Original Title: Tale of Two Tokens: What Ethena and HyperLiquid Teach Us
Original Author: DiogenesCasares, Crypto Kol
Original Translation: zhouzhou, BlockBeats
Editor's Note: Although HyperLiquid and Ethena adopted different financing and token strategies, both successfully executed their respective product visions. HyperLiquid focuses on decentralized derivatives, while Ethena rapidly grew into a leading stablecoin protocol. Both made decisions aligned with product development by understanding user needs and dynamically adjusting strategies. The key to success lies in guiding decisions based on a clear vision and belief, rather than a 'one-size-fits-all' approach.
The following is the original content (for readability, the original content has been reorganized):
Within weeks of its initial release, HyperLiquid became one of the top 20 tokens (if considering FDV), achieving this milestone without relying on any major centralized exchange listings. Its supporters are mainly traders and users, whose trust in the product is more akin to fans of BeReal/Instagram, rather than 'traditional' crypto finance groups like Link Marines.
The HYPE airdrop had no (too many) additional conditions, which indeed made many people wealthy, but many chose not to sell; they believe in this project. I think this is one of the core differences between HyperLiquid and many other current projects: people believe in HyperLiquid's vision and trust that they will make money.
The sacred symbiotic relationship between vision and execution, fundamentals, may be unique to HyperLiquid, but can also be seen to some extent in some of this year's most profitable and widely watched DeFi projects, such as ethena labs.
This article will explore the similarities between Ethena and HyperliquidX, both of which are building core products widely used by local users, and will also analyze their differences to help readers understand what factors lead to a system's success.
Laying the Foundation: Product
Creating a good product is always challenging, but in the crypto space, there’s a strange mindset that good products are 'impossible to achieve,' or that there is no product-market fit (PMF), or that 'it’s not big enough,' or 'someone has already done it,' which are all misconceptions.
One of the biggest criticisms of Ethena is that what it does has been attempted by decentralized protocols like UXD. However, Ethena solved the liquidity issue by leveraging centralized liquidity through custodians and was able to obtain yields from the underlying stETH/re-staked assets, achieving differentiation. This is a relatively small adjustment, but it gives Ethena's product scalability and stability. Additionally, by using USDe and sUSDe, which are almost equivalent to ETH and stETH, Ethena's yield will naturally be higher than if executing that strategy independently.
HyperLiquid is not the first decentralized derivatives platform, far from it. However, HyperLiquid has innovated in speed (very fast deposit processing), liquidity (HLP), and distribution (vaults). HyperLiquid's trading platform is very reliable, with almost no crashes, while competitors' systems have experienced outages lasting hours or even days, and one platform even encountered a block reorganization (reorg), forcing it to ask users via Google Forms how much they lost.
This poor user experience has also troubled liquidity providers and traders, who never know if they can deposit or withdraw smoothly. HyperLiquid eliminates this issue, thereby winning user trust and support.
Building Process: Distribution and Execution
Okay, both Ethena and HyperLiquid have great products, but that does not mean people will automatically find them. So, how do you get people to test the products and improve them? In the cases of Ethena and HyperLiquid, the answer is: communicate with as many people as possible.
On my anonymous account, the Ethena team actually contacted me when their TVL had not yet reached 20 million USD. At that time, I needed to deposit by signing a contract and locking funds for a certain period in exchange for receiving a fixed minimum yield, which I ultimately did not do (of course, that was a big mistake). However, I admire one thing about the Ethena team: their ability to leverage 'other people's networks' (OPNs).
Seraphim (MacroMate8) is an expert in this area. I was contacted by dcfgod, one of the best angel investors in this field, who reached out to me as well as the templedao team, other RFV traders, and large traders, essentially his entire network.
This is great for DCF God, as he believes in the product and the team, so these referrals are very helpful to people in his network. Meanwhile, this is also extremely useful for Ethena, which is why they allowed him to participate in the investment as an angel investor. This is also reflected in CryptoHayes' involvement, who might be one of the best storytellers and one of the platforms best able to communicate with users, and he just happens to invest as well.
In the case of HyperLiquid, Jeff and other team members cast a wide net. They reached out to everyone from HsakaTrades to my RFV trading friend burstingbagel. They brought as many people onto the platform as possible and began building products that the community needed, including ultimately helping to create HLP's vaults, which allowed HyperLiquid to have deep liquidity without market makers, avoiding the high costs typically associated with market maker liquidity trading on DEXs. The direct relationship between the product's users and the HyperLiquid team made users feel heard, important, and part of the project, rather than just external spectators.
Maintaining Control: Moats and Network Effects
All great projects will spawn imitators or competitors. For example, Ondo has OpenEden, Eigenlayer has Symbiotic, and there are numerous similar examples like Morpho and Euler, Aptos and Sui. However, truly excellent projects can identify and solidify their 'moats,' thereby strengthening product advantages and enhancing competitiveness.
Taking stETH/Lido as an example, it is clearly the market leader, even though its underlying product is theoretically replicable. Running validation nodes, earning yields for users, and creating a wrapped token are not difficult. However, what is hard to replicate or compete with is the massive liquidity that stETH has, along with its deep integration with lending protocols and the broader DeFi ecosystem.
These moats make users more inclined to use stETH, even if theoretically the yields may be slightly lower compared to competitors, because they can use stETH in DeFi. Ethena has replicated this model, focusing on funding rate arbitrage. It has integrated with almost all major protocols in ETH DeFi and an increasing number of centralized exchanges. The moats that Ethena has built around liquidity, acceptability/composability, and large-scale high yields provide users with a range of functionalities, greatly enhancing user loyalty.
For HyperLiquid, liquidity itself is its core moat. HyperLiquid's HLP is designed to provide quality liquidity to users, allowing new markets to grow, while ensuring that users always have a last buyer/seller guarantee. The more users there are, the better the pricing, attracting more users, and this positive cycle further strengthens the platform's position.
To solidify its dominance, HyperLiquid is allowing projects to build on an independent, EVM-compatible chain that can interact with HyperLiquid's spot/derivative positions. This will provide traders with a more seamless and capital-efficient market-making and neutral hedging strategy, while also enhancing user functionality and further strengthening its market position.
In theory, HyperLiquid could be forked after it becomes open source, but the forked version will not have HLP, all users, and liquidity. Even if it is an excellent product, the key to long-term survival lies in building and solidifying a moat. This is why, even though Ethena and HyperLiquid have nearly complete dominance in their respective markets, they are still continuously strengthening their moats.
Divergence: Funding Paths and Airdrops
This part is where significant differences between Ethena and HyperLiquid start to appear, differences that are not just stylistic but fundamentally very different. Ethena's product offers liquidity access for hedge-neutral yields, while HyperLiquid's product is a decentralized derivatives protocol.
Due to its model, Ethena must rely on existing platforms for scaling, and a good way to ensure this is by obtaining investments from exchanges to incentivize them. In contrast, HyperLiquid aims to replace these exchanges and does not intend to cooperate with them, so it does not need to rely on them.
The HyperLiquid team is known for its high-frequency trading (HFT) capabilities and does not need to raise capital. While the Ethena team is also very successful, they have not made the tens of millions that may be needed to build Ethena, ensuring its long-term survival and allowing it to focus entirely on the product without considering profitability.
In theory, Ethena could have chosen not to raise funds, but by doing so, they were able to increase their chances of success. From a game theory perspective, particularly from a financial standpoint, people are more likely to trust those 1) teams with rich experience in a specific field (like HyperLiquid) or 2) teams strongly recommended/supported by authoritative figures.
While the Ethena team is excellent, they do not have the same reputation as the HyperLiquid team in understanding exchange infrastructure (a core component of high-frequency trading) for managing hedge-neutral trading. Ethena's investment from these big players not only provides social support to accelerate their growth but also paves the way for final protocol integration, which may be the best decision for its specific product.
HyperLiquid decided not to raise funds, taking on the risk of covering HyperLiquid's operating expenses, with the aim of conducting a larger airdrop and avoiding systemic sell-offs (like VC). This decision is likely the best choice they could make based on their product characteristics; after all, their goal is to compete with most existing exchanges, even hoping to replace them.
Ethena's ENA airdrop was also very successful, with larger holders being forced to hold for a longer time, while retail users did not have such strict restrictions, cleverly using remilios to gain community support for Ethena.
Nevertheless, its response has been far less than that of the HYPE airdrop, which had almost no additional conditions and did not impose a vesting period for larger accounts. HyperLiquid actually restricted the recipients of the airdrop, prioritizing larger accounts that might benefit from 'airdrop farming,' giving them a small portion of the initial value, but those tokens would be fully unlocked after the airdrop.
Ethena's points system is also very clear, designed to guide user behavior, while HyperLiquid's system appears random, although it does disproportionately reward high-volume traders/market makers and liquidated users, without a clear formula.
Conclusion: Path Dependence
My conclusion is that I think this is a very important point, although I have not seen it in any articles about HyperLiquid's success. HyperLiquid has done an excellent job in executing its vision and product path.
Ethena also executes its product vision flawlessly, becoming the fastest-growing stablecoin protocol. They adopted a completely different approach to token and capital raising, but their decisions were based on a belief in their own development path and a clear vision for the final product.
There is no 'one-size-fits-all' way to manage airdrops and token economics; they are dynamic equations that must be adjusted based on an understanding of your product's context and user needs. If you can do this, and your decisions reflect the ideal path that best suits your product, then you can achieve success.
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