future protocol growth and risk mitigation, which builds trust.

• Vesting for contributors prevents immediate token dumping by them.

2. Negatives:

• A large portion of tokens (25% + 5%) is allocated to airdrops, which may result in temporary user acquisition rather than sustainable engagement. Airdrop recipients, especially airdrop farmers, often sell tokens immediately instead of participating in the ecosystem.

• A small liquidity allocation (3%) could cause issues with token trading in the early stages, such as higher slippage and low availability on exchanges.

• The "Future contributors/marketing/CEX listing" category (10%) is broad and lacks detail. This could raise questions about whether the allocation will be used effectively.

5. Partners and backers

Hyperlend is gradually expanding its partnerships and shaking hands with other businesses. Its integrations are mainly for enhancing security and diversifying its financial products. Hyperlend partners are as listed below:

• Swell (A restaking chain, powered by Proof of Restake, built on the Superchain.)

• Resolv Labs (Trustless stablecoin and low-risk crypto investments backed by the True-Delta Neutral Architecture): Through this partnership, Resolv Labs’ stablecoin ($USR) will be available as collateral on Hyperlend.

• Stargate (A fully composable liquidity transport protocol that lives at the heart of omnichain DeFi.): With this integration, Hyperlend will be able to offer cross-chain deposits.

• Theo (A stablecoin network fueling the highest on-chain yields): HyperLend will integrate Theo’s infrastructure, allowing users to lend and borrow across chains. Together, they will optimize risk and price management, which will elevate user experience and enhance overall functionality and accessibility.

• Pyth Network (An oracle provider)

• RedStone Oracles (Modular oracles for DeFi, also integrated with Pendle, EtherFi, Venus, and Puffer Finance)

• Thunderhead (An Ethereum-level LST ecosystem everywhere): HyperLend, in partnership with Thunderhead, will provide various financial services using stHYPE. Users can secure loans using stHYPE received through HYPE staking or acquired from exchanges as collateral, or earn interest through liquidity provision.

• Block Analitica (A cybersecurity provider that disrupts customer's adversaries and protect their businesses): Hyperlend uses Block Analitica services for comprehensive risk assessments, collateral onboarding, dynamic parameter management and continuous market monitoring.

• Hypernative (a cybersecurity company, not related to Hyperliquid, working with likes of Solana, Uniswap, Chainlink, Circle, Quantstamp, etc.): Hyperlend works with this company to provide real-time monitoring and incident response, mitigating threats before they happen with automated detection and onchain actions.

6. Development, roadmap, and future steps

To have a general understanding of what steps Hyperlend has taken so far, take a look at this timeline:

Jan 17: Introducing dApp V2

Jan 10: Website V2 is LIVE

Dec 23: HYPE goes live in the Core Pool, and stHYPE is added to the Isolated Pools

Dec 4: Partnership with RedStone

Nov 27: Partnership with Pyth Network

Nov 9: HyperTrack bot

Nov 6: Launching referral system

Oct 30: Partnership with Thunderhead

Oct 17: Partnership with Resolv Labs

Oct 10: Partnership with Swell Network

Oct 7: ETH added on testnet

Sep 13: Introducing HyperLend dApp!

Sep 5: Partnership with Theo Network

Jul 27: Introducing the website

According to the roadmap they’ve shared with DeWhales, the team has reached their goals as promised. In the mid-term, they’ve planned to fulfill these targets:

Q1 2025:

• Token launch (TGE)

• Airdrop

• Token staking

• P2P lending

• Revenue sharing

Q2 2025:

• Governance

• TBA

Moreover, in an article titled “HyperVision” which was posted on their X account, they introduced other features that they will enable in future:

1. Yield Looping (Leveraged Yield Generation)

Example: You have 1,000 USDC. You deposit it into HyperLend as collateral with an 80% LTV (Loan-To-Value) ratio. You can borrow 800 USDC as collateral. With the 800 USDC, you can deposit it again as collateral, which enables you to borrow more.

2. Collateralized HLP Vaults

This means you can participate in Hyperliquid's market-making strategies while simultaneously accessing liquidity without liquidating your holdings.

3. Advanced Vaults and Strategies

By collaborating internally with projects like Theo Network, they'll enable delta-neutral, dollar-denominated strategies that utilize both Hyperliquid and HyperLend to capture funding rates on perpetual contracts while remaining market-neutral.

4. Tokenized Perpetual Positions

5. Cross-Chain One-Click Lending

Hyperlend recognizes that many new Layer 2 (L2) networks face liquidity challenges, particularly following TGEs or security breaches that cause users to withdraw their assets and leave the L2. This often leaves these networks with unusable liquidity, lowering user experience and limiting investment opportunities.

They're addressing this issue with their cross-chain one-click lending solution. You can easily move your assets from underperforming or compromised networks to Hyperliquid’s network ecosystem, enhancing your investment potential.

7. Potential competitors

Putting lending-borrowing protocols on other networks (like Aave) aside, currently there is no direct competitor to Hyperlend in Hyperliquid ecosystem. But there are two projects that may indirectly challenge Hyperlend:

1. Felix: Also currently on testnet, Felix is a synthetic dollar protocol on Hyperliquid L1 that lets users deposit collateral and borrow feUSD. Users can deposit HYPE, PURR, and bridged majors (BTC, ETH, SOL) as collateral.

If users primarily need liquidity, they might choose the stablecoin protocol (Felix) over the lending-borrowing protocol, i.e. Hyperlend, especially if the borrowing rates are lower or the collateral requirements are more favorable. On the other hand, there could be collaboration instead of competition, as feUSD might be used within Hyperlend.

2. Hyperswap (The HyperEVM native DEX): Both protocols compete for liquidity. Users with idle assets must decide whether to provide them as collateral in Hyperlend or supply them to a liquidity pool on the Hyperswap. If the DEX offers better returns or lower risks, users might prefer to allocate their capital there instead of the lending-borrowing protocol.

8. Community

Hyperlend community on X, Discord, and Telegram has near 24.5k members, collectively (of course there are members that follow Hyperlend on more than one social platform.)

Since early December, number of followers of Hyperlend’s X profile has almost multiplied by three. This growth can be considered organic because there are concrete reasons backing it. Also, the number of top X profiles following Hyperlend has also increased. Among these high-profile accounts are:

• Robert Leshner, Founder at Compound

• Hsaka, Crypto trader and analyst

• Tarun Chitra, Founder CEO at Gauntlet

• DeFi Dad, DeFi analyst and Investor

Apart from social metrics, on-chain statistics of Hyperlend’s testnet point to an increase both in the number of users, and in their engagement with the protocol:

This growth in Hyperlend’s statistics can be attributed to many factors, including:

1. Optimism surrounding the market, especially the DeFi sector, because of a pro-crypto US administration and congress taking charge of the country,

2. The hype around the mother of Hyperlend, i.e. Hyperliquid, This hype is reflected in the numbers, like volume, number of users, and revenue of Hyperliquid.

3. Users, airdrop farmers in particular, anticipating an airdrop by Hyperlend.

9. Final thoughts

Nowadays, everything is in favor of Hyperlend. The crypto space is excited by the start of a pro-crypto government, and there’s a real buzz about Hyperliquid. If the Hyperlend team, from technical members to those handling marketing efforts, acts smart and strong, there’s nothing that could stop them from becoming a top lending-borrowing protocol in the future. Last but not least, below are some positives and negatives about the project that are worth noting:

1. Pros:

- They use different oracle providers, including HyperEVM chain’s built-in oracle, Pyth Network, and Redstone.

- They’re considering and planning to offer their users various investment and profit-making strategies.

- It looks like that security is indeed an important concern for the team, as the project is audited by one auditor (Cantina,) and is being audited by two other companies (Ackee Blockchain and Pashov Audit Group.) The team claims that “Every new feature and technology we develop will undergo rigorous auditing and be thoroughly reviewed by our risk management team. Before releasing anything, it will be triple-checked to ensure the highest standards of safety and reliability.”

- Many jurisdictions and geographical locations, including the USA, are restricted by the project. Also, as mentioned in the “Privacy Policy” section of the website, its principal office is located in the Republic of Panama. This will decrease the threat of legal challenges and scrutiny of this DeFi protocol by a great degree.

- The user interface emphasizes clarity and accessibility, ensuring that both novice and experienced users can navigate the platform with ease. The use of visual aids like charts and indicators enhances the user experience by presenting complex financial data in an easily digestible format.

- The tokenomics structure emphasizes community involvement and long-term growth, which are significant strengths.

2. Cons:

- The survival of Hyperlend extremely relies on Hyperliquid, which is another young DeFi project. This immaturity of Hyperliquid, compared with well-established L1s like Ethereum and Solana, may bring 3 main negatives to it and of course every protocol building on it, including Hyperlend. The negatives are:

• Much less capital on-chain,

• Smaller ecosystem and user base,

• Smart contracts and the codes being less battle-tested in real-life challenges

Although Hyperliquid has become one of the fastest growing blockchains since TGE in a November airdrop, if it is unable to meet the growth expectations of its community, many newly rich $HYPE holders and current users may quickly say goodbye.

- General risks that apply to every DeFi protocol, including:

• Exploits that rely on price manipulation on external markets

• Exploits caused by 3rd-party oracles providing invalid data

• Exploits only possible by permissioned entities

- Risk of the Telegram bot being compromised and users’ data security being undermined.

- Regarding the tokenomics design, there are potential concerns about the high allocation to contributors, the large percentage of tokens used for airdrops leading to temporary user acquisition rather than sustainable engagement, and the relatively low liquidity allocation.

Hyperlend links

Website | Twitter | Docs | GitHub

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10. References

https://hyperlend.finance/

https://docs.hyperlend.finance/

https://github.com/hyperlendx

https://staging.hyperlend.finance/dashboard

https://x.com/hyperlendx

https://hyperlend.finance/risk

https://hyperlend.finance/privacy

https://hyperlend.finance/security

https://testnet.hyperlend.finance/analytics

https://x.com/TheoNetwork_

https://www.linkedin.com/in/benjamin-sever-0613091b5/

https://dewhales.notion.site/Hyperlend-5d878d2b0e5d49cf949b181760d55b09

https://defillama.com/protocol/hyperliquid

https://dune.com/x3research/hyperliquid

https://stats.hyperliquid.xyz/

https://cryptorank.io/ecosystems/hyperliquid

https://app.tweetscout.io/search?q=@hyperlendx

https://x.com/felixprotocol?lang=en

https://usefelix.gitbook.io/felix-docs

https://x.com/ThunderheadLabs

https://x.com/redstone_defi

https://x.com/PythNetwork

https://x.com/StargateFinance

https://x.com/ResolvLabs

https://x.com/swellnetworkio