TradeXYZ and Hyperliquid: Unveiling the Symbiotic Relationship Under 50% Revenue Sharing

RWA has accounted for over half of Hyperliquid's volume. Will TradeXYZ leave?

Written by: Shaunda

Compiled by: AididiaoJP, Foresight News

The market is becoming increasingly cautious. AI-related spending will only be rewarded if it can drive growth without severely eroding cash flow; the crypto market continues to face pressure from ETF outflows and rising yields.

Within crypto, leadership has once again shifted back to Solana and DEX. We delve into the ongoing discussions about how the value surrounding TradeXYZ, Hyperliquid, and the distribution of HIP-3 will ultimately be allocated.

In the past week, major benchmarks showed mixed performance. The S&P 500 and gold rose slightly by 0.74% and 0.65%, respectively, while the Nasdaq remained flat. BTC performed the weakest, dropping 3.0% over the week.

Last week, AI giants released their earnings reports in quick succession. Amazon surged over 15%, recording its strongest quarterly revenue growth in more than four years, with AWS revenue increasing by 37% year-on-year to $42.2 billion. Microsoft also rose over 15%, with cloud business growth exceeding expectations, while capital expenditure guidance fell short of Wall Street's expectations. In contrast, Meta dropped 10%, with free cash flow plunging 91% in the second quarter, as AI-related capital expenditures weighed on profits. One theme is becoming increasingly clear this earnings season: the market no longer simply rewards AI investments but favors companies that can demonstrate returns on investment without sacrificing cash flow.

The crypto market continues to face pressure. ETF funds have once again turned to net outflows, with BTC and ETH ETFs seeing net outflows of $255 million and $69 million, respectively. Risk sentiment is also suppressed by the bond market, with the yield on the U.S. 30-year Treasury rising to 5.23%, the highest since June 2007.

Leadership within crypto has once again rotated. The Solana ecosystem performed the best this week, rising 8.5%; the Ethereum ecosystem fell 8.8% after several weeks of strength following the launch of Robinhood Chain. The DEX sector ranked second, rising 5.2%.

The Solana ecosystem was primarily driven by META, which surged 36% due to its listing on Upbit; PUMP rose 3%, accounting for about one-third of the index's weight. More importantly, the trading volume and revenue of Pump.fun have continued to rebound from the June lows, indicating that the "trench" activity may be returning.

The DEX sector was led by Uniswap, which rose 6.5% over the week. UNI benefited from the expansion of fee switches to Robinhood Chain, as well as some v4 deployments beginning to charge protocol fees.

Recently, many interesting on-chain innovations (including the FWA we covered last week) have been built using Uniswap v4 hooks. Uniswap and its broader ecosystem are definitely worth keeping an eye on.

TradeXYZ Debate

As TradeXYZ continues to dominate crypto trading volume, RWA has accounted for over 50% of Hyperliquid's trading volume, leading to intensified discussions about the consistency of interests and the high concentration of TradeXYZ on Hyperliquid. Concerns range from reasonable (how Hyperliquid will monetize HIP-3 in the long term) to rather far-fetched (whether TradeXYZ will leave Hyperliquid), making it necessary to clarify the current relationship.

First, let’s clarify one point: TradeXYZ is an independent team building on Hyperliquid. It is required by the program to share 50% of HIP-3 revenue with Hyperliquid, while the remaining half can be used at its discretion. We have found that TradeXYZ (which is the same team as Unit) has consistently used and continues to use its HIP-1 spot revenue to buy back HYPE, but has not done the same with HIP-3 revenue.

The first concern, which we believe is the weakest, is that TradeXYZ will leave Hyperliquid because the 50% revenue share is too high and it could capture more value elsewhere. I proposed the completely opposite view back in April: Hyperliquid is outsourcing too much of the value of the largest market to deployers. Let’s look at what each party provides. Hyperliquid provides the infrastructure layer, collateral, and most importantly, the user base that supports the vast majority of TradeXYZ's trading volume. To leave, TradeXYZ would need to rebuild the exchange layer (the most challenging part of the entire tech stack), almost abandon its entire trader base, and in the process, self-destruct its reputation. For Hyperliquid, bringing RWA in-house would also be a reputational suicide: undermining the dominant deployer that supports so much of its success would send a signal to all future HIP-3 deployers and all builders on Hyperliquid—any sufficiently successful team will be replaced. This is one of the most typical symbiotic relationships in the crypto space; from the perspectives of reputation, economics, and architecture, both parties have no reason to leave each other.

The second concern is about monetization, which is more valid but requires careful examination. First, it is dishonest to ignore TradeXYZ's execution capabilities; Hyperliquid's RWA market could not have reached its current scale without it; owning 100% of a much smaller pool would not be worth even half of the current pool. Secondly, the 50% revenue share is not the only monetization avenue for Hyperliquid: it also profits from writing priority fees and reading fees paid by market makers.

It also profits from second-order effects, such as the increase in USDC supply—after the cost adjustment of on-chain balances, Hyperliquid retains 90%. The trading volume is a proxy indicator: since the launch of HIP-3, its trading volume has increased by $3.68 billion, while USDC supply has grown by $1.38 billion over the past year, and crypto trading volume has declined towards the end of the year. As more traders bring USDC to long RWA, the revenue from this supply also belongs to Hyperliquid. This revenue is expected to be around $30 million per month, already exceeding the entire HIP-3 perpetual fee pool that Hyperliquid shares with TradeXYZ.

For us, the most interesting question is not the 50/50 revenue share between TradeXYZ and Hyperliquid, but how both can move out of the growth model and ultimately transition from low fee rates to a more stable and higher fee base.

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