Deciphering HIP-3: A Data-Based Guide to Profitability for Stakers

Written by: ether.fi Ventures

Compiled by: Tia, Techub News

HIP-3 quickly became one of the hottest features on HyperliquidX. The concept is simple: anyone who stakes 500,000 HYPE can deploy a perpetual exchange and share transaction fees with stakers. In practice, HIP-3 turns Hyperliquid into an “exchange-as-a-service” layer, where many independent mini-exchanges will compete for traders.

But there is a key problem that few people actually calculate:

With a real fee structure, operational costs, and staking size, how much volume does a HIP-3 market need to generate per day for stakers to earn attractive returns?

This article aims to answer this question with clear numbers and verifiable mechanisms—not by feeling—and provide a clean, iterative foundation for builders, stakers, and researchers.

Before HIP-3: What HYPE holders can already gain today

To understand the threshold that HIP-3 must cross, let’s first look at the yields that HYPE holders can already earn – liquid, redeemable, and transparent:

Pure staking (approx. 2.2% annualized) – simple to operate and redeemable at any time

Hyperliquid Treasury (currently around 4–5% APY) – Hyperbeat’s vault currently offers around 4–5% APR, with historical gains reaching double digits during periods of high on-chain activity. (Full disclosure: We are the investor)

Revolving leverage strategy (6–14% net annualized) – Lend HYPE and invest it in a more yielding strategy, such as a liquid vault of @ether_fi (don’t be ashamed to promote it 😁)

These underlying gains have no forfeiture risk, no obvious lock-up, and no exit coordination.

HIP-3 staking does not have these features – and this is critical.

Why HIP-3 Should Offer a Higher “Risk Premium”

HIP-3 introduces risks that are not present in standard staking. When you stake on mainnet or deploy your assets to a DeFi vault, you have full control over your funds. And in HIP-3, you give up that control. The structure of HIP-3 determines when you can exit, whether you can exit at a fair price, and whether you can lose your principal.

Any reasonable assessment of HIP-3 must consider the following four fundamental risks.

“Failed Exit Button” (Lock-up Risk)

In normal DeFi, when you want to redeem an asset, click “Unstake” and the protocol will process it. This is not the case with HIP-3. Stakers cannot redeem their HYPE at will.

To get your money back, the “deployer” (the team running the marketplace) must manually do the following:

Suspend trading on all markets on the exchange

Settle everyone’s positions

Wait for a 30-day lock-up period

Wait another 7 days for the exit queue

The risk is that only the deployer can press the “exit” button, and you can’t force them to do so. Whether your funds can be redeemed depends on whether the deployer is willing to shut down the entire business.

“80% Off Shipment” Problem (Net Value Discount Risk)

Since you can’t exchange HIP-3 staking certificates back to real HYPE at any time, the market should price it lower (ignoring the market itself for now, which will be discussed later).

In other words: a $100 bill you can’t open in a glass box is worth less than $100 in your wallet. If you want to sell this “locked banknote”, someone will ask for a discount.

Normal market: may lose a few percentage points

Panic market: Possible loss of 30–50% or more

Real-life example: When liquidity is uncertain, discounts can appear quickly. kHYPE, even with real secondary liquidity and 9-day guaranteed redemption, fell to 88% of its face value in a brief confidence shock. The same is true for closed-end funds; GBTC has seen a discount of more than 40% even when fully backed by assets.

HIP-3 LSTs do not have any guaranteed exit power, so the trade-in can be more severe during stressful events.

“Threat of forfeiture” (forfeiture and risk of loss of principal)

In order to run a HIP-3 marketplace, deployers must provide a huge margin: 500,000 HYPE (currently about $15 million). If the deployer makes a technical mistake, such as incorrect data or downtime, the network triggers a penalty mechanism, known as “slashing”.

This penalty directly threatens your bankroll in three ways:

Protocols do not distinguish between intents: the system does not care whether this is an attack or an engineer’s misoperation

Your money is collateral: LST is backed by staked HYPE, so you effectively guarantee the deployer

Loss of principal: Not only may you earn less, but you may also lose some of your deposited tokens

The risk is that forfeiture doesn’t just reduce future earnings, it permanently reduces your principal. Stakers are actually betting that deployers “never make mistakes”. As long as there is one mistake, the price is borne by you.

Conflict of interest (principal-agent risk)

HIP-3 can create a conflict of interest between deployers and stakers.

You (staker): You may want to withdraw due to market pressure, loss of confidence in operators, changes in personal liquidity needs, or simply want to get HYPE back

Deployer: It may be for income, to keep the business, for investors, for the salary of the team, etc., to keep the market running

The risk is: once your HYPE is locked, the one who controls when to release it is the deployer, not you. The incentives of the two sides may diverge. If the deployer keeps the market running for their own benefit, your funds will continue to be locked up, even if you are desperate to exit.

Why is 10–15% annualized not enough?

Due to the structural risks mentioned above, HIP-3 pledge certificates are more like “closed-end funds” – assets that are often discounted due to liquidity constraints. You take on the risk of indefinite lock-up, loss of principal due to technical errors, and the risk of the deployer refusing to let you out.

Therefore, an ordinary yield is not enough. To compensate for the risk of losing control, you should ask for a higher “risk premium”.

How the HIP-3 market generates revenue and why competition compresses revenue

HIP-3 marketplaces are essentially small exchanges that run on HyperCore. Stakers’ earnings come from transaction fees, but these fees are divided in order:

Hyperliquid takes 50%

Deployers take up to 50%, but deployers also need to pay oracle fees, engineering and operating costs, and investor benefits

The rest will go to HYPE stakers

If Growth Mode is enabled, the taker fee will drop by about 90%, which means that the income of deployers will drop significantly, and the income of stakers will also decrease. Effective for attracting traders – but terrible for stakers.

This further amplifies the impact in a competitive environment.

Multiple HIP-3 operators – Unit (@tradexyz), Ventuals (@ventuals), Kinetiq (@markets xyz), Felix (@felixprotocol), Ethena (@hyenatrade), etc. – all vying for the same group of traders. But Unit is the clear leader, and the HIP-3 market is structurally almost identical, so Unit’s pricing is basically the benchmark for everyone.

If a unit reduces fees or turns on Growth Mode (which they have turned on multiple times), other deployers either follow suit or lose liquidity. This means that stakers’ earnings ultimately depend on the pricing decisions of the Unit.

There is currently no moat for HIP-3 deployers:

Fluid non-sticky

Zero switching costs

The front-end experience is extremely similar

There is no differentiation for oracles

The order flow is not exclusive

When there is no moat, the only means of competition is fees (or modest points incentives), and Growth Mode is the strongest weapon.

So a simple economic reality emerges:

Growth Mode is beneficial for traders

Growth Mode destroys stakers’ earnings

A market that requires approximately $200 million in daily volume at normal rates to achieve competitive returns, and $2 billion in daily volume under Growth Mode.

And because deployers must keep up with Unit’s strategy - and Unit frequently activates Growth Mode - stakers’ earnings will be quickly compressed.

Another core problem is that HIP-3 revenue relies on fee income, and competition will keep fees down.

The more competitive it is, the lower the yield for stakers.

Earnings Reality: How Much Volume Do You Need?

To judge whether a HIP-3 market can truly deliver competitive returns, you must start with assumptions. We selected a “most favorable scenario for HIP-3” to model to make the results easier to understand.

Model assumptions

We adopted three premises that are extremely favorable to HIP-3:

Use only the minimum staking amount (500,000 HYPE): We assume that only the minimum staking amount is used, as the yield is shared in the pool; If more HYPE enters, the gains will be diluted, so this represents the most favorable scenario for stakers.

Stakers receive 20% of the deployer’s revenue (≈ about 10% of the total fees): We assume that stakers receive a very generous 20% revenue share (about 10% of the total fees), although most of the HIP-3s we see don’t give passive participants that much; If the share is small, the required trading volume will increase significantly.

Don’t enable Growth Mode (otherwise revenue will be almost gone): We use full HIP-3 fees to simulate earnings, as Growth Mode reduces taker fees by about 90% and effectively eliminates revenue for deployers; If the growth pattern is active, the volume requirements will become unrealistically large.

No rate discounts or cashbacks (nominal rate paid by users): We assume that users pay the base fee of HIP-3, which does not include staking and trading volume rebates, nor does it include corresponding stablecoin fee discounts. Any discount lowers the fees actually charged, lowering the deployer’s revenue and increasing the required transaction volume.

The above four core assumptions cover factors that determine deployer income and more than 90% of stakers’ annualized yield (APY). They define the main mechanisms of the HIP-3 economic model: fee rates, deployer shares, staker shares, and staking sizes. All other factors are minor relative to these variables and do not have a material impact on the final result.

Earnings and volume heatmap

When the above assumptions are applied to the current market conditions, the required volume rises rapidly. The heatmap crosses the HYPE price (vertical axis) with the target annualized rate (horizontal axis), showing the corresponding daily trading volume.

Take the HYPE price of $30 as an example:

Underlying Yield (10–15% APR): To achieve a standard yield, you need to maintain a daily trading volume of $90 million to $140 million.

Risk Premium Return (20–30% annualized): To justify the risk of issuing capital bonds above $15 million, we believe issuers must facilitate daily trading volume of $180 million to $270 million or more.

Comparative reference: To maintain a stable daily trading volume of $270 million, a HIP-3 market already has to compete directly with third-tier centralized exchanges. It may be achieved during high volatility, but it is extremely difficult to maintain the annual average.

Scale trap

The data also reveals a structural disconnect we call the “scale trap.” Even if deployers reach the required size today, it will become increasingly difficult to maintain stable earnings due to two factors:

Price trap: If the HYPE price doubles, the required volume will almost double to maintain the same annualized rate

Dilution Trap: If more people participate in staking, your earnings will be diluted. To maintain a stable APR as the pool expands, daily trading volume must grow at the same rate.

Taken together, these data clearly show that sustainable HIP-3 yields require consistent trading performance at the exchange level, not occasional fluctuations. Even if the hypothetical conditions are carefully crafted to make HIP-3 appear as strong as possible, the required trading volume to maintain a competitive APY is still at a level that only the most efficient market in the crypto space can sustain. In fact, realistic factors such as fee compression, rebates, operating costs, and daily trading volume fluctuations have further raised this threshold.

This is not a disparagement of HIP-3, but rather a reflection of the ambition behind it. The HIP-3 market is not a passive income tool but a well-established trading venue whose economic operation relies on consistent liquidity, efficient execution, and operational excellence. This is not intended to discourage builders or stakers, but to give everyone an idea of how the system actually works, so that the entire ecosystem can develop at scale with a full understanding of the situation.