Hyperliquid Founder Defends ADL Mechanism Amid Criticism
Jeff Yan, the founder of Hyperliquid, has responded to critics who claim the platform prioritizes protocol revenue over trader interests. Yan argues that Hyperliquid’s auto-deleveraging (ADL) mechanism actually saved traders millions during the October 10 market crash.
Yan explained that ADL actions made users “hundreds of millions of dollars” by closing profitable short positions at favorable prices. Instead of maximizing its own profits, Hyperliquid passed potential gains to users. He added that if more positions had been backstop liquidated, the platform could have made even more money but would have faced irresponsible risk exposure.
Yan emphasized that Hyperliquid’s ADL queue follows a simple formula similar to most centralized exchanges. It considers leverage and unrealized profit on open positions.While community feedback suggested more elegant mechanisms, Yan questioned if the benefits justify the added complexity.
Onchain openness is a key differentiator for DeFi platforms like Hyperliquid. Yan highlighted that centralized exchanges often underreport user liquidations, sometimes by up to 100 times. He cited Binance’s documentation as an example, where only one liquidation order gets reported even when thousands occur simultaneously.
Yan hopes the industry will recognize transparency and neutrality as crucial features of the new financial system. He encouraged other platforms to adopt verifiable on-chain operations, contrasting it with the secretive practices of centralized exchanges.
By maintaining transparency,Hyperliquid aims to build trust and set a new standard for the industry. He believes this approach will lead to a more reliable and fair financial ecosystem.
