Today, Hyperliquid's first L2 launched.

Called Elysium, it gives Hyperliquid the throughput HyperEVM deliberately lacks, and Kinetiq, the team behind it, is betting that gap has left substantial demand for blockspace untapped.

Some see this as the start of a new chapter for Hyperliquid, and day one gave them plenty of evidence. But whether Elysium can turn that early activity into lasting demand is another question.

Let's break down what it is, what's live, and what it will take for the chain to stick around.

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Why Hyperliquid Needs Another Chain

Hyperliquid is effectively two layers: HyperCore, which handles the order books where nearly all trading happens, and the underutilized HyperEVM, which handles smart contracts for apps like lending markets and DEXs.

These two layers share consensus and, since HyperCore is the most important piece of Hyperliquid's stack, HyperEVM's throughput is capped so heavy contract activity never slows down the Core's order books. That protects the exchange but limits the EVM's potential.

High-frequency apps like memecoin launchpads, active AMMs, and trading bots need more room, and with HyperCore's continued success, it will likely be a while until the team focuses on expanding the EVM's capacity.

Enter Elysium, which targets 300 million gas per second, roughly 100x HyperEVM's capacity. In theory, that gives the ecosystem an environment fast enough for more demanding DeFi applications, memecoins, and the rest of the high-speed onchain activity HyperEVM cannot support, while still settling to HyperEVM and using HYPE for gas.

What's Live at Launch

That capacity has already drawn a substantive lineup, including several apps that passed on HyperEVM because the juice wasn't worth the squeeze.

On the DeFi side, Aero, Nest, and Uniswap are the standout protocols live from day one. On the memecoin side, Ascend, fomo, and Pump.fun give traders launchpads and portals to discover and trade tokens.

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Traders showed up fast. In a post a few hours after launch, Kinetiq co-founder Omnia said Elysium had processed nearly 10 million transactions, with blocks landing every 50–90 milliseconds. Infrastructure provider Conduit even had to briefly rate-limit traffic in the first five minutes.

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That activity also feeds KNTQ. Half of Elysium's sequencer fees go toward buying KNTQ and sending it to Hyperliquid's Assistance Fund, which permanently removes it from supply, while a quarter goes to builders and the remainder to Kinetiq's treasury.

Among the launch apps, Ascend matters most for KNTQ because it adds a second source of buy pressure. Rather than launching a token of its own, the launchpad adopted KNTQ and, per its docs, directs 90% of protocol fees to buybacks, split 80/20 between KNTQ and HYPE. Of the KNTQ purchased, 40% is allocated to burns.

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In other words, memecoin activity generates both sequencer fees and, through Ascend, additional KNTQ purchases from launchpad revenue.

But the biggest expansion of what Elysium can actually do is still coming. An upgrade expected in about four weeks will let Elysium apps read and write to HyperCore's order books, opening up new ways for applications to interact directly with Hyperliquid's trading infrastructure.

The staggered rollout could actually help. It gives Elysium time to find its footing amid this sour market before another catalyst expands what builders can do and, potentially, attracts a new wave of protocols.

The Bull Case

Beyond the initial burst of activity, the bull case rests on Elysium attracting trading volume that Hyperliquid otherwise would have missed.

Trader KoolKrypto, whose conversation with David Hoffman will be released Wednesday, makes the most thorough argument.

He starts by rejecting the popular idea that Elysium drains value from Hyperliquid. HyperEVM fees are under 1% of Hyperliquid's revenue, so HYPE loses almost nothing even if Elysium absorbs all of them. Better still, additional USDC brought into the ecosystem through Elysium could expand the reserves generating AQAv2 revenue, the program Hyperliquid switched on in August that sends 90% of the yield on its USDC reserves into HYPE buybacks.

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The bigger opportunity, in his view, is trading flow from Solana, which handles 25–50x the spot volume of Hyperliquid's onchain layers, partly because HyperEVM is too slow for professional market makers. A fast chain next to HyperCore can host them, and the hedging they generate lands on Hyperliquid.

There may also be an opening to attract Solana's more speculative activity. As it does every few months, sentiment turned hard against Solana's memecoin machine this past weekend, Pump.fun especially.

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If that sticks, Elysium can pitch itself as an equally fast but more positive-sum venue. On Solana, value often drains into launches that pump and dump within minutes. On Elysium, trading also generates fees for KNTQ buybacks and the builders behind its applications.

I think that distinction could go some distance toward Elysium being viewed as a more positive-sum environment to trade in.

What It Still Needs

Still, attracting speculative traffic is one thing. Turning it into a durable source of activity will be the real trial.

KoolKrypto himself concedes a memecoin season could pump fees and then die. That matters because, beyond the immediate excitement, KNTQ has a substantial supply schedule to contend with. Starting Nov. 27, roughly 310 million contributor and investor KNTQ begin vesting over two years, with monthly releases equivalent to about 4% of today's circulating supply.

Offsetting that supply will require more than a short-lived rush of memecoin trading. Elysium needs to turn the attention it attracts into lasting DeFi activity, which is where its lineup of established protocols and forthcoming HyperCore integration become particularly important.

But even that presents challenges. HyperCore already supports a growing range of financial activities, including borrowing and trading. Elysium needs to demonstrate that its additional capacity and smart contracts can enable applications that meaningfully expand what users can do with Hyperliquid's assets and liquidity, rather than simply replicate existing services.

And this all must be done amidst the ever-increasing capabilities of AI-assisted hacks. Quite the hostile environment.

Overall, day one suggests the demand Kinetiq bet on is real. But Elysium's success will depend on whether it can turn that speculative interest into a useful, secure, and lasting DeFi ecosystem, one capable of generating the sustained activity needed to make its token economics work.