This episode explores the controversial events surrounding a series of attacks on Hyperliquid, a decentralized perpetual futures exchange. The discussion centers on a whale manipulating the price of a low-liquidity meme coin, $JELLYJELLY, to trigger liquidations and exploit the Hyperliquid Provider (HLP) vault. More significantly, Hyperliquid's response—manually intervening to set the price artificially low—sparked debate about the conflict of interest inherent in a protocol acting as both its own blockchain and oracle. For instance, the comparison was drawn to the DAO hack on Ethereum, although the analogy was deemed imperfect due to the integrated nature of Hyperliquid's app and chain. Against this backdrop, the actions of Binance and OKEx in listing $JELLYJELLY during the attack were analyzed, with varying interpretations ranging from responding to user demand to potentially exacerbating the situation for competitive reasons. Ultimately, the episode concludes with recommendations for Hyperliquid to improve its risk management, particularly regarding the HLP vault's role as a backstop of last resort, and to establish clearer rules for de-escalation in such events. This incident highlights the challenges and complexities inherent in decentralized finance, particularly concerning the balance between decentralized governance and the need for effective risk management.
