Hyperliquid's New Proposal: DEX Giant Enters Prediction Markets, Teams Up with Kalshi to Challenge Polymarket

Author: David, TechFlow

Original Title: Interpreting the HIP-4 Proposal: Is Hyperliquid Entering the Prediction Market? The New Business Model of a DEX Giant

Yesterday, Hyperliquid released a new proposal, HIP-4.

Amidst the bombardment of various meme coins and buyback narratives, this proposal didn't seem to spark much discussion within the crypto community. However, upon closer inspection, we found that its content points to another recent hot topic in the crypto market—prediction markets.

The core of the proposal is to launch a new trading product called "Event Perpetuals."

Simply put, Hyperliquid wants to add a binary prediction market function to its perpetual contract exchange. Users can bet on events such as "Will the Federal Reserve raise interest rates?" or "Will a certain token be listed on Binance this month?"

Notably, the authorship of Hyperliquid's proposal is quite interesting: it includes investors from Framework Ventures, team members from the prediction market platform Kalshi, as well as developers from Felix Protocol and Asula Labs.

It's rare to see "competitors participating in formulating the plan," especially since Kalshi itself is one of the main players in the compliant prediction market space in the US.

This may suggest that Hyperliquid's prediction market business is not aiming to disrupt existing players, but rather to seek some form of cooperation or differentiated positioning.

As the absolute leader in the perpetual contract sector, is Hyperliquid launching HIP-4 to tap into the huge potential of prediction markets, or is it looking for a new narrative to support the HYPE ecosystem?

Now It's a Convenient Business

The 2024 US election made Polymarket famous overnight, with trading volume surpassing $3.6 billion. Entering 2025, prediction markets have become the darlings of capital: Polymarket just acquired QCEX for $1.12 billion to re-enter the US market, Kalshi teamed up with Robinhood to launch prediction market features, with monthly trading volumes consistently above $800 million. Even traditional financial giants are eager to get involved.

Time magazine previously named Polymarket one of the "100 Most Influential Companies of 2025." The reason is simple: prediction markets are redefining the value discovery mechanism of information.

Faced with such market enthusiasm, could Hyperliquid remain unmoved?

Although HIP-4 is currently just a proposal and still requires community voting and technical validation, judging from the level of detail and the participants involved, this is clearly not a spur-of-the-moment idea.

More importantly, for Hyperliquid, this could be a "convenient" business.

First, there is a high degree of technical reusability.

Prediction markets and perpetual contracts are highly similar in technical architecture: both require order books, matching engines, and margin systems. For Hyperliquid, the development cost of adding Event Perpetuals is relatively low, and the cost of trial and error is manageable. Even if the final result is not as expected, it will not have a major impact on the core business.

Secondly, there is a natural overlap in user groups.

Traders who play with perpetual contracts and bettors in prediction markets are essentially speculators. They chase volatility, enjoy uncertainty, and are willing to bet on their own judgment. Hyperliquid has already gathered a large number of such users, so why not offer them more games to play?

Finally, the HYPE ecosystem needs a new story.

As one of the most successful DEXs of 2024, Hyperliquid's perpetual contract business is already quite mature. But the capital market always expects growth, and the HYPE token also needs more application scenarios to support its valuation. Prediction markets are not only a potentially good business, but also a good story—they are sexy enough, imaginative enough, and close enough to the current hot topics.

Rather than calling this a strategic transformation, it's more like a low-cost product line experiment. If it works, a new track is opened; if not, the original foundation remains.

HIP-4: A Clever Product Extension

Let's first understand a core question: why can't Hyperliquid directly add prediction markets to its existing system?

The proposal gives a vivid example: NFL game predictions.

Suppose the prediction topic is "Will the Chiefs win the Super Bowl?" If using the traditional perpetual contract approach, it would require continuous oracle price feeds, updating odds every 3 seconds. But here's the problem: sports betting odds do not change continuously. After a single play, the odds may jump instantly.

HIP-3 (Hyperliquid's current market deployment standard) limits price changes to a maximum of 1% per tick. This means that if the game result is determined and the price needs to jump from 0.5 to 1.0, it would take a full 50 minutes to complete.

During this period, traders who know the result can easily arbitrage.

This is why the new HIP-4 proposal introduces Event Perpetuals.

Event Perpetuals remove two core mechanisms of perpetual contracts: continuous oracles and funding rates. Prices are determined entirely by market trading and are only finalized by the oracle at the end of the event (0 or 1).

Interesting design features include:

• Opening auction mechanism: 15-minute call auction to avoid initial price chaos

• 1x isolated margin: no leverage, reducing liquidation risk

• Slot reuse: new markets can be deployed immediately after settlement, improving capital efficiency

On the surface, this is a technical innovation; in essence, it may be a business experiment that Hyperliquid wants to try.

The attempt to move from a single product to a product matrix is obvious. No matter how successful perpetual contracts are, they are still just one product. If Event Perpetuals succeed, it means Hyperliquid's infrastructure can support more financial products:

Today it's prediction markets, tomorrow it could be options, and the day after, structured products.

More importantly, Hyperliquid has chosen a smart way to expand: letting others create markets.

According to the proposal, any team that wants to create a prediction market on Hyperliquid (referred to as "Builder" in the proposal) needs to stake 1 million HYPE tokens. These Builders are responsible for:

• Deciding what market to create (e.g., "Will Trump buy Bitcoin?")

• Setting market parameters (settlement time, oracle source, etc.)

• Maintaining market operations (providing initial liquidity, promotion, etc.)

In return, Builders can receive up to 50% of the trading fee revenue from that market.

This design is quite clever. Hyperliquid doesn't need to judge "which prediction market will be popular" itself, but lets the market decide. Teams willing to stake 1 million HYPE will naturally be cautious in choosing markets with liquidity potential. If a Builder's market attracts no users, the opportunity cost is borne by the Builder; if the market is popular, both Hyperliquid and the Builder win.

This also explains why members of the Kalshi team participated in writing this HIP-4 proposal.

They may be exactly the kind of professional Builder Hyperliquid wants to attract. Kalshi has mature market operation experience and knows which types of prediction markets have liquidity. If they are willing to create markets on Hyperliquid, they bring not just a market, but an entire set of proven operational methodologies.

For a DEX with TVL exceeding $2 billion, this trial-and-error model is quite smart.

Challenges and Opportunities

Theoretically, it seems natural for a DEX to do prediction markets.

The technical architecture is highly reusable. Order books, matching engines, settlement systems, margin management... all these core components of perpetual contract DEXs are also needed for prediction markets.

But reality may not be so simple.

The vitality of prediction markets comes from the diversity of markets created by users.

On Polymarket, any user can create a market. This UGC model keeps the platform fresh and topical.

However, in Hyperliquid's HIP-4 proposal, creating a market requires staking 1 million HYPE. At current prices, this is equivalent to several million dollars as an entry barrier. While this ensures market quality and prevents a flood of junk markets, it may also stifle innovation and diversity.

Another challenge is the dispersion of liquidity.

Perpetual contracts can share liquidity; the depth of ETH/USD can support all ETH-related trades. But prediction markets can't—each event is an independent liquidity pool.

This means that even if Hyperliquid has $2 billion in TVL, once it's spread across hundreds or thousands of prediction markets, each market's depth may be very limited. Shallow liquidity leads to high slippage and a poor user experience.

In addition, when users see Polymarket and Kalshi, they immediately know these are prediction markets, while Hyperliquid is still mentally positioned as a perpetual DEX in the crypto world. If the proposal is implemented, user education and promotion will be key.

So, where are Hyperliquid's opportunities?

Certain prediction markets focused on crypto verticals may be the most realistic path. For example, whether a certain token will be listed on a major CEX this month, or whether a key Ethereum upgrade will be delayed...

In these markets, Hyperliquid's users are more knowledgeable, more interested, and more willing to bet than Polymarket's users.

Is This Bullish for $HYPE?

In the short term, the impact may be limited.

First, this is just a proposal and hasn't been officially implemented. Even if it passes a vote, it will take at least several months from development to launch to generating actual revenue. There may be some speculative hype, but it's unlikely to provide sustained price support.

Second, the revenue scale of prediction markets is uncertain. Even if Hyperliquid manages to capture 10% of Polymarket's market share (monthly trading volume of $80 million), at the typical DEX fee rate of 0.1%, monthly revenue would only be $80,000. For a project with a market cap of several billion dollars, this incremental revenue is negligible.

But in the medium to long term, the significance may go beyond financials.

First, increased staking demand.

If HIP-4 successfully attracts 10-20 Builders to create markets, that means 10-20 million HYPE will be locked up. Although this is not much relative to total supply, it is a real reduction in circulating supply.

More importantly, this proves the value of HYPE as a "license"—holding HYPE not only allows participation in governance, but also provides business opportunities.

Second, enhancing brand value.

If professional teams like Kalshi are truly willing to stake HYPE to create markets, it sends a strong signal: professional prediction market brands recognize Hyperliquid's future. This endorsement effect may be more valuable than direct revenue contributions.

The crypto market has never lacked money; what it lacks are stories. The story of perpetual DEXs has already been told. If Hyperliquid can successfully enter the prediction market, each new possibility adds another variable to its valuation model.

Exploring the Boundaries of DEX

In my opinion, the interesting thing about the HIP-4 proposal is that it reflects an intriguing trend: DEXs are testing their own boundaries.

From simple token swaps, to perpetual contracts, and now to potential prediction markets, you can see that successful DEXs are always actively expanding, turning convenient businesses into levers for increasing valuation and business scale.

Moreover, this kind of expansion is not like the previous hype-driven crypto project playbooks, where every change is loudly announced to attract attention. It's more like a relatively low-key experiment—testing the boundaries of technology, user acceptance, and regulatory tolerance.

For those following Hyperliquid, the best approach is not to over-interpret a single proposal, but to pay attention to the trends behind the proposals.

HIP-4 itself may succeed or fail, but the direction it represents—platformization, ecosystem building, and integration of DEXs—is likely the way forward. Projects that successfully expand their boundaries will achieve higher valuation multiples; those that remain stagnant will gradually be marginalized.

As for whether Hyperliquid can carve out a share of the prediction market with Event Perpetuals?

Let the market decide. After all, this is a prediction worth betting on in itself.