The decentralized exchange,
Hyperliquid, is considering a significant proposition that could radically alter how its tokenomics function.
The
proposal, put forth on September 22nd by Jon Charbonneau, an investment manager at DBA, and the researcher known as Hasu, suggests reducing the total quantity of HYPE tokens by 45%.
Charbonneau and Hasu suggest Hyperliquid’s existing framework produces valuation distortions, which places the protocol at a disadvantage in comparison to competitors.
They argue that simplifying the balance sheet allows the market to better understand Hyperliquid’s foundational strengths. This would also allow investors to make better-informed choices.
They stated:
“Considering HYPE’s current supply situation, it’s among the digital tokens facing the harshest undervaluation in today’s market.”
This proposal is arriving as anxieties concerning an
upcoming unlock of $12 billion worth of HYPE tokens
have triggered worries in the crypto community.
Taking this into consideration, the proposal describes key alterations to the HYPE token supply on Hyperliquid to alleviate those worries and stabilize its position within the market.
Burning excess HYPE’s supply
The core of the proposal focuses on revoking and burning above 450 million tokens that were originally set aside for the Future Emissions and Community Rewards (FECR) fund and the Assistance Fund (AF).
According to Charbonneau and Hasu, this high authorization in supply, notably the 421 million HYPE reserved for rewards programs and 31 million allocated for the aid fund, has created downward pressure on the token, causing the market to penalize it.
Their argument is that these massive reserves cause expectations of future distribution to be skewed, creating downward pressure.
According to them:
“Currently, Hyperliquid has a substantial authorized but not outstanding supply…This creates a problem because the market penalizes this oversupply when determining the protocol’s value.”
The authors suggest that by eliminating these allocations, Hyperliquid could clarify its financial standings and encourage more efficient capital movement by doing away with the excessive presence of unused tokens.
Removing the supply cap
In addition, the proposition made a controversial recommendation to remove Hyperliquid’s firm upper limit of one billion HYPE tokens.
The authors claim that HYPE’s stringent limit reflects an outdated Bitcoin influence stemming from its own 21 million coin limit, which relies on a unique and robust social contract.
They maintain that numerous top blockchains, such as
Ethereum and
Solana, unlike
Bitcoin, revise their issuance strategies without strict upper limits, leaning instead on group consensus. In this light, Hyperliquid’s fixed ceiling on supply could be limiting rather than helpful.
The authors stated:
“If many years down the road the FECR had been exhausted, but there were value accretive opportunities requiring additional HYPE issuance, the community would very likely all be in favor of this. There’s no religious tie to an arbitrary supply cap here.”