Lessons from Jeff Yan of Hyperliquid

In the fast-evolving world of cryptocurrency, Jeff Yan, the founder of Hyperliquid, has carved out a unique path, building one of the most successful decentralized exchanges with a contrarian approach. His philosophy, centered on user value over venture capital, has garnered significant attention.

On Venture Capital and Funding

On rejecting VC funding: "I was never really doing it for money. I think trading teaches you that money is really just a number." [1] This reflects his core motivation for building Hyperliquid, prioritizing the creation of something interesting and valuable over personal financial gain. [2][3]
The "illusion of progress" from VCs: Yan believes that venture capitalists often create an "illusion of progress" by inflating valuations without delivering real utility to users. [1][2]
Focus on user value, not investors: By avoiding external investors, his aim was to concentrate on what is best for the platform's users and community rather than what appeals to investors. [1][2]
Community-first tokenomics: All protocol fees on Hyperliquid are distributed to liquidity providers and insurance funds, with the development team taking no share, a testament to their community-first ethos. [1]
VCs as a "scar on the network": "If a bunch of VCs... own 50% of the network... I do think that is forever a bit of a scar on the network itself." [4]
Self-funding for long-term integrity: Hyperliquid was entirely self-funded, a decision made to maintain the long-term integrity of the project and avoid the short-term pressures from venture capital. [5][6]
Authenticity over superficial traction: The decision to self-fund was also about preserving authenticity and decentralization, rather than driving superficial growth through partnerships. [1]
Freedom to prioritize product: "We have an advantage in that our team's background allows us to avoid seeking venture capital (VC) funding. This makes it easier for us to make choices because we can focus on long-term product value rather than short-term profits." [7]

On Building a Product and Company

Build for the users: "Our philosophy is simple: create a product that users genuinely like and are willing to use." [7]
Listen to real users: "We're going to listen to users like real users not people who talk about what users might want." [4]
Substance over surface-level appeal: Yan advises builders to focus on creating projects with real substance, which he sees as crucial for the crypto industry to regain credibility. [1]
Small, high-integrity team: Hyperliquid operates with a lean team of just 11 full-time members. [1][5]
The cost of a bad hire: "Hiring the wrong person is much worse than not hiring anyone at all." [1][5]
Lean and focused: The success of the protocol is attributed to disciplined focus and passionate leadership within a close-knit company culture. [1][5]
No marketing department: "We don't have a marketing department. I think our community does a great job, better than the marketing departments of all those centralized exchanges." [8]
Organic growth: The focus was on building and letting users discover the platform organically, rather than engaging in heavy marketing. [1]
If someone else can build it, they should: "If something can be built by someone else, it should be done by someone else." [8][9] This philosophy allows his small team to focus on the core infrastructure.
A blessing in disguise: "We can hardly do anything ourselves. I think this is a blessing in disguise." [8] This limitation forces them to build tools that empower others.
Adaptability over rigid roadmaps: Yan emphasizes that Hyperliquid avoids rigid roadmaps in favor of adaptability to respond to the evolving needs of the ecosystem. [5]

On Decentralization and Market Structure

The FTX collapse as a catalyst: "We saw the problems with FTX firsthand... people realized that the value props of crypto itself actually ironically... are sort of antithetical to how these centralized entities are." [10] The event was a "light bulb moment" that the world was ready for DeFi. [4]
Merging the best of both worlds: Hyperliquid's goal is to combine the seamless user experience of centralized exchanges with the security and autonomy of DeFi. [2]
Building a custom Layer 1: The team built their own Layer 1 blockchain to support a fully on-chain order book, finding existing Layer 2 solutions too costly and slow for high-frequency market-making. [2][11]
Advocacy for transparent markets: Yan is a proponent of transparent markets, arguing they can lead to fairer and more efficient trading through a fully visible on-chain order book. [2][12]
Equal access to data mitigates risk: In response to concerns about front-running, Yan argues that providing equal access to data levels the playing field, unlike on centralized exchanges where insiders can exploit information. [2]
Competition enhances execution: By distributing order data across many market makers, the system fosters a competitive environment that can lead to better pricing and lower slippage for all traders. [2]
No special deals with market makers: "For a decentralized exchange, it is critical to avoid reliance on internal desks or designated market makers from the outset." [2] This stance, while potentially slowing short-term growth, was deemed crucial for long-term integrity. [2][13]
Community-driven ownership: "Ownership should be community-driven. Real progress is users actually getting value, not investors cashing in early." [5]

On His Personal Journey and Philosophy

Background in traditional finance: Yan studied math and computer science at Harvard and worked at the high-frequency trading firm Hudson River Trading, where he "learned a lot about markets and thinking about them rigorously." [8][10]
Early interest in DeFi: DeFi "spoke to me even in 2018 when there were basically no users yet." [10]
Lessons from early failure: An attempt to build a Layer 2 prediction market in 2018 failed due to regulatory uncertainty and low user acceptance, teaching him valuable lessons about what crypto users really want. [8][11]
Trading as a learning experience: After his initial startup failure, he focused on prop trading in crypto, which gave him a deep understanding of the market's inefficiencies. [10][11]
The analogy of Go and chess: "You don't need to be completely sure where you're going to end up, but make sure every step is in the right direction. It's important to take every step well, rather than being overly obsessed with the distant end." [6]
Focus on infrastructure: "That's why we focus more on infrastructure construction rather than short-term market performance." [6]
Not materialistic: "I'm not very materialistic... I don't actually have anything to do with with money so like for me it's about like doing something interesting." [3]
Success is a combination of factors: "A lot of this is hard work, community support, and luck. We always dreamed big, but no one could have predicted it would grow this much." [5]

On the Future of Crypto and Finance

The vision for Hyperliquid: "The focus now is to really just make this blockchain as performant and scalable, and have all the right features to build all the finance on that blockchain." [1]
Becoming a foundational layer: Yan sees Hyperliquid evolving into a decentralized protocol layer, enabling others to build stablecoins, tokenized assets, and various applications on top of it. [5]
Inspired by Amazon Web Services (AWS): "We are inspired by AWS... and believe that the key to DeFi is building universal financial infrastructure that allows developers to create more applications on top of it." [7]
Crypto will change finance: "Our core philosophy is: Cryptocurrency will change the way finance works. Traditional finance will eventually migrate to cryptocurrency. Hyperliquid will become the basic platform for these financial activities." [6]
Decentralized systems for national finance: The goal is to prove that decentralized systems can handle the scale and complexity of national financial systems. [8]
Enhancing user experience is key: Yan believes that improving the user experience is essential to attract users from centralized exchanges to DeFi. [14]
Building for a decentralized "Amazon": The emergence of Hyperliquid is likened to a decentralized "Amazon," aiming to make centralized exchanges look like traditional brick-and-mortar stores. [7]
Specialization in DeFi: "People who understand the needs of users in a specific region can focus on serving those users, while Hyperliquid provides support in the background." [6]
Focus on what users love: "We focus on building products that users love, and everything else is secondary." [8]
Real progress is user value: "Real progress is when users actually derive value from what you're building." [15]
A new model for crypto: Jeff Yan's approach suggests a new model where decentralization is not a meme and performance is not an afterthought. [16]
Winning by doing less: "You can win by doing less. Less hype. Less dilution. Less noise. More engineering. More fairness. More real users." [16]
Challenging the DeFi playbook: He critiques the common DeFi strategy of prioritizing market maker incentives over user benefits. [4]
Building from first principles: The team prioritizes creating a product that users love by building from first principles, rather than following typical startup approaches. [2]
Long-term vision over short-term thinking: Yan's strategy consistently emphasizes long-term success and user-driven growth over the short-term, profit-driven mindset often encouraged by venture capital. [15]

These quotes and learnings provide a comprehensive overview of Jeff Yan's principles and the vision driving Hyperliquid, offering valuable insights for builders, investors, and users in the crypto space.

Learn more:

Lessons from Jeff Yan of Hyperliquid

On Venture Capital and Funding

On Building a Product and Company

On Decentralization and Market Structure

On His Personal Journey and Philosophy

On the Future of Crypto and Finance

Written by Antoine Buteau

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