What is Hyperliquid's HLP?

Hyperliquid’s HLP (Hyperliquidity Provider) is the flagship protocol vault on Hyperliquid, serving as the primary market maker and liquidator. It allows any user to deposit USDC and share in the vault’s profits and losses, effectively democratizing institutional-grade trading strategies.

The vault earns revenue through trading fees, liquidations, and funding rate payments collected from the exchange's participants. Since Hyperliquid is community-focused, the protocol retains 0 fees, distributing nearly all profits back to depositors who provide this essential liquidity.

Operating on the platform’s high-performance Layer 1, HLP uses automated algorithms to provide deep order book depth. Unlike traditional market makers, it remains fully transparent on-chain, offering users a passive way to earn yield while securing the network.

How Does The Hyperliquidity Provider (HLP) Work?

HLP works like a shared USDC vault that becomes a counterparty on Hyperliquid, market-making and liquidating positions, with depositors collectively earning (or losing) the vault’s PnL.

Here’s the practical flow from deposit to withdrawal:

• Deposit Entry: Investors contribute USDC into the vault to receive HLP tokens representing their proportional share of the underlying liquidity.
• Market Making: The strategy automatically quotes buy and sell prices for all assets to provide deep liquidity for active traders.
• Yield Generation: Rewards accumulate from protocol trading fees and funding payments, which the algorithm captures through its diverse market positions.
• Liquidation Role: Acting as the backstop, the vault liquidates underwater positions to maintain system health while capturing additional profit margins.
• Sharing: Profits and losses accrue to all depositors; there is 0 manager cut because HLP is community-owned and fully automated.
• Withdraw: After the 4-day lock-up, you can withdraw USDC from the vault page at your current, real-time share value.

GMX's GLP Explained

GMX’s GLP is the original multi-asset index that powered decentralized perpetual trading from 2021 until mid-2025. It allowed users to provide liquidity across a basket of blue-chip tokens and stablecoins while earning a high 70% protocol fee share.

However, the protocol officially sunsetted GLP in July 2025 after a critical $42 million re-entrancy exploit targeted the V1 vault architecture. This security breach forced a mandatory migration to ensure all future liquidity provider funds remained fully protected.

To replace the index model, GMX launched GM Pools, which offer isolated liquidity for specific trading pairs like BTC or ETH. This granular approach prevents 1 single market’s volatility from impacting the entire protocol's stability, considerably improving overall risk management.

For passive investors, GMX Liquidity Vaults (GLV) act as advanced wrappers that automatically distribute capital across multiple underlying GM Pools. These vaults use algorithmic rebalancing to maximize yields while ensuring that deep liquidity remains available for the platform’s active traders.

Jupiter's JLP Explained

Jupiter’s JLP serves as the core liquidity provider token for the platform’s perpetual exchange on Solana. It functions as a decentralized vault where users deposit assets to support high-leverage trading while earning a 75% share of all protocol-generated trading revenue.

The pool acts as a multi-asset index consisting of SOL, ETH, WBTC, and stablecoins. By holding JLP, you become the counterparty to traders, profiting from their losses and capturing fees from open/close actions, price impact, and borrowing costs across the network.

JLP’s value is driven by three specific pillars: the index, trader PnL, and reinvested fees. These rewards are automatically redeposited into the pool, compounding returns without manual staking. This mechanism ensures the JLP token price appreciates organically over time for all holders.

HLP vs GLP vs JLP Compared

HLP, GLP, and JLP all let you “be the house” on perpetual DEXs but they do it through different market structures, risks, and payout mechanics. Use this comparison to pick the pool that matches your thesis: passive fee farming, directional index exposure, or higher market-making PnL volatility.

1. Architecture

Hyperliquid’s HLP utilizes a sophisticated order-book-based architecture where the vault acts as a programmatic market maker. Unlike index pools, it relies on high-speed execution to provide liquidity directly into the exchange’s central limit order book for every single available pair.

GMX’s GLP (and now GLV) and Jupiter’s JLP both utilize a multi-asset index pool model rather than an order book. Traders execute against this global liquidity basket, which consists of blue-chip assets and stablecoins, making the pool the universal counterparty for all trades.

While HLP only requires USDC deposits for entry, JLP and GLP allow users to mint tokens using various supported assets. This design offers a broader price exposure to the underlying market compared to the pure cash-based liquidity found in Hyperliquid.

2. Rewards and Fees

Hyperliquid stands out by taking 0 protocol fees from the HLP vault, which is fully community-owned. Unlike user-led vaults that charge a 10% profit share, HLP distributes 100% of its trading revenue and funding directly back to its depositors.

GMX distributes 70% of generated platform fees to GLV holders, while the remaining portion supports the GMX token stakers and treasury. These rewards are typically paid out in real yield like ETH or AVAX, providing a consistent source of income.

Jupiter’s JLP allocates 75% of trading fees to the vault, which the system automatically reinvests into the underlying index assets. This compounding effect allows the JLP token price to grow steadily over time without requiring any manual harvesting or restaking.

3. Statistics

According to the latest 2025 data from DefiLlama and other aggregators, the decentralized perpetual market remains highly competitive with billions in total value locked.

Current performance metrics for these vaults are listed below:

• HLP TVL: The Hyperliquid vault currently holds $373 million in total value locked, according to Hyperscreener, with an all-time average PnL of $43.02 million.
• JLP TVL: Jupiter’s Solana-based vault leads the sector with $1.62 billion in liquidity across its diverse asset index today, with $1.01 billion available and $603 million borrowed.
• GLV TVL: GMX maintains a solid $450 million in its GLV liquidity pools on Arbitrum, Ethereum, Base, and other chains, following the full transition to V2 infrastructure.

Based on the latest data, yields have stabilized following a high-volume quarter. JLP currently leads with a 12.88% APY due to strong Solana trading activity, while HLP sits around 1-14% depending on daily funding rates, and GLV fluctuates between 9-18% as GMX shifts focus toward its V2 GM pools.

Risks of Using Liquidity Provider Vaults Like HLP

Investing in decentralized liquidity vaults involves large capital exposure to volatile market conditions, complex algorithmic strategies, and the underlying security of blockchain protocols.

Potential investors should carefully evaluate the following critical risks:

• Smart Contract Risk: Vulnerabilities or bugs in the protocol smart contracts code could lead to a permanent loss of all deposited user funds.
• Trader PnL Exposure: Depositors act as the counterparty and suffer losses whenever traders consistently achieve highly profitable market positions.
• Asset Delta Risk: The value of index-based vaults fluctuates based on the market price of volatile underlying tokens like BTC.
• Liquidation Events: Massive liquidations can force vaults to absorb large positions at unfavorable prices, resulting in sudden, enormous drawdowns.
• Oracle Failure: Inaccurate price feeds from compromised oracles may trigger incorrect liquidations or allow malicious actors to exploit liquidity.
• Exit Latency: Certain vaults enforce 4-day lock-up periods that prevent users from withdrawing capital quickly during extreme market volatility.
• Systemic Contagion: Integration with external stablecoins or lending protocols introduces additional risks if those secondary platforms experience a failure.
• Execution Risk: Algorithmic market-making strategies may underperform or fail to hedge correctly during unprecedented periods of low market liquidity.

Final Thoughts

Back in 2021, GMX opened the gateway for decentralized perpetual trading with GLP, pioneering the community-owned house liquidity model that traders use today.

Now, 4 years later, Jupiter’s JLP and Hyperliquid’s HLP have scaled this concept, attracting billions in TVL across Solana and the Hyperliquid L1.

Looking ahead, we expect other perps like Aster and Lighter to refine these vaults with hybrid order books and multi-chain yield-bearing collateral options.