GammaSwap vs HLP (Hyperliquidity Provider)

GammaSwap

GammaSwap is an innovative decentralized derivatives protocol that enables trading of volatility by allowing users to borrow LP positions from AMM liquidity pools, creating a market for going long or short on implied volatility without needing a traditional options exchange or order book. It is one of the most technically novel volatility products in DeFi, built for sophisticated traders who want directional exposure to price swings rather than just price direction. The core mechanism works by enabling traders to borrow Uniswap v3-compatible LP tokens from liquidity pools and pay a continuous borrow rate equal to the impermanent loss accrued by the LP position. This creates an elegant two-sided market: liquidity providers earn borrow fees that compensate them for IL risk, while volatility traders gain convex exposure to price movement. When assets move significantly in either direction, borrowed LP positions gain value relative to the borrow cost, effectively giving the trader a long-gamma position. For LPs seeking to hedge their impermanent loss exposure on HyperEVM AMMs, GammaSwap provides a natural counterparty. A liquidity provider who is short gamma can take an offsetting long-gamma position through GammaSwap, dramatically reducing the directional risk of market-making in volatile assets. This opens up AMM liquidity provision to a wider class of market participants who previously avoided it due to IL risk. GammaSwap operates without external price oracles as it derives all pricing purely from on-chain LP data and pool reserves, making it manipulation-resistant and fully permissionless. Any token pair with sufficient on-chain AMM liquidity can have a GammaSwap market created for it, enabling a long tail of volatility markets across HyperEVM assets. On HyperEVM, GammaSwap integrates with Uniswap v3-compatible concentrated liquidity DEXes to offer volatility products on Hyperliquid spot assets, complementing the perpetuals market with a new layer of derivatives exposure. The protocol is designed for quant traders, volatility arbitrageurs, and sophisticated DeFi participants who understand options greeks and want to express volatility views on-chain. GammaSwap has been audited and is backed by leading DeFi investors. Its novel approach to permissionless volatility trading positions it as a foundational primitive for the next generation of on-chain derivatives.

HLP (Hyperliquidity Provider)

The Hyperliquidity Provider (HLP) is Hyperliquid's native protocol vault — a community-owned, fee-free market-making and liquidation fund that operates directly on HyperCore. Launched in May 2023 alongside the early Hyperliquid platform, HLP allows any user to deposit USDC and participate in the profits generated by Hyperliquid's core market-making, liquidation, and fee-accrual operations. It represents one of the clearest examples of a decentralized exchange opening its market-making infrastructure to retail participants, and has become one of the largest and most consistently performing USDC yield products in DeFi. HOW IT WORKS HLP runs inside HyperCore, Hyperliquid's fully on-chain central limit order book (CLOB) engine, which handles over 100,000 orders per second with sub-second finality. The vault deploys multiple market-making strategies simultaneously across all perpetual futures markets listed on Hyperliquid — currently over 130 trading pairs. At a high level, the strategy computes a fair reference price for each asset using tick data from Hyperliquid's own order book combined with price feeds from major centralized exchanges including Binance, OKX, and others. A decentralized oracle pulls spot prices from these sources every three seconds, using a weighted median computed by Hyperliquid validators to prevent manipulation. The vault then places bid and ask orders around this fair price — "making" the market — capturing the spread between buys and sells as profit. In addition to directional market-making, HLP performs liquidations. When a leveraged trader's account falls below the maintenance margin threshold, HLP absorbs the liquidated position at a discount to market price, earning liquidation fees. In extreme market conditions — such as the liquidation cascade in October 2025, when Hyperliquid processed approximately $10 billion in liquidations in a single event — HLP can generate extraordinary single-day returns. HLP also supplies USDC to Hyperliquid's Earn product, a protocol-managed lending facility, accruing lending interest on idle capital. All strategy execution runs off-chain but is fully auditable: every position, open order, trade, deposit, and withdrawal made by HLP is recorded on-chain in real time and viewable through Hyperliquid's blockchain explorer. Profits auto-compound continuously — depositors do not need to claim rewards manually. The deposit lock-up period is four days: a user who deposits cannot withdraw until four days after their most recent deposit. This is designed to prevent HLP from experiencing sudden capital flight during volatile periods when liquidity support is most needed. KEY FEATURES - Protocol-Owned, Fee-Free Structure: HLP is owned by the protocol itself and charges no management fee or performance fee. Unlike user-created Hyperliquid vaults (which take a 10% profit share for the vault leader), 100% of HLP profits flow directly to depositors proportionally based on their share of the vault - Multi-Strategy Execution: HLP simultaneously runs market-making on all 130+ perpetual markets, liquidation absorption, and Earn facility lending — three independent alpha sources within a single deposit position - Full On-Chain Transparency: Every trade and position is published to the blockchain in real time; any user can audit the strategy's current book without trusting the team's disclosure - Auto-Compounding: Profits accumulate automatically without gas costs or manual claim transactions, making HLP a truly passive yield instrument - No Tokenization: Unlike GLP on GMX or similar products, HLP deposits are not represented by a tradable token — deposits and withdrawals occur in USDC and returns are credited to each depositor's account balance TEAM AND BACKING HLP is not a third-party project — it is operated directly by Hyperliquid Labs, the core development team behind the Hyperliquid blockchain and exchange. The Hyperliquid team includes founders with quantitative trading and high-frequency market-making backgrounds, who designed HLP based on their own internal strategies. By placing their own market-making operations into a community vault, the founding team eliminated the information asymmetry that plagues most DeFi platforms, where insiders typically benefit from exchange market-making at users' expense. Hyperliquid raised no external venture capital for its development. The team is funded by protocol revenues, and HLP's success is structurally aligned with the platform's overall trading volume — more trading means more fees and liquidations, which benefit both the protocol treasury and HLP depositors simultaneously. TRACTION AND METRICS HLP launched in May 2023 as part of Hyperliquid's early closed alpha. It has operated continuously since, accumulating a multi-year track record that is rare among DeFi yield products. Historical annual percentage yield has averaged approximately 17%, with significant spikes during high-volatility periods. During the October 2025 market event — a major liquidation cascade that Hyperliquid processed without downtime — HLP generated approximately $41.5 million in a single day's fees and delivered roughly 10% returns to depositors within 48 hours. As of October 2025, HLP held approximately $300–400 million in total value locked (TVL), denominated in USDC. This positions it among the largest single DeFi yield vaults globally. The vault has historically maintained 100% uptime even during periods when competing platforms experienced technical failures or outages, reflecting the reliability of HyperCore's underlying architecture. Hyperliquid itself captured over 73% of decentralized perpetuals market share by mid-2025, with peak daily trading volume exceeding $59.5 billion — the throughput that directly feeds HLP's fee and liquidation income. COMPETITIVE POSITION HLP occupies a unique position in DeFi that has few direct comparisons. GLP on GMX is the closest structural analog: a protocol-managed vault that provides liquidity to a derivatives exchange and distributes fees to depositors. HLP improves on GLP's model in several key ways: it charges no vault fees, the strategy is fully transparent on-chain, and HLP is exposed to a CLOB rather than an AMM — meaning it can make active markets rather than passively absorbing counterparty flow. Against traditional stablecoin yield products — Aave, Compound, Pendle, Curve — HLP offers meaningfully higher historical returns (17% historical APY versus 5–10% in lending markets) with a different risk profile: exposure to market-making losses during directional markets rather than credit or smart contract risk in lending. HLP's primary risks relative to competitors are correlated with Hyperliquid platform risk — platform downtime, liquidity crises, or regulatory action would disproportionately impact HLP depositors. In contrast, assets in Aave are exposed to smart contract risk but not to a single exchange's operational performance. HYPERLIQUID INTEGRATION HLP is the most deeply integrated product in the Hyperliquid ecosystem by design — it is built into HyperCore at the protocol level and is not a third-party application. It uses Hyperliquid's native vault infrastructure, which allows deposits to be held and deployed within HyperCore without EVM bridging. Users deposit USDC through the main Hyperliquid interface at app.hyperliquid.xyz/vaults, and the vault operates entirely within HyperCore's order book environment. As Hyperliquid expands its market listing through HIP-3 — which enables permissionless deployment of new perpetual markets — HLP's addressable market of spreads and liquidations grows accordingly. Each new market added to Hyperliquid represents additional alpha for HLP's strategies, creating a compounding relationship between Hyperliquid platform growth and HLP returns. RISKS AND CONSIDERATIONS The primary risk of depositing in HLP is strategy risk: the vault's market-making and liquidation strategies can take losing positions. During periods of strong directional trends or correlated price dislocations, market-making strategies consistently lose money (buying into falling markets, selling into rising ones). HLP's 4-day lock-up means depositors cannot exit immediately when they observe strategy losses. While historical performance has been positive over multi-month periods, there is no guarantee of future profitability. The lack of tokenization, while simplifying accounting, also means HLP positions cannot be used as collateral in DeFi lending markets — the capital is locked in USDC and cannot generate secondary yield. This is a capital efficiency disadvantage relative to liquid staking or yield-bearing tokens. HLP's performance is structurally correlated with Hyperliquid platform volume. If trading volume on Hyperliquid declines substantially — whether due to competition, regulatory action, or market conditions — HLP's fee income falls proportionally. The vault does not generate revenue independent of platform activity. Finally, because HLP's strategy runs off-chain and is not open-sourced, depositors must trust Hyperliquid's team to accurately report strategy performance and run the execution without manipulation — a meaningful trust assumption for a multi-hundred-million-dollar vault.

Choose GammaSwap if you...

• ✓Want a decentralized exchanges solution on Multi-Layer
• ✓Need: Volatility trading protocol enabling long/short vol positions on HyperEVM LP pools

Choose HLP (Hyperliquidity Provider) if you...

• ✓Want a yield & vaults solution on HyperCore
• ✓Prefer a verified and vetted protocol
• ✓Need features like vault and liquidity
• ✓Need: Protocol-owned liquidity vault powering Hyperliquid's order book