Controversial Hyperliquid HIP-5 Proposal Leaves Community Split
The Hyperliquid community is debating proposal HIP-5, which introduces a secondary assistance fund (AF2) to support ecosystem projects using up to 5% of the decentralized exchange's revenue. This proposal would alter the current 99% fee buyback mechanism for HYPE tokens and allocate funds to buy tokens from a curated list including PURR and ecosystem tokens from Kinetiq, Felix, and others. HIP-5 allows HYPE stakers to vote on token allocation. Some community members, like Altoshi, oppose the proposal, citing concerns about potential bribery and misuse of funds. Others, such as Purrteil, support it, emphasizing its benefits for incentivizing builders and enhancing HYPE's utility.
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Introduction to HIP-5 Proposal
The Hyperliquid community is considering a new proposal, dubbed HIP-5, which seeks to establish a secondary assistance fund to support Hyperliquid ecosystem projects. This fund would use a portion of the decentralized exchange’s revenue. One of the proposal’s co-authors, Ericonomic, shared the details on both X and the Hyperliquid Discord, highlighting the plan's potential impact on Hyperliquid's fee buyback mechanism—a change that has divided the community.
Current Mechanism and Proposed Changes
Currently, Hyperliquid allocates 99% of its revenue to buy back HYPE tokens through its existing assistance fund. Under the proposed HIP-5, a new secondary fund (AF2) would be formed. This fund would allocate up to 5% of the total protocol fees to buy back tokens from a strict list, including PURR and upcoming tokens from projects like Kinetiq, Felix, and other HyperEVM protocols.
Community Voting for Fee Distribution
As part of HIP-5, stakers of HYPE tokens would gain the ability to vote on which ecosystem tokens should be bought back and in what quantities. This voting system would grant the community direct influence over the fund allocation, aligning it with community interests.
Criticisms of the HIP-5 Proposal
Altoshi, a community member, criticized the proposal on X, stating: “Respectfully, I don’t support this. Allocating fees to third-party projects may lead to bribery, and cabals milking money from the DAO. Given the USDH voting process, this would lead to some groups using AF2 as the exit liquidity for their seed investments.” Altoshi further noted that similar issues have occurred in networks like Cosmos ($ATOM) and Polkadot ($DOT), where cabals exploited the system.
Support for HIP-5 and its Benefits
On the other hand, several HYPE holders voiced their support for HIP-5, claiming that it would incentivize builders and encourage governance participation. An anonymous trader and Hyperliquid supporter, Purrteil, remarked: “This is literally what I spoke about since TGE. Would love to see it happen!”
Purrteil added, “It will encourage literally every single builder in the space to build on top of HL, because their token would participate in this. Meanwhile, it brings another utility for $HYPE.”