Hyperliquid is also getting a Layer 2 — what do you need to know?
- Key Takeaway: The Hyperliquid ecosystem is facing challenges with HyperEVM performance bottlenecks and unsustainable meme热度. Kinetiq has launched Elysium, an HYPE-based L2 network designed to support complex DeFi applications through a high-performance execution environment and enhanced L1Read interoperability, while funneling new on-chain activity back to HyperCore and reshaping the token lifecycle.
- Key Elements:
- The HyperEVM dual-block architecture results in gas fees exceeding $10 per swap during network congestion, and the lack of a unified token launch platform has caused meme trends like egg and joff to quickly lose momentum.
- Kinetiq is Hyperliquid's largest liquid staking protocol, with a TVL of approximately $1.214 billion. Its core product, kHYPE, provides liquidity to staked assets.
- Elysium will continue to use HYPE as gas, targeting block speeds and throughput several orders of magnitude higher than HyperEVM. It also revamps L1Read to deliver deeper order book market data, serving latency-sensitive applications like PropAMM.
- Elysium proposes a complete token pipeline: tokens first undergo cold-start via long-tail AMM on Elysium, then move to PropAMM, followed by establishing a HyperCore spot order book, and ultimately listing perpetual contracts through HIP-3.
- KNTQ's value capture path is clearly defined: 25% of Elysium's sequencer revenue is allocated to applications, 25% goes to the treasury, and the remaining 50% is used to buy back and burn KNTQ from the open market.
- New-generation Perp DEXs like PaperTrade rely on high-frequency state updates, where HyperEVM's performance falls short. Elysium provides a faster settlement environment while retaining HyperCore's native pricing advantages.
On August 22, the HYPE price broke through $80, setting a new all-time high. Capital and attention subsequently returned to Hyperliquid, and HyperEVM witnessed a long-awaited meme rally, with two high-market-cap assets, egg and joff, emerging.
The hype faded even faster than it arrived.
This has almost become the standard script for memes on HyperEVM. During the first meme season in June last year, BUDDY's market cap briefly reached $35 million, but no asset has since managed to sustain the momentum. HyperEVM has never lacked retail traders willing to place bets; what it lacks is a trading infrastructure capable of supporting this speculative demand.
HyperEVM adopts a dual-block architecture, which, while connecting to HyperCore, also leaves complexity to developers and traders. During network congestion, gas for a simple swap can exceed $10, and in extreme cases reach as high as $20. After a new token launches, traders must separately seek out AMMs, spot liquidity, and perpetual contract markets, and HyperEVM lacks a unified token launch platform to tie these pieces together.
Kinetiq has identified this gap. As the largest liquid staking protocol on Hyperliquid, it has announced the launch of Elysium, an L2 for Hyperliquid. Following the announcement, discussions around KNTQ repricing, HYPE value capture, and new application migration quickly spread across the community.
From Staking Protocol to Hyperliquid Infrastructure
Kinetiq initially addressed the liquidity problem of staked HYPE. Users delegate their HYPE to the protocol for staking and receive kHYPE, which accrues staking rewards; kHYPE can then enter DeFi scenarios such as lending and yield strategies, allowing the same asset to serve both staking and liquidity functions simultaneously.
Kinetiq's current TVL stands at approximately $1.214 billion. Beyond kHYPE, Kinetiq has also launched products such as Earn, kmHYPE, Launch, and Markets.
According to Kinetiq's disclosed design, Elysium will continue to use HYPE as gas. Users will not need to purchase another base asset to enter the new network, and transaction demand generated on Elysium will directly expand HYPE's use cases.
Performance is the first layer of transformation. Kinetiq claims that Elysium's block speed and throughput at launch will be several orders of magnitude higher than HyperEVM's, with a long-term goal of bringing block times close to HyperCore's. Clearly, Kinetiq aims to build an execution environment viable for high-frequency spot trading, automated market making, and applications requiring continuous state updates.
More critical is Elysium's connection to HyperCore.
HyperEVM's existing L1Read precompile contract allows smart contracts to read HyperCore data, but the order book information visible is primarily limited to best bid/ask prices. Elysium plans to upgrade L1Read, providing developers with richer market depth and quotes near the top of the block.
For ordinary traders, this merely means a few more order book levels. For market makers, however, the implications are entirely different. They can continuously quote in Elysium's AMMs while reading HyperCore's depth and prices to complete hedging.
Kinetiq regards PropAMMs as the first category of applications Elysium needs to attract. These AMMs use professional market makers' proprietary capital for quoting and are highly sensitive to latency and hedging efficiency. According to Kinetiq's disclosed data, spot volume handled by PropAMMs on Solana has consistently been far higher than on HyperCore. What Elysium seeks to replicate is precisely this portion of spot trading demand that Hyperliquid has missed.
Restructuring the Token Lifecycle
Hyperliquid's current shortcomings in spot trading extend far beyond transaction speed.
Listing a spot asset on HyperCore requires participating in Ticker auctions and rebuilding an order book; issuing tokens on HyperEVM requires developers to independently find launch platforms, AMMs, and market makers. Even if a new token gains short-term attention, it is difficult to channel that liquidity into HyperCore. Spot and perpetual contracts appear to belong to the same ecosystem, but in practice they follow two separate paths.
Elysium proposes a complete pipeline: new tokens are first generated on Elysium, achieving cold start through long-tail AMMs; once liquidity expands, they move to PropAMMs; they then optionally establish a spot order book on HyperCore; and finally, perpetual contract markets are launched via HIP-3.
This is what Kinetiq calls a "value-accretive L2." L2s on Ethereum are often criticized for siphoning activity and fees from the mainnet, whereas Elysium attempts to channel incremental on-chain activity back to HyperCore. It uses HYPE as gas, assets establish spot markets on HyperCore, and derivatives return to HIP-3. The more active Elysium becomes, the more transaction volume HyperCore theoretically receives.
Kinetiq's token, KNTQ, also has a dedicated value capture path. Elysium's sequencer revenue is planned to be distributed as follows: 25% to applications consuming block space, 25% to the Kinetiq treasury, and the remaining 50% used to repurchase KNTQ from the open market and send it to the Hyperliquid Assistance Fund for burning.
Supporting Complex Application Scenarios
Among Elysium's potential use cases, memes are merely the easiest to understand. What truly tests the chain's limits are new-generation Perp DEXs with complex settlement logic, such as PaperTrade.
We previously covered PaperTrade. It reads Hyperliquid order book prices and allows users to settle profits and losses directly against a public LP pool. Trades never enter HyperCore matching; the profit queue, LP balances, and PAPER token minting logic all run within HyperEVM smart contracts.
This design inherently depends on high-frequency state updates. Every position opening, closing, profit enqueueing, and subsequent payout requires on-chain execution, and HyperEVM's slow transaction confirmations and high gas fees directly undermine the product experience. A more practical concern is that any high-performance chain can replicate PaperTrade's mechanism by integrating an external price oracle, while offering lower gas and more aggressive token incentives. PaperTrade chose Hyperliquid for its native price feeds and native users; yet HyperEVM's performance is eroding both advantages.
Elysium offers an alternative path. PaperTrade could continue reading HyperCore prices, leverage the extended L1Read for richer order book data, and move settlement and token logic into a faster execution environment. It would not need to leave Hyperliquid in search of performance, nor entrust its most critical price source to an external oracle.
It is no wonder that Kinetiq's founder, Omnia, specifically called out PaperTrade after releasing Elysium: "It now has a home."
Similar opportunities will emerge in options, automated trading, and lending protocols requiring real-time hedging. HyperCore already possesses the most active traders and deepest liquidity on-chain. What Elysium aims to do is enable developers to run more complex financial logic alongside that liquidity.
