Dragonfly Partner: Hyperliquid's Order Book Model Can't Solve RWA Liquidity Issues; Variational's RFQ Model Can

Odaily Planet Daily News: Dragonfly partner Haseeb Qureshi posted on X, stating that the Central Limit Order Book (CLOB) model cannot solve the liquidity issues of RWA assets. While Hyperliquid has indeed gained a grip on the liquidity of a few macro RWA assets, liquidity drops off a cliff for assets outside the top 10 by trading volume (which account for about 90% of all volume).

The order book model can work when retail demand is strong enough, but if you have to build an order book for every single asset, it means you have to cold-start demand ticker by ticker, subsidizing "rented" liquidity, and you end up with a bunch of illiquid markets.

Variational bypasses all of this with its RFQ (Request for Quote) model. RFQ is the real way institutions trade. In this model, market makers provide instant quotes on demand and hedge on primary trading venues after the order comes in. This allows Variational to directly tap into mainstream TradFi liquidity and map it onto the chain – with margin managed in smart contracts, settlements using stablecoins, and liquidity sourced from users who are already trading on the largest underlying markets like the CME and NYSE.

This means anyone can get the same market depth and spreads as the traditional market, without permission. Once the cold-start problem is solved, launching new markets can be as fast as releasing software. It is expected that by next year, RWA perpetuals will become the largest contract category on-chain, even exceeding the total size of BTC and ETH perpetuals combined. Ultimately, the platform that wins this race won't look like a traditional exchange.

Yesterday, 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.