Hyperliquid DeFi Ecosystem: The Complete Guide to DeFi on HyperEVM

Hyperliquid

The HyperEVM DeFi Stack

Hyperliquid started as a perpetual futures exchange. It is now a full DeFi ecosystem.

The catalyst was HyperEVM — Hyperliquid's Ethereum-compatible smart contract layer that launched on mainnet in early 2025. HyperEVM gave developers the ability to deploy Solidity smart contracts that interact directly with Hyperliquid's native order book and trading engine. No bridges. No oracles. No cross-chain complexity. Just composable DeFi built on top of one of the deepest liquidity pools in crypto.

What has emerged in the months since is a coherent financial stack: lending and borrowing protocols, multiple stablecoins with distinct backing models, decentralized exchanges listing everything from Bitcoin to gold to Apple stock, liquid staking derivatives, market-making vaults, yield strategies, and options and structured products that compose across all of them.

This guide maps the entire landscape. Whether you are looking for the best place to earn yield, trying to understand which stablecoin to use, or want to see how all the DeFi pieces fit together, this is your starting point.

Lending and Borrowing

Felix Protocol — The Dominant Lending Venue

Felix Protocol is the #2 DeFi protocol on Hyperliquid by total value locked, holding over $1 billion in TVL. It is the primary place to borrow and lend on HyperEVM, and it operates two distinct lending models.

CDP (Collateralized Debt Position): This is Felix's flagship product. You deposit collateral — HYPE, kHYPE, wstHYPE, or other supported assets — and mint feUSD, Felix's native stablecoin. It works similarly to MakerDAO's system on Ethereum: you lock up volatile assets and borrow a stable dollar-denominated token against them. If your collateral value drops below the liquidation threshold, your position gets liquidated to protect the system.

Vanilla Markets: Felix's lending marketplace where suppliers deposit assets (USDC, HYPE, and others) into pools and borrowers take variable-rate loans against their collateral. This is closer to the Aave/Compound model — straightforward supply-and-borrow with algorithmically determined interest rates based on utilization.

The combination of CDP and Vanilla Markets means Felix covers both sides of the lending spectrum. Want to mint a stablecoin and keep exposure to your HYPE? Use the CDP. Want to earn yield by lending your USDC? Deposit into Vanilla Markets. Want to borrow HYPE for a leveraged position? Vanilla Markets handles that too.

Beyond Felix, HyperLend offers an alternative lending model with traditional pooled markets, flash loans, and its HyperLoop automated leverage tool — giving borrowers and lenders another option on HyperEVM.

For a deep dive into Felix's mechanics, collateral types, and liquidation parameters, read the full Felix Protocol guide. For step-by-step borrowing and lending instructions, see the lending and borrowing guide.

Stablecoins

Hyperliquid does not rely on a single stablecoin. The ecosystem has four distinct stablecoins, each backed differently and serving a different purpose.

USDH — The Native Stablecoin

USDH is Hyperliquid's native, dollar-pegged stablecoin issued by Native Markets. It is backed 1:1 by cash and U.S. Treasury equivalents managed by BlackRock and Superstate. USDH was selected through a competitive validator vote and went live in September 2025.

The critical advantage of USDH is alignment. As Hyperliquid's "aligned quote asset," USDH markets give traders 20% lower taker fees, 50% higher maker rebates, and 20% more volume credit toward fee tier progression. The reserve yield from USDH does not go to an external company — 50% funds HYPE buybacks and 50% goes to ecosystem development grants.

feUSD — The CDP Stablecoin

feUSD is minted through Felix Protocol's CDP system. Users deposit crypto collateral (HYPE, kHYPE, wstHYPE) and mint feUSD against it, similar to how DAI works on Ethereum. feUSD is native to HyperEVM and deeply integrated into Felix's lending and stability pool ecosystem.

feUSD's peg is maintained through arbitrage incentives and Felix's liquidation mechanism. When feUSD trades below $1, arbitrageurs can buy it cheaply and use it to repay debt at face value, profiting from the difference. When it trades above $1, borrowers are incentivized to mint more, increasing supply.

USDhl — T-Bill Backed

USDhl is a collaboration between Felix Protocol and M0 Foundation. It is backed by U.S. Treasury bills, providing a stablecoin with transparent, yield-generating reserves. USDhl represents the growing trend of real-world asset (RWA) integration on HyperEVM, bringing T-bill exposure directly into the DeFi stack.

USDC — The Bridge from TradFi

Circle's USDC is available natively on HyperEVM via Cross-Chain Transfer Protocol (CCTP). It serves as the primary on-ramp for new users and remains the most widely held stablecoin on the platform. If you are depositing to Hyperliquid for the first time, you are almost certainly starting with USDC.

DEXes and Trading

Hyperliquid's trading layer spans three distinct venues, covering perpetual futures, spot markets, and a rapidly expanding universe of traditional finance assets.

Hyperliquid Native DEX — Perps and Spot

The native Hyperliquid exchange remains the core of the ecosystem. It operates a fully on-chain order book for perpetual futures and spot trading with sub-second finality and zero gas fees. Over 150 perpetual markets are available, covering major cryptocurrencies, memecoins, and increasingly, real-world assets.

If you are new to the platform, the beginner guide walks through everything from wallet setup to placing your first trade.

trade.xyz — TradFi on HyperEVM

trade.xyz is the leading HIP-3 builder on Hyperliquid, having listed approximately 50 markets that bring traditional finance assets on-chain. Through trade.xyz, you can trade perpetual futures on:

• Equities — Individual stocks like Apple, Tesla, Nvidia, and major tech companies. See the equity perps guide for details.
• Commodities — Gold, silver, crude oil, and other physical commodities. The commodities trading guide covers strategies.
• Forex — Major currency pairs including EUR/USD, GBP/USD, and USD/JPY.
• Indices — S&P 500, Nasdaq, and other market benchmarks.

trade.xyz uses HIP-3 builder codes to deploy and manage these markets, earning fees from the trading activity they generate. For traders, this means 24/7 access to traditional markets without brokers, market hours, or geographic restrictions.

Felix FLX DEX — Focused TradFi Markets

Felix FLX is another HIP-3 builder operating on Hyperliquid, maintaining 14 markets across equities, commodities, and crypto assets. While smaller in scope than trade.xyz, FLX adds liquidity and market diversity to the ecosystem. Having multiple builders listing similar assets creates competitive market-making and tighter spreads for traders.

Liquid Staking

Liquid staking is the connective tissue of Hyperliquid's DeFi ecosystem. It solves a fundamental problem: when you stake HYPE to secure the network and earn rewards, those tokens are locked and cannot be used elsewhere. Liquid staking gives you a receipt token that represents your staked position, freeing your capital for DeFi.

kHYPE (Kinetiq)

kHYPE is the liquid staking token from Kinetiq, the leading liquid staking provider on Hyperliquid. When you stake HYPE through Kinetiq, you receive kHYPE in return. kHYPE accrues staking rewards automatically — its value relative to HYPE increases over time as rewards compound.

wstHYPE

wstHYPE is a wrapped version of staked HYPE, similar to how wstETH works on Ethereum. It provides another liquid staking option with slightly different mechanics, giving users choice in how they access staking yield.

Liquid Staking as DeFi Collateral

Here is where liquid staking becomes powerful. Both kHYPE and wstHYPE are accepted as collateral on Felix Protocol. This means you can:

1. Stake HYPE and receive kHYPE (earning staking rewards)
2. Deposit kHYPE into Felix as collateral
3. Borrow feUSD or other assets against it
4. Put those borrowed assets to work in other parts of the ecosystem

You earn staking yield on the underlying HYPE while simultaneously using the liquidity for other purposes. This is capital efficiency that simply is not possible without liquid staking. For a complete walkthrough of how to liquid stake, the differences between kHYPE and wstHYPE, and risk considerations, see our liquid staking guide.

Vaults and Yield

Hyperliquid offers several distinct yield sources, from protocol-level market making to DeFi lending returns. Understanding where yield comes from — and what risks each source carries — is essential.

HLP Vault — Protocol Market Making

The HLP vault is Hyperliquid's native market-making vault. When you deposit into HLP, your capital is used to provide liquidity across Hyperliquid's perpetual futures markets. Returns come from the bid-ask spread captured on trades and from liquidation proceeds.

HLP is not a risk-free yield source. Market-making profits depend on trading volume and volatility, and the vault can experience drawdowns during extreme market moves. But for users who understand the risk profile, HLP provides exposure to Hyperliquid's core trading activity without needing to run a market-making bot yourself.

For a complete breakdown of vault mechanics, performance history, and risk factors, read the vaults guide.

Felix Stability Pools

Felix Protocol's Stability Pools are the backstop for the CDP system. When you deposit feUSD into a Stability Pool, your funds are used to absorb liquidations from under-collateralized positions. In return, you earn two types of yield:

• Liquidation gains — When a position is liquidated, Stability Pool depositors receive the liquidated collateral at a discount. If HYPE is liquidated at $20 but the market price is $22, depositors capture that difference.
• Borrower interest — A share of the interest paid by CDP borrowers flows to Stability Pool depositors as ongoing yield.

Stability Pool returns can be highly variable. During calm markets with few liquidations, yields are modest. During sharp drawdowns with mass liquidations, returns can spike significantly — but so can the risk of holding recently liquidated collateral that continues to fall in value.

Vanilla Markets Lending Yield

Felix's Vanilla Markets offer the most straightforward yield in the ecosystem. You deposit assets (USDC, HYPE, or others) into lending pools, and borrowers pay interest to access those assets. Interest rates are variable and adjust algorithmically based on pool utilization — high demand for borrowing means higher rates for lenders.

This is the closest equivalent to a savings account in the Hyperliquid ecosystem. The risk profile is lower than market making or stability pools, though smart contract risk and borrower default risk (mitigated by over-collateralization) still apply.

The Composability Flywheel

The real power of Hyperliquid's DeFi ecosystem is not any single protocol — it is how they compose together. Each piece amplifies the others, creating a flywheel effect that makes the whole greater than the sum of its parts.

Here is the canonical example:

1. Start with HYPE. You hold HYPE tokens, Hyperliquid's native asset.

2. Liquid stake for kHYPE. You stake HYPE through Kinetiq and receive kHYPE. Your HYPE is now earning staking rewards while remaining liquid.

3. Collateralize on Felix. You deposit kHYPE into Felix Protocol as collateral. Your staking rewards continue accruing.

4. Mint feUSD. You borrow feUSD against your kHYPE collateral. You now have liquid stablecoin value without selling any HYPE.

5. Deploy feUSD. You can deposit feUSD into a Felix Stability Pool for liquidation yield, trade with it on the native DEX, or swap it for USDC to take profits — all while your original HYPE keeps earning staking rewards and your kHYPE position appreciates.

This is one path through the ecosystem. Others exist: depositing USDC into Vanilla Markets for lending yield, providing HLP liquidity for market-making returns, or trading equity perps and commodity perps listed by HIP-3 builders.

What Makes This Different from Ethereum DeFi?

On Ethereum, a similar loop would require moving assets between Layer 1 and multiple Layer 2s, paying gas fees at every step, trusting bridge contracts, and relying on oracle networks to price collateral. A single liquidation might need to propagate across three different chains.

On Hyperliquid, the entire stack runs on one L1 with shared state between HyperCore and HyperEVM. Liquidations are atomic. Price feeds come directly from the native order book. There is no bridge risk, no oracle manipulation vector, and no cross-chain latency. The composability is real, not stitched together with trust assumptions.

This architectural advantage is why the DeFi ecosystem has grown so quickly. Developers can build protocols that genuinely compose with each other and with Hyperliquid's core trading infrastructure, and users get a seamless experience without the fragmentation that plagues multi-chain DeFi.

Getting Started

If you are new to Hyperliquid and want to explore the DeFi ecosystem, here is the practical path:

1. Set up and deposit. Follow the deposit guide to get USDC onto Hyperliquid. This is the starting point for everything.
2. Learn the platform. The beginner trading guide covers the interface, order types, and basic mechanics.
3. Explore DeFi. Once you are comfortable, start with lower-risk options like Vanilla Markets lending on Felix or the HLP vault before moving to more complex strategies.
4. Understand the assets. Read up on HYPE, USDH, and HyperEVM to understand what you are interacting with.
5. Explore beyond DeFi. The ecosystem extends past lending and trading — there is a growing NFT scene on Hyperliquid with marketplaces like Drip Trade and NFT lending via BAE.