Hyperliquid co-founders: The leverage system and HLP liquidation mechanism have been updated, and loss limits have been set.

Odaily News Hyperliquid co-founder @chameleonjeff posted on the X platform that it is sad to see the misinformation campaign targeting Hyperliquid, so he will provide a detailed and factual explanation of how Hyperliquid works: The margin design of Hyperliquid strictly ensures the platform’s solvency through mathematical mechanisms, with HLP’s losses always limited to its own treasury, and the protocol’s operation never relying on HLP—this feature existed before the JELLYJELLY incident. The new protective mechanisms added after the incident only optimize HLP’s loss resistance in reserve liquidation, while the underlying protocol architecture remains unchanged. Recently, in the JELLYJELLY incident, an attacker attempted to manipulate HLP (liquidity provider pool) by establishing a massive long and short position. Although the unclosed contract limit at that time allowed for the establishment of a position worth 4 million USDC, the logical flaw lies in HLP using its entire fund balance as collateral for this liquidation. It should be clarified that the platform itself does not face solvency risk, but HLP indeed faced excessive risk exposure due to market manipulation. Currently, the HLP’s liquidation component treasury has set a collateral limit, restricting potential losses through a backup liquidation mechanism. Hyperliquid still maintains its original operating mechanism, processing under-collateralized positions in the following order: 1) market liquidation 2) backup liquidation 3) automatic deleveraging (ADL). The current HLP’s backup liquidation has added a protection mechanism by setting a loss limit, making the cost of manipulating the mark price far higher than the limited gains that can be obtained from HLP.