Hyperliquid: Updated leverage system and HLP liquidation mechanism and set loss limit

Odaily Planet Daily News Hyperliquid co-founder @chameleon_jeff posted on the X platform that it is sad to see the coordinated misinformation campaign against Hyperliquid, so a detailed, factual explanation of how Hyperliquid works will be provided: Hyperliquid's margin design strictly ensures the solvency of the platform through mathematical mechanisms, HLP's losses are always limited to its own vaults, and the operation of the protocol never relies on HLP-this feature existed before the JELLYJELLY incident. The newly added protection mechanism after the incident only optimizes HLP's ability to resist losses in backup liquidation, and the underlying architecture of the protocol has not changed. In the recent JELLYJELLY incident, an attacker attempted to manipulate HLP (liquidity provider pool) by establishing huge long and short positions against himself. Although the open interest limit at the time allowed a position worth 4 million USDC to be established during the transaction, the logical loophole was that HLP used its entire fund balance to provide collateral for this liquidation. It should be clarified that the platform itself does not have solvency risk, but HLP does face excessive risk exposure due to market manipulation. Currently, the HLP liquidation component vault has set a collateral cap, which limits potential losses through the backup liquidation mechanism. Hyperliquid still maintains the original operating mechanism and handles undercollateralized positions in the following order: 1) market liquidation 2) backup liquidation 3) automatic deleveraging (ADL). The current HLP backup liquidation has added a protection mechanism, which sets a loss cap to make the cost of manipulating the mark price much higher than the limited income it can obtain from HLP.