What to Expect from Kinetiq's Upcoming Hyperliquid L2
Hyperliquid’s first L2 is nearing launch. Here’s what Elysium could mean for DeFi, spot markets, and Kinetiq’s growing role in the ecosystem.
Yesterday, Hyperliquid’s largest liquid staking provider Kinetiq announced Elysium, the upcoming, first-ever Hyperliquid L2.
Elysium intends to revive two areas of Hyperliquid: DeFi, which Kinetiq argues has been held back by HyperEVM’s performance, and spot markets, whose weekly share versus Binance recently fell to a 15-month low.
David Christopher
These are real problems to address.
HyperEVM uses a dual-block architecture: small blocks (designed for transactions) arrive every second with a 3M gas limit, while larger 30M-gas blocks (designed for computationally intensive activity like contract deployments) arrive roughly once a minute. It’s an intentionally conservative design which Hyperliquid has clarified will improve over time, though that does come at the cost of current tradeoffs. For example, amid this weekend’s HyperEVM meme revival, average gas reportedly jumped from roughly 0.15 Gwei to 60 Gwei in two days: 400x.
Kinetiq sees these design choices as throttling DeFi application expansion around HyperCore and believes a faster, more performant environment can change that.
The same opportunity extends to spot. As Kinetiq co-founder Omnia explained in a recent interview with "When Shift Happens," Hyperliquid has “categorically” won onchain perps, so it makes sense for its small team to keep prioritizing HyperCore. Spot matters less today, but eventually matters if Hyperliquid is actually going to house “all of finance.”
Kinetiq believes Elysium can help fill that gap. Its pitch goes beyond simply creating a faster place to trade spot. Elysium will be designed around PropAMMs, AMMs run by professional market makers that have become important liquidity sources on Solana, while giving them richer access to HyperCore market data. Paired with Kinetiq’s broader stack, the idea is to create an entire lifecycle for new assets: launch a token on an Elysium AMM, graduate it to PropAMM liquidity, establish a HyperCore spot book, then potentially add a HIP-3 perp.
Beyond that vision, details remain limited. We know Elysium will:
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- Use HYPE as gas
- Be built on the OP Stack
- Settle to HyperEVM and sit tightly beside HyperCore
- And that sequencer fees will be split three ways: 50% to buy and burn KNTQ, 25% to builders and 25% to the Kinetiq treasury.
We're still waiting for technical specifications and launch partners, which all matter given Elysium arrives at an interesting point in Kinetiq’s own evolution as it faces contraction in its core business.
When I last wrote about the protocol in June, kHYPE supply had fallen from roughly 41.5M at its August 2025 peak to 14.6M at the end of May. Today it sits around 13.9M, another 5% decline and roughly 67% below peak.
David Christopher
I attribute this in large part to the broader reckoning DeFi has had with AI and exploit risk, and the downstream effect that has had on the usefulness of LSTs. If DeFi opportunities no longer justify the added smart-contract and exploit risk of using LSTs, their advantage disappears. Just stake natively and accept the unstaking delay or don't stake at all.
But far before the specter of AI loomed so largely over DeFi, Kinetiq had been expanding beyond liquid staking. It has operated Markets.xyz, Kinetiq’s own HIP-3 deployer and its trading front end, since the beginning of the year and recently debuted Launch to let teams crowdsource HIP-3 deployments (though adoption has remained small). While Markets.xyz’s own markets have struggled, like everyone else’s, to break Trade.xyz’s liquidity moat, the front end appears to have found a much stronger lane. Omnia says several hundred users now sign up for Markets.xyz every day, with Kinetiq increasingly acting as a distribution layer (something it can do thanks to builder codes) for Trade’s markets rather than trying to beat Trade head-on.
That may actually be Kinetiq’s most compelling position today: owning a meaningful swath of the HIP-3 user relationship. Elysium could pair naturally with that distribution, giving Kinetiq more tokens, spot markets, DeFi applications and HIP-3 products to put in front of those users.
But distribution only gets Elysium so far. It still runs into two of the same forces that shaped Kinetiq’s evolution in the first place.
- Elysium can address HyperEVM’s performance constraints, but it cannot solve DeFi’s broader risk/reward problem. What made kHYPE less compelling still hangs over whatever applications Elysium attracts.
- The second is spot. Here, Kinetiq has a more interesting answer because its existing front end can provide some distribution and its broader stack can help bootstrap an asset from launch through spot and eventually perps. But PropAMMs still need market makers, hedges and, above all, order flow.
And that means competing for liquidity against ecosystems like Solana which have a rich meme economy, professional market makers, and enormous existing order flow. Elysium can maybe offer better plumbing and Kinetiq can bring some users, but convincing liquidity to form around an entirely new execution environment is a much harder problem than simply making that environment performant.
Still, Elysium marks Kinetiq’s most ambitious play yet to increase its real estate across Hyperliquid. It is one of the ecosystem’s earliest native teams and has already helped catalyze expansion at different points in Hyperliquid’s lifecycle, so I expect something meaningful to come from the effort regardless of what ultimately happens to the L2 itself.
At worst, Elysium could serve as a third-party technical proving ground whose best features eventually inform a more performant HyperEVM. At best, it could address the problems Kinetiq has correctly identified and push Hyperliquid meaningfully closer to housing all of finance. Which outcome looks more likely should become much clearer once we see the launch partners and, most importantly, how closely Hyperliquid itself embraces Elysium. Let's see what happens.
David Christopher
David is a writer/analyst at Bankless. Prior to joining Bankless, he worked for a series of early-stage crypto startups and on grants from the Ethereum, Solana, and Urbit Foundations. He graduated from Skidmore College in New York. He currently lives in the Midwest and enjoys NFTs, but no longer participates in them.
