Vault
Vaults on Hyperliquid L1 are powerful tools enabling both individual traders and the community to participate in advanced trading strategies. They democratize access to market-making profits and liquidation mechanisms, previously reserved for privileged parties on traditional exchanges.
Types of Vaults
1. Protocol Vaults: Hyperliquidity Provider (HLP) 🌐
Overview
The Hyperliquidity Provider (HLP) vault is a community-owned protocol vault that plays a vital role in the ecosystem:
Key Roles
Engages in multiple market-making strategies
Performs liquidations (via a dedicated liquidation strategy).
Receives a portion of the platform fees.
Currently, the HLP vault also receives auction fees.
3-Core Strategies Used by HLP:
Strategie A (0x010461c14e146ac35fe42271bdc1134ee31c703a): A sophisticated market-making strategy that helps maintain liquidity without requiring you to create your own complex strategy or invest in separate funds.
Strategie B (0x31ca8395cf837de08b24da3f660e77761dfb974b): Another advanced market-making approach working in tandem with Strategie A to optimize liquidity provision and risk management.
Liquidator (0x2e3d94f0562703b25c83308a05046ddaf9a8dd14): This component steps in during backstop liquidations, taking over positions from accounts that have fallen below their maintenance margin thresholds. It then exits these positions using a market-making algorithm, contributing to the platform’s stability.
Community Participation
Anyone can deposit liquidity into the HLP vault to share in its profits.
No profit share fees for vault owners—benefits are fully distributed to depositors.
Lock-Up Period
Deposits have a 4-day lock-up period.
Withdrawals can only occur 4 days after the most recent deposit.
2. Protocol Vaults: Assistance Fund (AF) 🛡️
The Assistance Fund (AF) address (0xfefefefefefefefefefefefefefefefefefefefe) is safeguarded by a validator quorum, ensuring that its usage is subject to strict conditions.
Fee Allocation and Flow
Initially, it is assumed that trading fees from the Hyperliquid DEX were routed to the 0x36715f6408819492c27C1a1538156af9a2BFe963 address, controlled exclusively by the Hyperliquid team, which then funded 0xfe.
However, there may have been other addresses involved in this process that are not publicly known.
Currently, trading fees are sent directly to 0xfe, streamlining the process.
On-Chain Visibility:
At present, fees are not directly visible on explorers, making it difficult to track fee flows or analyze their exact allocation.
🚧 I will conduct a study to estimate the fees generated by the platform based on its trading volume.
Additionally, I will review the Assistance Fund’s expenditures to gain deeper insights into its activity.
Automated Fund Activity:
Today, the Assistance Fund constantly purchases HYPE tokens using a TWAP (Time-Weighted Average Price) strategy. This ensures a steady and systematic buyback of HYPE using the trading fees it receives.
Purpose
The Assistance Fund acts as a safety net during emergencies or special situations, providing stability and covering potential losses.
3. User Vaults 👥
User-created vaults allow individuals to run personalized trading strategies and share profits with depositors.
Vault Leaders:
Profit Share: Vault leaders receive 10% of the profits generated by their strategies.
Requirements to Create a Vault:
Deposit at least 100 USDC to initialize.
Maintain at least 5% ownership of the vault.
Vault leaders execute trades directly from the Trade page, applying their strategy to the vault's balance.
Closing a Vault:
Leaders must close all open positions before closing a vault.
Depositors receive their share of the vault’s assets upon closure.
Vault Depositors:
Earnings: Depositors earn a share of the vault’s profits proportional to their contribution.
Lock-Up Period: Deposits are locked for 1 day before withdrawal is allowed.
Performance Tracking:
View vault statistics, including APY, total deposits (TVL), and historical performance, on the vault’s page.
Withdrawals:
If margin requirements are met, withdrawals do not affect open positions.
Otherwise, a proportional amount of positions is closed to maintain stability.
Risk Considerations ⚠️
Trading is inherently risky, and past performance does not guarantee future returns.
Depositors should carefully review the performance history and strategy of a vault before committing funds.
Resources 📚
For further reading and detailed insights on HLP, Assistance Fund, and Vaults, you can explore the following official resources:
Vaults: Docs: Vaults Overview | Vault Page
HL Revenue Analysis: Twitter Post
Vaults on Hyperliquid enable anyone—from DAOs to individual traders—to engage with sophisticated trading strategies, share in the ecosystem’s growth, and democratize access to advanced DeFi tools.
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