How Hyperliquid works: the decentralized perpetuals exchange

What it is

Hyperliquid is a decentralized exchange focused on perpetual contracts. It runs on its own blockchain, built for trading, and keeps the entire order book on that chain. Every order, cancellation and fill is recorded publicly.

The difference from a centralized exchange is custody. On Hyperliquid, your balance sits in an account controlled by your wallet. No one at the exchange can withdraw on your behalf.

An order book on the blockchain

Many decentralized exchanges use liquidity pools with prices set by a formula. Hyperliquid works like a traditional exchange, with buyers and sellers placing orders at set prices. That allows limit orders, stops and take-profits the way traders already know them.

Each coin's mid price is public and anyone can look it up. That is where Aval reads the market all day, with no key or account needed.

How money gets in

Deposits are made in USDC, a stablecoin pegged to the dollar, sent over the Arbitrum network. Once deposited, the USDC becomes margin for opening positions. Withdrawals take the reverse path back to your wallet.

For anyone new to crypto, this is the hardest step. You need a wallet, you need to buy USDC, and you need to send it over the right network. Sending over the wrong network can mean losing the funds.

Fees

Hyperliquid charges a fee on every filled order. Orders that add liquidity to the book (maker) pay less than orders that take liquidity (taker), and the tiers change with trading volume. Current rates are in the official docs (https://hyperliquid.gitbook.io/hyperliquid-docs).

Apps like Aval can charge their own per-order fee, called a builder fee, which the user approves first. The protocol caps that amount. On the paper trading scoreboard, Aval already deducts Hyperliquid's taker fee and Aval's fee from every entry and every exit.

Risks that apply to everyone

• Leverage magnifies gains and losses in the same proportion. A highly leveraged position can be liquidated by a small move.
• Smart contracts and cross-chain bridges can have bugs.
• Coins with low liquidity can see sharp swings and manipulation.
• Positive or negative funding changes the cost of keeping a position open.