"December 2024 Exclusive Interview:"
Question: Suddenly, people have real reasons to distrust centralized exchanges. Many have lost money, doing what everyone thought they would do, spending it in ways they shouldn't. But for you, this feels like a moment of inspiration, as if the era of decentralized finance (DeFi) is finally upon us. What fascinates you so much about the cryptocurrency space?
Jeff: The cryptocurrency space is quite wonderful; the market efficiency is very low. Many people pessimistically view it as a failed experiment, but I still see a glimmer of hope. This is what we pursue in the Hyperliquid project; it truly is humanity's only hope to reshape the financial system.
Question: If you had to explain Hyperliquid to your mother, how would you do it?
Jeff: Hyperliquid is built in a way that meets your expectations of Web2 finance. It’s low-cost, allows for transfers, and enables instant settlements. I can integrate it with applications being developed by others in a trustless manner, essentially allowing me to do anything I want with my money.
However, this is also more frightening because there are no ready-made operation manuals. For me, doing something incredibly difficult feels like suffering every day, but I think suffering is necessary; otherwise, there will be a greater existential fear.
Question: How specifically do you apply Jeff Bezos' principles to the cryptocurrency space?
Jeff: I think it ultimately comes down to creating a product that users love. This will attract market makers who can profit from it, which is the best incentive for anyone. This has been the pattern in the DeFi space for years: bringing large market makers into the shareholder list and launching incentive programs. They trade heavily to earn incentives, and only then do real users get involved, often without reaping many benefits from early participation in the platform.
Question: You said, "We are just trying to create a product that people will use and love." In the cryptocurrency space, many projects prove that less money is better. What do you think about this?
Jeff: I truly believe Hyperliquid is in a class of its own. What we are doing, I feel, other projects are not attempting. As for whether the amount of funds raised is related to success, I don’t see fundraising as a negative signal; I just think it’s not that important. If you can’t pay the bills, then raising some funds might be reasonable.
But for Hyperliquid, the goal is to create a platform where all financial activities can take place. This is a big goal, and it has some path dependency. If a group of venture capitalists comes in early and takes 50% of the network, I think it will leave a "scar" on the network forever. I feel this doesn’t matter in almost all other businesses, but if what you are creating is valuable for pioneering a new way of finance, and is more focused on end users, then I think not raising funds is beneficial.
Moreover, based on our team's previous background, we have the conditions to not raise funds, so this decision was quite easy to make. Ultimately, the product is the result of the hard work of the team and the community, which is what we truly care about.
Question: Tell us about your background; you can choose how to share it.
Jeff: Let me first talk about what we were doing before Hyperliquid, as I think it’s quite relevant to your earlier question. Around early 2020, I was tinkering with some simple scripts, studying centralized exchanges in the cryptocurrency space. At that time, most large market-making firms had already captured a significant market share, and I heard that competition wasn’t as fierce before these big companies came in.
But sometimes ignorance can be a powerful weapon, so I wanted to see if I could make money from it, and I found that I could. The initial research was promising, so I decided to sit down and really build a system, then trade on a large scale myself.
Initially, I collaborated with a few people, but it was hard to find a co-founder who met all the requirements. However, this was also good because it forced me to learn programming. By certain standards, I was already somewhat proficient in programming, but I didn’t know how to write a real system or how to program in a practical sense.
I think this is a crucial distinction for building a large-scale technical system like Hyperliquid. Building a trading system is a great step; if you only know how to write simple Python scripts and do some analysis, there’s a huge gap between that and writing a production-ready system that can handle real money, capture a large market share in a high-risk environment, and is sensitive to latency. The strategy itself has low risk, but there are many technical risks, such as code issues or not functioning as expected, and I learned a lot in this area.
By 2022, we had scaled significantly and had become one of the largest participants in many trading venues. Based on the strategies we operated, we might have been performing the best in a certain sense.
There are many different participants in the market interacting with each other, making money on many different time scales. But in pure high-frequency market making, we had basically reached our limit, and then we started focusing on DeFi. There are many interestingly designed protocols, and I think a big theme in DeFi is that people who don’t understand finance are trying to build financial systems, which leaves a lot of room for quantitative strategies to make money, and then FTX collapsed.
At that time, it felt like everything was coincidental. It was clear that our team had something to do:
First, people suddenly had real reasons to distrust centralized exchanges, not some obscure theoretical issues.
Second, people had genuinely lost money because centralized exchanges did what everyone thought they would do, misusing funds.
For us, this felt like a moment of inspiration, as if the world was finally ready for DeFi. However, I was mistaken; about a month later, everyone returned to trading on centralized exchanges. Fortunately, this gave us the motivation to decide to fully commit to building this project.
Question: How can we get those who forget how dangerous centralized exchanges are within a month to correctly use cryptocurrency and adhere to the principles of cryptocurrency?
Jeff: I think this is a slow process. Ultimately, it comes down to improving the product. The definition of product here is a bit vague; DeFi products are essentially the currency and financial system itself. I think the key is to improve it.
Because at the end of the day, most people only care about user experience; they want to do what they want to do. When disaster strikes, people will say, "That’s too bad." But new users won’t decide whether to use a decentralized protocol that is actually worse than the centralized version just because they remember a disaster that didn’t affect them. Competing purely from a value perspective is not feasible, so we need to create better products. I believe it will eventually happen.
Question: How far do you think we are from that goal? What else needs to be done?
Jeff: I think we are quite close. I spend almost all my time thinking about Hyperliquid, so I haven’t closely followed other exciting developments in the DeFi space. However, based on what we are building on Hyperliquid and what I see in the community, as well as the growth rate, this is basically the first time that real funds are flowing from centralized platforms to purely on-chain financial systems.
Of course, there is still a lot to build and improve. I wouldn’t say we are close to completion, but I can feel that momentum. It feels like Hyperliquid represents something that was previously impossible, making centralized exchanges look a bit like traditional brick-and-mortar stores, while Hyperliquid feels like an e-commerce platform like Amazon has come in. However, I’m not saying we have achieved that, nor do I want to overcommit.
Question: Regarding the capital flows you mentioned earlier, how much do you think is due to better products, and how much is due to speculation? After all, cryptocurrency is a highly speculative industry, with speculative behaviors around tokens.
Jeff: It’s hard to say for sure. Many people would say it’s all speculation or manipulated, and I think they are wrong, but I can’t prove it.
What I can say is that trading volume has increased significantly. If it’s natural growth, it’s not closely related to other things happening. For example, some teams have very clear ways to sell tokens by converting trading volume or paid fees into rewards. Market makers can easily figure this out by looking at the data. The capital flow in Hyperliquid is strongly correlated with the overall market trading volume. Whether looking at total trading volume, the ratio of transaction volume to open interest, daily trading volume growth, daily open interest changes, or the distribution of different trading pairs, almost all indicators suggest a solid foundation of natural capital flow. That said, compared to the benchmarks of centralized exchanges, its trading volume is also growing rapidly, so I’m quite optimistic about that.
Question: A few weeks ago, I did a podcast with @QwQiao from Alliance Dao. He mentioned that he judges a cryptocurrency founder with huge potential based on two main traits: one is a certain degree of "autistic" traits that help with independent thinking; the other is childhood trauma, which drives a desire to prove oneself. Do you think you fit these traits?
Jeff: I don’t fit the second trait, but I do fit the first. I think it’s essential to think from first principles. Take Hyperliquid, for example; we start from first principles and inherently question all those conventional ways of scaling businesses.
Because at the end of the day, Hyperliquid is not a conventional business we are building. Whether it’s not paying market makers, not seeking investors, from an on-chain perspective, the company itself doesn’t even count as a company, and we don’t charge fees. We also don’t do growth marketing or anything like that. It seems many people claim to be growth experts or business people who talk a good game; we reject all of that. We see ourselves as a tightly collaborating team of doers, doing what we believe is best, listening to the voices of real users rather than the opinions of those who talk about what users might want, and then developing through iteration. This is harder and scarier because there are no ready-made operation manuals, but I think in the not-so-long development history of Hyperliquid, we have innovated multiple times and have many firsts in the DeFi space. So I believe the market has proven that our approach is correct. I strongly resonate with the first point; I don’t know if that counts as "autism," but it definitely involves thinking from first principles.
Question: You previously mentioned that you are a quantitative trader and have been quite successful, but that’s not enough. The folks in Silicon Valley often mock the quantitative trading crowd. Have you ever felt an existential crisis thinking that just making money in business isn’t enough?
Jeff: I don’t think that’s insufficient. However, stepping back, I believe that doing quantitative trading and market making is one of the most impactful things that capable people can do. It’s one of the most elite industries because there are really no shortcuts. It’s like a system; you are competing against everyone, and it’s the purest form of competition. In a sense, it’s also the most profound quantitative game in real life, and it’s challenging. Many of the smartest people in the world are competing with you in this field. While playing this mentally taxing, brutal, and intense game, you are creating something beautiful: deep liquidity on the order book. I think that’s quite wonderful.
The market itself is also quite wonderful, with many interesting patterns, like a system with endless dynamic models, from which one can discover a lot. This is why many excellent PhDs in physics and mathematics enter the field of quantitative finance when they realize they want to think about interesting things but don’t want to starve.
For me, the main reason is that I have always had this mindset: if I can create something that truly improves people's lives in a more direct and non-marginal way (something others can't do), then I will definitely do it. So, for me, leaving the field of quantitative trading wasn't that difficult because I feel that in the process of trying to expand Hyperliquid, I can gain almost as much, if not more, intellectual stimulation, and make a more meaningful contribution than the game our small team is participating in.
Question: What specifically have you given up to build Hyperliquid?
Jeff: I haven't really given up much. The "Holy Grail" in finance is probably a high Sharpe ratio strategy that can continuously make money; everyone is pursuing this, but in reality, there isn’t much. As far as I know, no fund accepts external capital, or if they do, they return it because if there were a strategy with a Sharpe ratio of 30, they would just run it themselves and keep improving it.
I haven't truly given this up because I believe Hyperliquid might be the only opportunity in history to have such a popular, widely participatory platform with pure alpha characteristics. This was a well-considered decision on our part.
The collapse of FTX was both an important lesson and motivation for us to start the project, as well as a warning that showed us the worst side of cryptocurrency in people's eyes. We wanted to contrast as much as possible with that. Given that FTX took people's money—who knows what they did with it—and ultimately lost everything, we at Hyperliquid understand how the market operates and how to provide liquidity sustainably. To prove this, we won’t take profits to do things like FTX; instead, we will integrate them into the protocol. This was crucial in the early days, and while it’s not as important now, it was a key factor in getting Hyperliquid off the ground. So, in a sense, I haven’t given it up; I’ve developed it into something that can directly provide value to users.
Question: You mentioned trying to retire and travel the world. When was that?
Jeff: It was around the time I first started researching the cryptocurrency market. The market efficiency was astonishingly low; you could write a few Python scripts and retire—it was that inefficient. So I did that, but it was quite boring. I’m not very good at traveling; I think some people know how to enjoy it, but for me, it’s very stressful. You have to go to new places, figure out what to do, sleep in unfamiliar places, eat foods you’ve never tried before—it’s not that pleasant, and it’s inefficient because everything is new. Having a daily routine is nice; seeing new things is cool, but if life is just about constantly seeing new things, then if you eat something you don’t like one day, you feel like you’ve failed that day. I think some people can derive deep enjoyment from understanding different cultures and such, but for me, I’m unhappy every day. Looking back over a week, it feels like I haven’t done anything; I’ve just seen some interesting things. I’d rather be at home building something.
Question: You say you easily become fascinated and have a strong tolerance for doing difficult things. Why is doing difficult things a necessary condition for your sense of fulfillment?
Jeff: I think from the perspective of human existence, getting used to the status quo and wanting more comes with no free lunch. I believe this is an evolutionary result that allows humans to take control of the world and achieve accomplishments.
But this is an inherent part of human nature: dissatisfaction with what one already has. I know some people have that rare quality of being content, and I envy that.
But for me, like everyone else, doing something incredibly difficult feels like suffering every day. But I think suffering is necessary; otherwise, there will be greater existential fears, like wondering, "Why am I here? What is the meaning of all this?" For me, suffering every day is a bit like working out. You can get used to that pain, and then you can push yourself to endure more pain and achieve more. The benefit of this kind of suffering is that when you look back, you can say, "Wow, we really left something meaningful behind. I hope it can serve as the foundation for many years and many future projects." I think there’s no feeling that can compare to that.
Question: Many people have a misconception that by the age of 25 or 26, or in their early 30s, they should retire and then be happy, or that earning a million dollars will make them happy, etc. It’s not like that. What do you think?
Jeff: It’s definitely not like that. For most people, after the initial one or two months of the "honeymoon phase" where you can do whatever you want, it loses meaning and can be quite oppressive. I think the key is whether you feel you are wasting your potential. If you feel you are wasting your potential, then you probably won’t be happy. That’s the source of that unhappiness. If you feel you’ve done your best, even if you didn’t achieve what you wanted, you will still feel great because you know you tried your best. Of course, failure is indeed quite bad, but failure also gives you an action item: to make yourself better. So I agree with your view; I really like that perspective.
Question: What fascinates you so much about the cryptocurrency space?
Jeff: I’m lucky to have encountered cryptocurrency in that way—seeing this inefficient market and then studying the patterns within it. I come from Wall Street, where market efficiency is very high, at least in the U.S. stock market.
The inefficiency of the cryptocurrency market is "wonderful." Approaching it in that way makes you see its shortcomings as positives, and then you think, "Now that I understand what’s going on, creating something specific isn’t that hard."
Maybe we can rethink the entire DeFi space, build from the ground up, create an L1 layer, decentralized exchanges (DEX), and build everything. I feel fortunate to have had this trajectory. If I had started out thinking, "I want to build something," but was unclear about the situation, I might have found this field quite oppressive, filled with scams and short-term thinking.
I think many people now pessimistically view cryptocurrency as a failed experiment, perhaps just an iteration of scammers learning new ways to deceive. It’s quite sad that such things have happened so far, but I still see a glimmer of hope, which is what we pursue in the Hyperliquid project.
Blockchain is indeed humanity's only hope to reshape the financial system. I believe finance is one of humanity's greatest inventions. Currency represents value, capital allocation, and the entire economy in a more abstract way, all of which are among humanity's greatest achievements.
If we don’t understand the essence of finance, all other achievements are impossible. People might still be farming or even foraging and hunting. I think people often forget this because it happened a long time ago, and it’s not a single invention; there have been many iterations.
But I believe the latest iteration that should have happened is that software should revolutionize finance, but it hasn’t. Software has innovated almost everything in the world; perhaps finance, healthcare, and a few major industries haven’t seen substantial innovation. Fintech has done some things, like not having to call a broker anymore, but ultimately, the tracks are still remnants from decades ago, and cryptocurrency has the potential to revolutionize these legacy tracks.
The builders in fintech and the Web2 finance space are very smart; they are doing great things, building excellent companies worth billions of dollars, doing good work, but they are all operating within the confines allowed by the traditional financial system. From Bitcoin’s inception to people exchanging value in ways not controlled by centralized institutions, to applications built on this foundation, like Ethereum, which promises builders the ability to program money, I think these are all wonderful things, just not yet at the level of widespread application that needs to be achieved. That’s the allure of cryptocurrency for me.
I think there’s nothing wrong with coming in wanting to make money. The benefit of the market is that it allows a group of selfish individuals or entities to operate within the rules and create value for others in the system. This is also a microcosm of economics. Moreover, spending a long time in this field, dealing with it daily, makes you more invested. You start to know the people here, hear the real problems, and it becomes more personal rather than just looking at numbers on a screen. I didn’t even know about the Twitter circle in the cryptocurrency space before; later, I learned about it and occasionally check it out, but I don’t tweet much or do many podcasts because I feel the returns aren’t great. It seems like a waste of time to repeat the same things.
Question: When you launched Hyperliquid, you didn’t charge a penny and even returned over $25 million in revenue to the community. This is quite different from public perception. Why did you do this?
Jeff: It’s not a traditional business project, nor is it charity. Like Jeff Bezos at Amazon, who wasn’t in a hurry to profit in the early days but pursued long-term growth, focusing on revenue growth and market share expansion. For Hyperliquid, the cryptocurrency industry is too predatory from many perspectives. Many projects extract value from retail investors. We want to show that we don’t do that; we want to operate in a community-first, anti-traditional (anti-VC, against the practice of specializing market makers) manner, making users the core, allowing everyone to work in a peer-to-peer way according to the original vision of cryptocurrency. I think this philosophy has been recognized by many users and those disappointed with traditional projects. Ultimately, it’s not much different from the approach of others in the world who want to build long-term valuable projects.
Question: In the cryptocurrency space, why is it that almost no one follows a user-centered model like Bezos?
Jeff: Because acquiring users in the cryptocurrency space is too difficult. So far, many projects have found their product-market fit by issuing tokens with scam-like characteristics to attract users. In our Hyperliquid project, we have to do a lot of technical innovation, essentially building three businesses at once: constructing a layer of the network, creating a decentralized exchange, and optimizing the entire user experience chain. All of these are very challenging. If we can’t achieve these, we might only be left with short-term gimmicks.
Question: There are many serious builders in the cryptocurrency space who want to do the right thing but don’t get attention, leading to the value they create not being reflected. How can we ensure that protocols that truly create value for users can have their value recognized?
Jeff: I think this should be a goal. If a lot of effort is put in but no value is gained, then the incentive mechanism is broken, and people won’t want to do the hard work of building anymore; they’ll just go issue air tokens.
However, the problem isn’t that cryptocurrency doesn’t reward actual product efforts; it’s that many people haven’t built good things. Hyperliquid is an exception in the cryptocurrency space; it’s hard to imagine it as a protocol not capturing value. After all, in cryptocurrency, so far, the only things that have proven long-term value are exchanges and layer-1 networks. Combining these two in a composable way has a multiplicative effect, not just a simple addition.
From a cash flow perspective, Ethereum is a very successful business project, and centralized exchanges like Coinbase and Binance are also very successful. Although Hyperliquid isn’t a traditional business project, the things we are doing will inevitably capture value, so there’s no need to be overly concerned. The market is still relatively efficient; as long as you create good things, you will capture value if you succeed.
Question: You mentioned applying Jeff Bezos' principles to the cryptocurrency space. In what specific ways have you been inspired by Amazon Web Services (AWS)?
Jeff: Amazon created AWS because they saw that their infrastructure couldn't keep up with the demands of their online retail business expansion, so they decided to build it themselves and open it up for others to build upon.
In the Hyperliquid project, we also saw a lack of trustworthy products in the decentralized order book derivatives exchange market. During the building process, we found that the existing blockchain infrastructure couldn't meet the needs, so we thought we couldn't limit this product to a specific infrastructure. Instead, we needed to create a universal infrastructure that allows everyone to build DeFi applications on it, similar to what a layer-1 network does. This is essentially redefining the meaning of infrastructure by combining a universal smart contract platform with high-performance financial native functions, abstracting it so that everyone can build. Just as AWS abstracts away the complex details of hardware, allowing developers to focus on software and business logic, we abstract the complexities of the exchange platform, allowing developers to focus on products and user acquisition.
Question: What is Builder codes, and why is it important?
Jeff: Conceptually, it’s a very simple idea: to allow anyone building financial applications on the Hyperliquid order book side (which is just part of the overall Hyperliquid layer-1 network) to create exchange-like businesses. For example, those wanting to build mobile wallet applications, social trading applications, or regional exchanges (involving fiat deposits, local currencies, etc., enabling seamless trading of perpetual contracts and various ideas) can do so using a backend that is user-trusted, with a transparent fee mechanism built into the protocol, rather than a model that involves behind-the-scenes trading with centralized exchanges.
This can bridge various user-facing financial applications (like those similar to Robinhood) and the underlying liquidity, allowing access to liquidity like that of Binance while also having a neutral platform like Ethereum. This will open up new ways to build businesses in the DeFi space, whether for those building smart contracts or those focusing solely on the frontend to ensure user satisfaction. Hyperliquid can support both and will incentivize builders who truly understand users to participate, allowing them to profit by bringing trading volume to the platform.
Question: Can you give two examples of exchange-scale projects that can utilize Builder codes?
Jeff: I think there are many examples like regional exchanges. Currently, while DeFi has trading volume—Hyperliquid's trading volume is larger than many tier-three and even some tier-two centralized exchanges—DeFi as a whole is still in its early stages. Hyperliquid has attracted many new users who previously had bad experiences on centralized exchanges to use DeFi, and they have started building various interesting applications based on it.
However, from a global perspective, this user base is still very small. To truly reach the masses, there will be more focus on regional applications, such as providing applications that cater to users in areas with unstable local currencies and severe inflation, offering interfaces that align with their language habits and expectations. This will enable them to convert depreciating currencies into assets with on-chain value storage and trade them. Whoever can do this well will profit, and such examples will continue to emerge. The key is to empower capable individuals to do this.
Question: What is your long-term view on cryptocurrency, and what role will Hyperliquid play in the future?
Jeff: It’s hard to say with certainty what the long-term future will look like, but I think the direction is clear, and we just need to execute well on the current steps. It’s like the difference between playing Go and chess; in chess, you can calculate many moves ahead, but in Go, there are too many possibilities, and it’s more about feeling and intuition to make the next move or the next few moves.
For cryptocurrency, it will definitely change the way finance operates, and finance will shift towards the cryptocurrency space. We hope Hyperliquid can become the platform that all financial activities rely on as they transition. However, it’s hard to say which applications or regions will develop first. Nevertheless, elements like Builder codes, the integration of on-chain native components with the Ethereum Virtual Machine (EVM), and good liquidity are foundational and necessary factors that will remain important, regardless of how cryptocurrency evolves over the next decade.
Question: What beliefs do you hold strongly that most people disagree with?
Jeff: When we decided not to raise funds initially, certainly no one agreed with us. However, the people I was communicating with at the time were those wanting to invest in us, so the sample was a bit biased. Sometimes we do controversial things, and a few months later, we find that others in the DeFi space start doing the same. It’s hard to have a long-term, unique perspective, especially since this space is relatively small; once we do something, others might follow suit.
For instance, when Hyperliquid first launched, many project teams opposed it on Discord and Twitter, saying it wouldn’t work, etc. I was quite concerned at the time and would argue back, but later I realized it was better to just ignore those comments on social media. Others on the team handled this aspect better than I did, so I kept my distance from those negative evaluations.
I feel very honored to hear snippets from your other podcasts every quarter; I think they are all great, so thank you for having me participate.
Host: Thank you for bringing hope to the builders in the cryptocurrency space. I think everyone feels a bit fatigued by what’s happening now, seeing those who are overly short-sighted. So seeing someone like Jeff, who is genuinely trying to do things in a long-term way, is truly refreshing.
CEO Twitter: @chameleon_jeff
Content translated by AI; the original video can be accessed at
https://www.youtube.com/watch?v=WeRh589I76o&t=1062s&ab_channel=WhenShiftHappens
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