HIP-3, USDH, and Felix | Charlie

Transcript

The HyperVM in my mind it's the goal of it was always to basically serve as an optimizer for the trading experience on the hyperlquid exchange to this point. It's been it's that's still the main purpose it serves. Like I want to bargain my hype on Felix. I go trade on Hyper Core. That's still the primary use, but it's not as close as it could be per se. >> If you care about what's actually happening on chain, subscribe to the Zerx Research newsletter. Our team at Blockworks Research sends a daily brief with analyst insights, datadriven breakdowns, and sharp opinions on what's happening on chain built by people who live in the arena. Subscribe at the link in the description today.

Nothing said on Xerox Research is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only and any views expressed by anyone on the show are solely our opinions, not financial advice. Pocachio, Ryan, and our guests may hold positions in the company's funds or projects discussed. >> What's up, guys? Welcome back to another episode of Zerax Research. Today, I'm joined by Charlie from Felix and Shondaanda from the research team. Um, Charlie, maybe before we get started, do you want to give a short introduction of yourself and then of Felix and then we can get going?

>> For sure. Yeah, I appreciate you guys having me on. Um, I'm Charlie from the team of Felix. We're building money market infra and more on hyperlquid. We just started building Felix back in July of last year. We went live in April. Um and yeah, we crossed a billion deposits two days ago. So, um yeah, we've been scaling out that. But yeah, that's a bit of our uh our story. >> Very good. Um, I have I want to do some basic questions first because I'm not as familiar with Felix as Shondaanda is and I think it's good to get what um what is the back end for Felix look like? Like it's CDP, right? And then you issue a stable coin based on the collateral that

is deposited or is there something else happening? >> Yeah, so Felix is sort of a it's we're basically offer a platform. We have two protocols currently live. Um the first is Felix CDP like you mentioned which is built on liquidity v2 that went live in April of this past year. Um and so like you said CDP you deposit proof collateral assets you can mint the native stable FUSD against that collateral. Um there's about 65 million FUSD in circulation and yeah the main collateral assets there are Hype Kype and UBTC. Uh then there's also Felix Vanilla which is now uh significantly larger than Felix CDP. Um but that's built on Morpho. So that's a basically

we were building out the CDP since you know July August of last year. Um and I kind of had an idea of okay well what if we built sort of a complimentary money market protocol right next to the CDP sort of like Maker and uh Maker and Spark. >> Yeah. >> And that was kind of idea that came to mind. We talked to the Morpho team and things kind of made sense there that they would deploy Morpho on heartb and we would service basically offer everything else on top of that. Um so yeah, Felix Vanilla is a Moro deployment heartb that we operate serve as a curator um and deploy the markets for. So yeah, that's kind of like the the two products that we currently have live along with um USDHL.

>> Yeah. Um, do you think the CDP TAM is much smaller than the like vanilla product there? >> I think the the scalability of the CDP is certainly uh bit more difficult. Um, it's difficult to nail because everything basically on the CDP side comes down to secondary liquidity for that CB CDP stable coin FUSD. Um and that is when we launched there was no other stable coin on hyperbm and then obviously USDC was there's no native stable coin so there's no USDC across and so it was a bit difficult to find like a suitable stable to pair with I think when USDT zero went live later on it things made more sense but by that

time we had been all live we were already focused on scaling that um but I think it you know it still has pretty decent usage maybe something around 200 250 million in TVL on the CDP side if I'm not mistaken. Um, and a lot of users still just like the way that you can, you know, mint it at your own rate on the CDP side. Um, but I do think there's a a scalability benefit at least right now to the vanilla product. >> That makes sense. USDT0 is also not particularly liquid, right? Like it's more liquid than everything else has been, but it's not. >> That's right. Yeah. So, it's uh and I think maybe something that we can we can jam on here is like with the USDH stuff and all this new kind of stable coin liquidity coming to Hyperliquid or potentially going to um while these

other issuers, I think it's that gets pretty interesting. Um but yeah, we we've had a a der of stable coin liquidity on Hyperlid specifically HyperVm since launch. So, um something that like I've been actively working to try to boost and change internally, externally, and yeah, try to figure out solutions on that side. And internally that looks like the CDP product. Wait, okay, so there's FEUSD which is from the CDP product. And then there's USDHL. Am I mistaken? >> Nope, that's right. So USDHL um was sort of our internal response to this issue of um basically not having native USDC or not having a native fiat back stable.

We thought it would be great to have a hyperlquid native fiat back stable and we should build this out internally. This was before USDT0 went live. Um we you know we're riding on this product and so yeah we we launched USDHL in mid June. The value prop was USDHL would be essentially a USDC competitor that took all the treasury yield backing it bought hype and then distributed that hype to users. Um so that was kind of like the the value prop of USDHL. Obviously it history rhymes um with what's being built today which is why I think we can get into like some of the the sort of questions that we faced on that side.

USDHL um it's not a a dead product by any means. It's still I think around maybe 14 million supply. Um but obviously with any stable coin you're trying to get to you know three four five billion and that's the goal. And so um I would say on the USDHL side there's not a clear path to that right now. But that's a big piece why we're kind of interested in these sort of USDH deployers and seeing what that might bring because on our side we're not really in the business of running and scaling stable coins. We're a moneymark provider and we we do basically trade infrastructure and trade financing. Um the stable coin is sort of a means to an end around hey we want to scale our borrow system. We need more stable coin liquidity. Let's just do it ourselves.

Um, so we're very interested in kind of seeing what these US providers can bring and or whoever wins it and then what other these other deployers assuming they stick around will also bring to Hyperquit. So yeah. >> Yeah, it's tough to scale a stable coin. I don't think a lot of people realize how difficult it is, especially if you have another business as well that is like full-time. >> Exactly. Exactly. >> Um, so on your hand you have let's do a bit of US because I feel like that's one of the most interesting things that's been happening this week. >> Sure. Um what is so you guys basically did what Paxus initially proposed which was um keep the yield buyback USD and then redistribute it. Is that what Paxos

did or Agore? One of the teams said that they would do this and a lot of >> keep the buyback hype, right? >> Yeah. >> Yeah. Yeah. Yeah. Um yeah. Like that was the value prop that we offered. I think sort of the interesting I guess a couple things here like the first is that to make this really work at scale like it's like it's sort of a chicken and egg like you need a lot of supply to have that yield to buy back any hype to make it substantial. Um otherwise like you're not making any real dent compared to what the assistant fund is doing. Like sure it's great if you're buying back you know 100 hype or a thousand hype you know good on you but it's not really making a dent. Um, and so it becomes more of a narrative thing.

And I think the narrative game eventually dies if you don't have like a real impact being made. Um, and so I think that was sort of a an issue that that we saw with that. Um, there were some questions around like, hey, maybe you should just basically internalize all this hype and create sort of a second sort of native assistance fund as opposed to distributing it to users because it's not enough to distribute to make any sort of meaningful difference there. But it's the same question. It's like, "All right, well, sure. We'll build up an assistance fund of 5,000 hype." Okay. It's like, "All right." Um, like, "Cool." You know, that 250 grand like, "All right." Like, so yeah, I mean, like, that's uh that's kind of what we're into. But yeah, I'm happy to go into like the specific proposals that we've saw and get you guys get your guys

thoughts on them, too. >> But yeah. >> No, but that point makes a lot of sense because I was doing the math yesterday and I think if they whoever launches and captures the full um USDC supply, so it's like 5.8 bill. Um I think if it was Ephina it was going to be like 20 mil um buyback which is significant but also I mean that's the biggest one and they're proposing doing 95% by capturing like all of the USCC supply right now and then as you go lower it obviously becomes like semi- irrelevant um especially since annualized I think buybacks are like 1.2 to bill on the assistance one side. So it does take >> yeah right and I think that's also you're also looking at you know these

stable coins capturing 100% of USDC supply okay like what if it's 10%. you know, now it's now, you know, what then? And then also, um, what's to say that like obviously Circle has taken a lot of flack for their lack of speed in this and you know, even you know, Jeremy's statement on basically the USDH situation, hey, we're not participating here. But was to say that if if Circle, assuming they're a fairly competent business, sees that, hey, this is a business line for us and we're going to lose it if we don't start buying hype.

What's to say that they just don't start doing the same thing? Um, in which case it's like we'll use to protect our position. So yeah, I guess like that was kind of the question and I this narrative of hey, we're just going to auto swap, you know, 5.5 billion USDC USD. seemed a bit like let's pump the brakes here and see how much over how much time is this going to take and what are sort of the fail cases for this. >> Yeah. Another thing there is with USDH like I think the main reason for the ticker being sold is because you want some form of not anointoriented but like trusted ticker but USDC already is a trusted ticker and like I'm very passionate about USD because I'm very interested in hyperlquid but reality is I I imagine like what 70 80% of people who use liquid IVM they're probably

maybe they trust USDC more because it's a trustworthy product so that like shift to go to 5.8 and eight bill. Um I don't think it's like as easy as what people think it is and I don't think it's the end of the world also like the way people think it is if it doesn't go to the right person. >> No, I agree. And I think I mean even just last night maybe you saw Jeff's announcement in the discord around um permissionless spot code assets and you know what be required there. we can walk through the requirements because yeah, they're they're pretty stringent. Um like it's not like anyone's just going to be able to to do this, but you'll see that USDC and USDT, they don't have to follow these requirements because they already have this trusted nature. USD is

not included in there. So, it's like obviously, you know, he knows like I'm not going to cannibalize my business for the stable coin. Even though yes, it would be excellent to have five 5.5 billion buying hype and you know staking hundreds of thousands of hype and ensuring there's all this liquidity or to avoid slashing but um it's not as easy as just like hey we'll launch it and great we have our USDC competitor. >> Yeah. >> Also whatever buyback comes from the 5.8 donate bill. I don't know if it's worth as much as having like so we have the USDC pairs now, but if you just had USDT pairs as well, I feel like that's probably worth more because you just get more fees, more buyback on the assistance fund side itself.

>> C what do you mean by that with US pairs like >> because I imagine USCT pairs are something that people want because a lot of people hold USCT um and they just trust USCT more. >> I see what you mean. Um, and if you can just like capture that side of the market as well, that's I think probably worth more than somebody clipping in like 50 mil a year off of whatever US like whatever USDA supply they're able to Does that make sense? >> Oh, yeah. Yeah. No, no, I I fully agree. Um, I do think it's interesting how um I don't know. I curious to hear your guys thoughts on this, but why Tether has been so quiet on this end. I think Circle has been somewhat vocal about

Hyperlid, you know, not obviously to the extent of that we'd like to see, but um Tether's been just been silent and like really USDT on Hyperlid is just USDT0, which nothing against USDT zero, but you know, it's obviously not canonical USDT. Um I do wonder like maybe this is a it's obviously a significant benefit for USDH and USDC if they can capture that but um yeah I wonder if eventually we see a a beer tether push on the high liquid side and then yeah things make more sense there but I don't know.

>> We'll see. I wonder if they have a exclusivity thing for us. I don't have any information on this. I'm just like making guesses. I wonder if USDT0 has like an exclusivity agreement within Hyperlquid for the time being. so that they can only make the um or like for the year or something. Um cuz that was like a pretty big partnership with Layer Zero and USDT. >> Um >> and I see that UST0 is I don't know if it's them or if it's layer zero, but they're buying quite a few tickers on um the auction thing. So I imagine they have plans to do stuff. Um and maybe that's why it's like they're like, "Well, we're already like the base asset now. We're small, but we can keep growing. Um we don't really need to worry about this." And they also benefit

from the name, right? Like USDT0 is still, it's not USDT, but they benefit from the name such that they don't have to go out and say we need USD versus like Paxos really needs USDH. Agora really needs it. Frack needs it. Native markets needs it. Um I don't think USDT0 needs it that much. What do you think Shondaanda? Yeah, I mean I think one of the reasons that you you see Circle being more vocal is it's their USDC that they have already the distribution advantage and it's their game to lose, right? So you would say whatever growth comes from USDH probably the majority of that is flows coming from USDC swapping into USDH and I think um Tether I do think in

the future it's a huge market that they need to penetrate but until now there's nothing that they're going to lose by not stepping in immediately right and I think there's a lot of good arguments that you have discussed about what to do with this T bill yield and I think something interesting is a lot of criticism comes down to like hyperlink's model of using 97 I think now it's 99% of revenues for buyback right I think a lot of people don't understand why a growing company wouldn't reinvest that and I think this is a good example of like looking at hyperlas different revenue sources taking the USDC this is one area where we can still grow right like a lot of growth is going to come from these HIPP3 markets um spot um books it doesn't make sense to just take

100% and add that right to the buyback instead if you take like 50% that's my ideal and use that to grow the markets like um we were talking about like 200 mil annualized revenue right that you get from that 4% 50% of that is 100 mil a year to incentivize these like HRP3 markets these hyper um EVM projects that's going to be a huge amount and that's going to move the needle and you can kind of think like each new HIPP3 market will probably be with USDH instead of USDC right just because of this um advantage that they have to incentivize it.

>> So you're a native markets guy basically. >> I I think I think there it's a it's hard to make a decision, right? Like a lot of it comes down to how are you going to incentivize the pairs? I think a lot of teams have the same like idea of like incentivizing HIPP3 incentivizing HyperVM. But then the key is how do you do that, right? And I think at least we're privileged enough that everyone wants to participate in the ecosystem and they're going to participate regardless if they have the USDH sticker or not. So, um, we're going to see a lot of interesting like work done there regardless.

>> Charlie, I imagine you can't give a lot of opinions on who you support. Um, but like on my end, I viewed Athena and um, native markets as the best simply because of like what Sean also mentioned is I view HIV free as the next big thing. I think everybody does at this point. Um, maybe it's true, maybe it's not, but I think it's like the best way to uh exponentially grow going forward. Um, and I felt like those two were the only ones that were really focused on HIV free.

>> Yeah. Yeah. I mean, um, yeah, I can touch on this. I also like to touch on a point Shauna that you made earlier um on this incentivization side, but I think on that side um yeah, I mean I really did not expect anyone to challenge native markets on this. Um so I thought it was interesting when Paxos made a real bid. Um, I do think that the Sky and Athena proposals were really the deathnell for Paxos because um, it really just framed Paxos as another outsider versus NATO markets being the like the hyperlquid native the hyperlquid only team. Um, which was interesting to see like I for a good you know day or so there I was like oh maybe

this is like you know 60 40 native markets packed for a little bit of time and then it was quickly like no it's it's not close. Um so it's interesting to watch that as far as yeah a preference like um yeah I think like there's a lot of good proposals out there um you know stuff across the board. Uh I would say on in on sanivization though I would be the piece that I and again I'm a USDH you know bull to the end and I think it's excellent to to see this coming but um I mean obviously this is why we did USDL so like this is a very interesting value prop but the piece that I sort of question a bit is that um other stable coins don't also want to

incentivize HIP 3 markets and that USGH becomes the default here. And I'm not saying that it's not going to happen. I think there's a great chance it does. And obviously I've chatted with multiple of the USH teams and they they've all said this like they they want to grow through HIPP 3 or HIP3. But um I'm assuming Circle does too and I'm assuming Athena does too. And I I don't think they're just going to kind of throw up their hands and say, "Hey, USDH is incentivizing so we're going to back off." Um, but I'm yeah, obviously curious to see how it plays out. Um, but I just, yeah, I just don't think these guys are going to sit on their hands, um, while another stable eats their

bunch. So, I guess that's the piece that I'm trying to think through, too. >> I imagine Ephena is very aggressive um, if they get it or if they don't get it. I don't know about Circle. They've historically been very, very slow, right? Like always they've been very slow. Um, they're very comfortable player. They they I think they benefit off of brand a lot, especially in the US, and just like they use Coinbase, but they also I mean, we know that they pay 50% of everything that they get to Coinbase, which is a ridiculous amount to pay. Um, and like that's just how they've always been. So, I'm a bit I wouldn't be very sure about USC.

Charlie, I'm also cognizant that your business is stable coins, so I don't want to put you in like a spot where you have to give your like full opinion about everything, but >> No, I'm damned to give opinions. Um yeah, I'm happy to give opinions. So >> um yeah. Yeah, go ahead. >> Um with that what you mentioned like the quote asset stuff um from Jeff's um post yesterday. I think it's I don't quite understand how the mech do you like can you share because I know you guys are also working on some HIPP3 implementations or testing out some HIPP3 implementations. So maybe it's like how are you guys thinking about the co asset um stuff on your end and um yeah and then maybe we can talk about

HP3 a bit more. >> Sure. Sure. Yeah. So just to clarify the announcement yesterday was purely on the spot side not the per side. Um and so yeah just I don't want to confuse on that end. Um on the spot code asset side um I think it's pretty interesting. I think that will be an early area where USDH can try to gain traction there. Um, I think on the HIP 3 quad side, I think Jeff said early in the announcement, he's something along the lines of this is to be determined around how configurable quad assets will work with HIPP3 markets. Um, but yeah, I think, you know, we on our side are chatting with a few players. Um, we obviously

have, you know, stable coins of our own, but want to work with. I I think really the the piece to consider here is what will users want the most. And so I think that's something pretty helpful on our side is having built substantial user base, having a lot of users that we can talk to and try to get an understanding of what really moves the needle for them. Um because yeah, if there are if there is an asset that was needable, that's that's all we're optimizing for is just, you know, how can we grow as a as a business and have this as a piece of that, it's less around kind of like a a narrative or something like that. Um obviously the the narratives are great if they can help the business, but that's the main thing that we're just trying to optimize for.

>> And in terms of um I was expecting for you to dive in, but I can ask the Tesla question. >> Yeah, go ahead. I I just didn't want to like skip too far ahead because what I wanted to ask is something that I saw on the HIPP test net and I saw that Felix has uh created a test or so I wanted to kind of dig in. I know you spoke about Felix started as a FEUSD CDP. I think now you're kind of moving away from just a stable coin. I think that was made clear by you choosing not to participate in the USDH auction. So, I'm kind of wondering what going forward, what kind of products are you offering and how does this tie into like um HIPP3 markets that you guys will be launching yourself

potentially? >> Yeah. Um yeah, I would say it's sort of um something that we will probably be, you know, fully announcing um pretty soon here. But kind of the the Felix vision is sort of this overall platform for calling it trade and trade financing. Um, we've sort of done a fair amount on the trade financing side already. The original use case of Felix was, hey, I want to borrow against my hype and go trade one hyperlquid. I can't use hype as cloud on hyperlquid. So, I'll go use cloud on Felix. I'll borrow, I'll go trade one more hyperlid.

Um, that use case I think has that's been our core value prop um, thus far. And so I think now we're at a place of how do we kind of go up the stack there and see what other value that we can offer to users with that as like an underlying base product um now that we've sort of built a fairly decent liquidity mode there. Um and so yeah, I think trying to your to your question on the on the per side. Um yeah, we're looking actively on the HIPPA3 side, testing actively. We have an internal team purely focused on this. Um and yeah, it's uh it's definitely a big initiative um on our side. I think that market in particular um we were testing markets. we're assessing where demand

is. Um, and we aren't set on a particular market, but yeah, I think it's just it's cool to see a Tesla perk, you know, and to to play around with that and understand parameterizing that and managing risk on a Tesla per market, these different things. So, yeah, I think we're we're testing and iterating and seeing where the the value lies. >> Can you can you launch spot markets on HIPPEXes or no? >> Um, it's a good question. I mean, 3 is per is a per product. Um but you could well you could deploy a spot market on hyper core and then basically you can offer a build a code app where you can ser service that market from your exchange. Um, but yeah,

>> I'm just like trying to understand if maybe the end vision is you launch a bunch of these stock things um on a spot on the spot side and then you allow people to use like cross collateral, cross margin and then like the initial goal of like you want people to be able to borrow on their hype and then you know reuse that. Um maybe that's the end goal but I guess not yet. So you're saying with respect to stocks so it would be essentially the same use case but with equities >> but the regulation side is I mean I don't know if you guys ever want to deal with that right like that's >> that's a big qu yeah yeah so that is a big big question mark um and yeah hence why you know there's there's still a lot

of testing and kind of assessing demand across the board because yeah the regulatory piece is certainly um not black and white and so you know we're trying to figure figure out like yeah what is a viable path to navigate there without you know violating anything that we don't want to violate. So yeah. >> Do you work closely with the unit team to figure out like so is it more like the unit you guys are talking to the unit side and you're like we think it would make a lot of sense for example for a spy or like a um token spot thing on HIP3 and then we can let people loop on it or borrow on it etc. or is it more like you just assess whatever they're putting up and then you're like, "Yeah, this this will probably do." Okay.

>> Yeah, it's more the latter. I mean, we we obviously know them well, but we aren't kind of telling them, "Hey, you guys should deploy this or we want to deploy this." Um, more so the latter. And yeah, kind of obviously we collaborated on the the major spot assets they listed and then have become significant collateral assets on our side. Um, but yeah, it's it's more so on the on the latter there. And then also Kinetic I assume is a pretty large partner for you guys. Uh yeah, especially with the K hype stuff. Uh the points program. Um wait, can you Shondaanda, can you um explain that thing again that that you say is like a really really good way of do approaching the whole KHIP program? Do you know what

I'm talking about? The point swing and Felix is involved somehow. So I want to understand a bit on that side. >> What do you mean? My like looping strategy. >> Yeah. Yeah. >> And I want to hear Charlie as a risk manager say if this is actually a good way to approach this or not without >> Sure. It's your strap. >> Oh, I mean to be honest, it's a it's a pretty conservative strategy, right? It's nothing too crazy, but um like for context, recently put out a report for Blockworks Research talking about Felix and uh we kind of think it's asymmetric opportunity to get exposure into the hyperm ecosystem because like so many projects are PTG and Felix offers a pretty secure way to get exposure

through the points, right? because you deposit into morph for vaults and um my recommendation was just take K hype loop K hype right against uh hype markets I think there's one risk that I want to point out to everyone is that interest rate fluctuates a lot so what you see on the UI sometimes like 5% that can spike up but essentially you loop that and you're getting exposure to um leverages Felix points and connected points >> and then in Charlie what what is your uh do you think it's it's okay?

>> No, I mean obviously it depends on the the leverage you're taking. Um but you know overall it's you're mainly taking smart conduct risk, deep d risk there. Um granted I mean Sean you bring up a good point on the interest rate side if you're something wild would happen where your rate is so high that you're becoming you know liquidated because of your rate certainly something to consider but I highly doubt most people are holding these positions open for long enough for that to be the case. Um, but overall, yeah, it's a it's a pretty good strategy. AI is fragmented. Every team is scrambling to pick, swap, and manage LLM models that can't keep up.

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more collateral maybe? um or is that just >> Yeah, it's it's a couple interesting dynamics and I think it touched on some some other things too. The the first is uh really it's just because there's a a der of hype liquidity on HyperBM. Um and so obviously you know on our side we've been looking at different ways to increase this or offer these yields because if you look at the staking yield it's around 2% but the lending yield on hype can be you know depending on the borrow demand on the day it can be anywhere from you know five six 7%. So, you know, you're talking from a two to maybe a 4x of a staking yield there just to lend. And if you're lending at Felix, you know, you're lending on trusted interface, trusted codebase on the morpho codebase. Like this is um about

as secure as it gets on the morpho side. Um but all that considered, like there is certain benefits of keeping hype stake natively, mainly the fee discounts. And so that's something that obviously we've been, you know, pushing with the kinetic guys a fair amount on is is there a way where we can do sort of a governance process around getting feed discounts for approved LSTs. Um and that would enable people to get that feed discount while bringing stake type and um to the EVM side. Obviously something that we're trying to figure out and weigh a bit. It's there's we've talked to the team there's no confirmed information on this. Um but that's a it's basically the reason for the rate spikes is because there's so much leverage demand on HyperBM and there's just not enough uh liquidity to borrow.

>> Do you think that um fee discount thing is on the kinetic end? Like do they have to figure out a way to do the accounting or is it I get it's like the hyperlquid side right because >> Right. I think it's it's more on the hyperlquid side because it's per account and so it's you know it' be um there yeah there there could be a model where connect do but I'm sure like I I haven't chatted with Omnia on it recently but this is obviously a key a key unlock if they if they had this that would be you know billions more TVL for kinetic as well so um there's just certain difficulties in it. Yeah, I imagine Omnia like I imagine they'd be pushing for it pretty hard if they if they were

able to do it on their end. So maybe Hyperlid Cypric. Um, one thing I like to ask Oh, sorry Sean to finish up in. >> Yeah, I was just going to say one more thing about the interest rate and Charlie, please correct me if I'm wrong. I think the reason it's so volatile is because like normally lending protocols have two slopes. They have slope one, which is under optimal utilization, and slope two, which is when you go over. And I think these assets are always like right at optimal utilization which is like around 90% right and as soon as they spike a little bit above the interest rate increases dramatically. So that's why you see like um it can go up to like 10%.

>> Right? I mean that's that is technically the reason but the reason for that is because you don't have enough hype supply going to those markets. So that's why the utilization is so high which is just the ratio of borrow to supply and so if you have more supply you know and they're willing to lend at say 3% or 3 and a half% which is still you know call it 50% more than the staking rate um like that is that would obviously be a major decrease in that rate and so you could have looping at you know four or five%. Um but yeah the reason you see that rate so high is because there's just little liquidity compared to the bar demand.

Charlie, what do you see on the Oh, finish it. >> There's just not enough hype. We need current hype growing team. >> Need more hype. >> Um, what do you see as like the So, I think HIPP3, like I mentioned, is the big thing. Everyone's really excited about it. Um, some people are super excited about builder codes. I kind of get that as well because you just get massive distribution for Hyperlid um as an exchange. I'm curious if there's anything else that you're like really looking forward to on your side. That's question number one. Question number two is how do you see the um Hyper EVM evolve over the next year? Um >> yeah, >> for sure. Um yeah, it's interesting. I think so

I'll do this this the second question first. Um I'm curious to get your guys thoughts on this too, but um in my mind it's all sort of fairly connected. The HyperVM in my mind it's the goal of it was always to basically serve as an optimizer for the trading experience on the Hyperlquid exchange to this point. It's been it's that's still the main purpose it serves. Like I want to bargain my hype on Felix. I go trade on Hyper Core. That's still the primary use, but it's not as close as it could be per se. Um the ideal would be I'm on Hyperlid. I'm trading. I have to use USDC as collateral. Well, I actually want to use Hype Collateral. Okay. Well, let me just hit a drop down. I'll drop down to hype immediately. That's routed

through Felix. I borrow stables. I go trade on Hyper Core. That's not going to happen because the Hyperlid team doesn't want to king make a certain project on that side to be this sort of margin back end on the Hyperlquid exchange. Um, however, with HIP 3, that certainly can happen. You can have people launching full-on brand, you know, new exchanges that integrate all hyperlquids markets via builder codes and then offer new markets through HIPP 3 and then they can access any sort of HyperVM protocols they want to access under that exchange. Um, and so that's kind of the way I see it going is hyperv protocols will eventually just become these sort of um in for pieces for exchanges launching through HIP 3 and then in the same way HIP 3 stands will start benefiting

HyperVM protocols much more by tapping into that. So that's kind of like the way I see it working in in in unison. Um I think overall we'll probably see some, you know, new new protocols launching in in the in the near future, but a lot of the current core primitives are built in there and they're they're pretty stable at this point. And so I know there's been some kind of critique on HyperVM like, hey, this is just another copy paste copy paste ecosystem. Everything's the same. Um but the reality is that in finance there aren't that many primitives to do. It's pretty standard what you're doing. You're trading, you're using leverage, um or maybe you're parking assets to earn yield to someone else who's earning leverage.

It's not like you're doing a million things and we have these these primitives pretty much there. So, probably there's some new use cases to be built out. Um but I think it's it's fairly standard where it is right now and it's more on okay well how do we build distribution through hip 3 through these integrations and kind of hone the products now which are still a bit rough around the edges. Um, that's kind of that. But I don't know, but were you gonna say something after that? >> I agree with the like you need lending one modular, one non-modular. You realistically need a few AMMs with like different V tiers. Um, one will win out inevitably, but you want a few um, LST obviously and then like if it's EVM, there isn't really that much

differentiation between the code base. So it it I assume like from what I understand LST was the most difficult bit um because they had to wait for core writer um and pre-ompiles um but apart from that I agree with you like there's some core primitives that you really really need and you want those to be right and for those to be like trusted and true ones and not people just deploying random crap. Um >> right >> Shondaanda, what do you think? Yeah, I mean I agree 100%. I think um to box point a lot of like um ecosystem has this core infrastructure that you need and once you kind of have this TVL mode and also point mode, right? Because now

people that are in the ecosystem are invested into your success, you can kind of build out. Um so it's going to look really interesting in the future. There's one more question I had. So as a humble farmer myself and someone who wants to get more exposure into Felix, I wanted to ask about um a possible Pendle integration. I saw Kinetic is doing really well, right? They have a ton of volume. Uh can we expect to see any Felix markets on Pendle soon? >> Uh I I won't roll it out. Um so yeah, we we obviously know that we're chatting with them. So, um, yeah, I think there's a a good chance of it, I'd say.

>> Very good. Thank you, Shondaanda, for making our guest a little nervous, but I appreciate it. One thing, um, I was actually going to bring this up. I feel like you want the core primitives and then afterwards to get like really exponential growth. you want to bring in Pendle and like have a points program and then you essentially three, four, 5x your entire TVL just because that's like guess a little bit of financial engineering and you're getting a little silly but it works and your TVL gets maximized as much as possible, >> right? And I think like you know fixed income is a core product across finance.

It only makes sense that it works in DeFi. And I think it's kind of kudos to the Pendle team for sticking in that in that mode for in that kind of offering for so long. I mean, if you look at their DeFi Lama TBL chart, it's like looks like years of pain before they really saw growth and now it's like it's impressive. You know, it's an obvious one now, but you know, I'm sure for a few years there it was pretty questionable. So, good for those guys. And yeah, I think like like you said, bring the scale. I mean, if you look at the kinetic TVL from Pendle, it's it's pretty insane. like the usage that's that's happened there on the KHIP side.

It's uh yeah, it's very good to see. >> Um question one, do you have a I know it's a tough one. HIV free builder codes, those are we think um great. Do you have any other things that you're like super duper excited about? >> Um I mean there's sort of there sort of a couple that that we touched on already, but I I am, you know, I'm cautiously optimistic, but I am very excited on the USDH side still. I think there's a lot to do there even just as a sort of as a canary in the coal mine of stable coin liquidity to come to Hyperli liquid overall. Um which I think has still just been um you know a piece of a piece of issue, but I'm excited for that piece. Um and it's the

one other piece I'd add there is I I don't have a super strong view on whether this is just a fad or something to stay, but I do think the dats are interesting. um the hype debts and obviously I do think the way that they can offer leaving aside you know the the ways that they can offer different means of leverage exposure to hype uh just so that they can offer access to hype to users when or to buyers when it's not listed on major exchanges and even so when they can't even when these people can't buy major exchanges they can buy through a venue that they are comfortable with and they know well and through people that you know look and talk like them. Um, I do think that is

pretty interesting. So, I'm I'm interested to see the unlocks that that might bring over the next, you know, six months or so. >> Yeah, that's a good point. I think hype's probably one of the few um ones that make a lot of sense and is not just like to it's not just selling from like people who look like you and sound like you. It's like actually you're getting giving access to this thing which it was originally very difficult for even like very cryptonative funds to custody because like Fireblocks didn't support them. Copper didn't support them. Beco didn't support them. Um, but now it's like there's an entire other side that is very interested in all of crypto, but it's kind of difficult for them to get hype exposure. So, >> Right. Right. And I think I mean I think uh maybe Shauna, you had a tweet on

this, but sort of a breakdown of like the P multiple that you could put on hype if you mapped it out. And um like it's really one of the only cryptonative assets you can do something like that for and it makes any sense. And when you do map it out, it's pretty intriguing, too. So, um, yeah. >> Yeah, it's very attractive. Um, we do this, we've it's one of the they've done a really good job. Like they, um, I've first of all, I think it's easy to understand what revenue is and fees are with like a product that is an exchange. um like you can really tell and since it's all on chain it's relatively tell um and they like they split it across quite well that like buyback is very clearly revenue and they are showing it directly um well not

showing it directly but you can kind of track it across multiple um sources and try and piece it together perfectly um but yeah they've done a pretty good job I um I have one question and then Sean if you have another thing as well we can do that but what I was going to ask is like what should people look forward forward to with Felix um over the next let's do six months and maybe 12 months um depending on whichever one you think is more interesting. >> Sure. Um I mean I would say really on our side we we're mainly focused on the next call it three months. Um you know maybe three to six but um I'd say in that time yeah

people can kind of look forward to um maybe Felix chapter 2 uh something like that. So yeah we're have some interesting things in the pipeline there um on the trade side more things coming on on the bar loan side as well different products there. So, I think it'll be yeah, it'll get it'll get pretty interesting. And, um, I know I said like, yeah, we have a lot of the current primitives built out, but yeah, I think on internally we'll we'll hope to have at least one or two new pieces there that will uh be Hyperlid unique. So yeah perfect. Sean, anything you want to ask or else we're gonna >> No, nothing. Nothing on mind.

>> Very good. Charlie, this was fantastic. I really appreciate you coming on. I am actually going to say this on the pod, so make sure that it's recorded so that you can't back out of it. But um I think you should come on the on the live streams and on the podcast more often because you have um very good takes and very interesting opinions on a lot of stuff that is happening. So we'd love to have you on as much as possible if you are interested. >> It's a yeah a longtime viewer, so it's an honor to be on and um yeah, try to try to go a little Max Vay mode. give some good takes with a with a pira accent.

>> Very good. >> Yeah. No, it'd be an honor. >> Very good. Okay. Um, again, thank you for coming on and thank you to you as well, Jakob, for being here. >> Yeah. Thanks for your time, guys. [Music]