Original author: KarenZ, Foresight News

Imagine this: Hyperliquid invites you, "Hey, as long as you have enough skills, you can build a Perp DEX yourself!"

HIP-3 is just such a feature. On October 13th, Hyperliquid officially activated HIP-3 on its mainnet, allowing any qualified developer to independently deploy and operate a perpetual contract market. This marks a key step towards a fully decentralized contract listing process for Hyperliquid.

Simply put, Hyperliquid's HIP-3 is a rules system that allows you to become your own boss and open your own perpetual contract market.

Core gameplay: How to open a perpetual contract market?

What are the entry barriers?

Hyperliquid sets a high staking threshold:

• 500,000 HYPE must be staked (currently worth over $20 million) : However, it is expected that the stake requirement will be reduced as the infrastructure matures.
• No permission is required at all : no application or approval is required, and deployment can be done as long as the pledge is in place.
• Oracle selection, contract design, etc. are handled by yourself.

Basic gameplay

• One pledge corresponds to one DEX : Under the current rules, one pledge corresponds to one Perp DEX. In the future, one pledge may be allowed to open multiple DEXs.
• High-performance order book : HyperCore will provide you with an independent margin system and on-chain order book.
• Listing a token contract requires participating in an auction : Want to list a token contract? You must participate in a Dutch auction and pay the gas fee with HYPE tokens. Auctions take place every 31 hours. The first three assets in each market can be listed directly without participating in the auction; starting from the fourth, they must participate in a Dutch auction with others, following the same rules as the previous HIP-1 (spot listing) auction. The reason for this design is to allow new DEX operators to start quickly, and starting to charge fees from the fourth one ensures that only valuable tokens are listed. All HIP-3 DEXs share a single auction pool.
• How are deployer fees charged?: Deployers can set a commission share of up to 50%, and can even add additional fees on top of the base rate.
• What can be used as collateral? In theory, any quote asset (the pricing asset of a trading pair) can be used as collateral.
• Margin Mode : Currently, only "Isolated Margin" is available for trading (loss of one asset does not affect other assets). "Full Margin" (margin shared by all assets) will be gradually added in the future.

As a market "boss", what else do you need to do?

As a deployer, you are the "boss" of this market and are responsible for:

• Define market rules: for example, which oracle to use and how to design the contract
• Daily operations: setting oracle prices, controlling leverage, and settling markets when necessary
• It is also possible to use a multi-signature mechanism for management to make operations more standardized.

How is the handling fee calculated?

• Users pay double : Trading on the HIP-3 Perp DEX costs twice as much as trading on the perpetual contract market operated by validators.
• Deployer takes 50% : Your commission share is fixed at 50%, plus additional fees.
• Protocol revenue remains unchanged : the Hyperliquid protocol makes the same amount of money as the official market (because the extra half goes to HIP-3 Perp DEX deployers).
• Discount mechanism continues : The HIP-3 market continues to integrate mechanisms such as staking discounts and referral rewards.

Simply put: users pay twice as much, and the HIP-3 Perp DEX deployer and the protocol each take half.

How to control risks?

• Malice will be punished : 500,000 HYPE pledge requirement is equivalent to a deposit. If malicious market operations occur, the validator has the right to reduce the deployer's pledge through pledge-weighted voting.
• If you operate maliciously, you will not escape punishment even if you unstake : Even if you start to unstake, you will still be fined if you find problems within 7 days.
• Even if you shut down all markets, your pledge will still be locked for another 30 days.
• Position Limits: To manage risk, the system implements two open interest constraints: a nominal cap and a size cap. The nominal cap is calculated as the sum of "number of open positions x current price" for all assets within the DEX. This applies to both total market open interest and individual asset positions. The size cap is simpler, calculated based on the number of open positions, enforced only for each asset. Currently, the maximum open position for each asset is 1 billion units. Therefore, it's crucial to set your minimum trading unit appropriately.

What behaviors will be punished?

• Malicious input of unusual data in an attempt to attack the system (even if unsuccessful).
• Exploiting vulnerabilities or boundary conditions to bypass system restrictions.
• Invalid input that causes network crashes or performance issues.

However, protocol bugs (protocol problems) caused by normal input and system failures unrelated to the deployer's operations will not result in penalties.

How much is the fine?

Validators will vote to decide, generally referring to this standard:

• Causing prolonged system crashes or invalid state transitions: up to a 100% penalty.
• Causing a brief system outage: a fine of up to 50%.
• Invalid input that causes network performance degradation or performance issues: Up to 20% penalty.

The deployer’s penalized stake will be destroyed instead of being distributed to affected users.

What changes will HIP-3 bring to the market and players?

The launch of HIP-3 can be considered a significant turning point in the development of the Hyperliquid ecosystem, opening up the right to list coins to everyone. This is a huge leap from centralized to decentralized governance. While Hyperliquid officials may be conservative, listing only mainstream coins, the community's imagination is limitless. For example,

• Keeping up with market trends: If a new public chain token suddenly becomes popular, the creator can quickly launch its perpetual contract to capitalize on the market's enthusiasm. This "small and fast" market model can fill the gaps left by larger platforms and provide users with more trading options.
• Long-tail assets: Tokens that are niche but in demand can also have perpetual contracts.
• Innovative products: For example, creating a perpetual DEX that focuses on AI concept coins, RWA special sessions, and Meme coin special sessions.

Furthermore, after staking 500,000 HYPE, deployers become tied to the Hyperliquid ecosystem, and subsequent auction fees are dependent on HYPE. They will actively promote their own DEX, attract their own communities and users, and hold HYPE long-term, forming a moat for the Hyperliquid ecosystem.

More importantly, HIP-3 will create value for HYPE tokens. Each DEX will lock 500,000 HYPE. Locking = reducing circulation = price support.

What are the potential negative effects of HIP-3?

Although HIP-3 brings many innovations to the Hyperliquid ecosystem, from the perspective of actual operations and user experience, there are still some potential risks that require our objective examination.

First, the 500,000 HYPE token price excludes many. The threshold of over $20 million is astronomical for individual developers, leaving only institutions, large investors, and VCs within reach. This could ultimately lead to a concentration of market creators in the hands of a small number of well-funded institutions or large investors, deviating from the original intention of decentralized co-construction. However, this approach can also mitigate many risks.

Secondly, HIP-3 places the responsibility for market definition and operation in the hands of the creator. If the creator makes an inappropriate choice of oracle, has loopholes in the contract rules design, or makes operational errors during operation, user assets may be damaged.

At the same time, with the emergence of a large number of markets operated by different creators, users need to spend a lot of energy to identify the quality of the market, and the selection cost increases significantly. If they accidentally enter an "unreliable" market, they will face higher transaction risks.

Furthermore, while the first three assets listed don't require an auction, starting with the fourth asset, they will be subject to a shared Dutch auction. If multiple creators compete for listing on popular assets, this could drive up auction prices. Small and medium-sized creators, with limited financial resources, will struggle to compete for listing on high-quality assets, forcing them to choose less popular assets, further limiting their market development.

Of particular concern is that each DEX operated by a creator is independent, with separate order books and margin systems. This results in liquidity within the Hyperliquid ecosystem being dispersed across multiple small markets. Individual markets may lack sufficient depth, leading to issues such as high slippage and slower transaction times, impacting the user trading experience. For small and medium-sized creators in particular, insufficient liquidity can become a fatal bottleneck for growth, creating a vicious cycle of "less liquidity, less use, and less use, less liquidity."

at last

To sum it up in one sentence: HIP-3 transforms Hyperliquid from a simple exchange into an exchange platform.

This is like:

• In the past, Amazon mainly relied on its own sales.
• Now, Amazon lets anyone open a store.

In short: If you have 500,000 HYPE, the technical skills, and the desire to make a name for yourself in the Perp DEX space, then HIP-3 is the platform for you. But remember, with great power comes great responsibility, so don’t mess it up!