Hyperliquid Founder defends ADL Mechanism Amid Criticism
Jeff Yan, the founder of hyperliquid, has responded to critics who claim Hyperliquid 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. He claims ADL actions made users “hundreds of millions of dollars” by closing profitable short positions at favorable prices. Yan’s tweet highlights that the platform passed potential profits to users instead of maximizing its own returns.
Yan also defended Hyperliquid’s ADL formula, which prioritizes simplicity and user understanding. He explained that the ADL queue follows a similar formula to most centralized exchanges, incorporating leverage and unrealized profit on open positions. While community feedback suggested more elegant mechanisms, Yan noted that increased complexity might not justify the added complications.
Onchain openness is another key point yan emphasized. He contrasted Hyperliquid’s fully on-chain operations with centralized exchanges, which underreport user liquidations. Yan cited Binance’s documentation, showing that under certain conditions, liquidation reporting could be 100 times less accurate. He hopes the industry will recognize transparency and neutrality as crucial features of the new financial system and encouraged other platforms to adopt verifiable on-chain operations.
- ADL saved traders millions during the market crash.
- Hyperliquid’s approach ensures transparency, unlike centralized exchanges.
- He called for the industry to value transparency and neutrality.
