Dragonfly Partner: Hyperliquid's Order Book Model Cannot Solve RWA Liquidity Problems, Variational's RFQ Model Can

Odaily Odaily Planet Daily News, Dragonfly Partner Haseeb Qureshi posted on X stating that the Central Limit Order Book (CLOB) model cannot solve the liquidity problem of RWA assets. Hyperliquid has indeed mastered liquidity for a few macro RWA assets, but beyond the top 10 assets by trading volume (which account for approximately 90% of total volume), liquidity drops off a cliff.

The order book model can work when retail demand is sufficiently strong. However, if every asset requires building its own order book, it means you have to cold-start demand ticker by ticker, subsidizing "rented" liquidity, ultimately resulting in a collection of illiquid markets.

Variational bypasses all of this through the RFQ (Request for Quote) model. RFQ is the actual trading method used by institutions. In this model, market makers provide instant quotes on demand and hedge in primary trading venues after orders are placed. This allows Variational to directly tap into TradFi's mainstream liquidity and bring it on-chain — margins are managed in smart contracts, settlements are completed using stablecoins, and liquidity comes from users who are already trading in the largest underlying markets like the CME and NYSE.

This means anyone can permissionlessly gain the same market depth and spreads as traditional markets. Once the cold-start problem is solved, the launch speed of new markets can be as fast as releasing new software. It is expected that by next year, RWA perpetual contracts will become the largest category of on-chain contracts, even surpassing the total size of BTC and ETH perpetual contracts combined. Ultimately, the platform that wins in this arena will not look like a traditional exchange.

Yesterday, it was reported that Variational announced the completion of a $50 million Series A funding round, led by Dragonfly Capital, with participation from Bain Capital Crypto and Coinbase Ventures.