Hyperliquid is also getting Layer2, what is Elysium?

On August 22, the price of HYPE broke through $80, setting a new historical high once again. Funds and attention returned to Hyperliquid, and HyperEVM also saw a long-awaited meme market. Two high market cap targets, egg and joff, emerged.

The heat comes quickly and retreats even faster.

This has almost become a fixed script for memes on HyperEVM. During the first round of meme season last June, BUDDY's market cap once reached $35 million, but it has been difficult to find a target that can sustain the momentum since then. HyperEVM has never lacked retail investors willing to bet; what it lacks is a trading infrastructure that can capture this speculative demand.

HyperEVM adopts a dual-block architecture, connecting to HyperCore while leaving the complexity to developers and traders. During network congestion, the gas for a simple exchange can exceed $10, and in extreme cases, it can even reach $20. After new coins are issued, one must separately find AMM, spot liquidity, and perpetual contract markets; there is no unified token launch platform on HyperEVM to connect these stages.

Kinetiq saw this gap. As the largest liquidity staking protocol on Hyperliquid, it announced the launch of Elysium, Hyperliquid's L2. After the announcement, discussions around KNTQ revaluation, HYPE value capture, and new application migration quickly spread in the community.

From Staking Protocol to Hyperliquid Infrastructure

Kinetiq initially addressed the liquidity issue after HYPE staking. Users stake HYPE with the protocol and receive k HYPE, which can then enter lending, yield strategies, and other DeFi scenarios, allowing the same asset to simultaneously serve both staking and liquidity functions.

Currently, Kinetiq's TVL is approximately $1.214 billion. In addition to kHYPE, Kinetiq has also launched products such as Earn, kmHYPE, Launch, and Markets.

According to Kinetiq's disclosed design, Elysium will continue to use HYPE as gas. Users do not need to buy another base asset to enter the new network, and the trading demand generated by Elysium will directly increase the use cases for HYPE.

Performance is the first layer of transformation. Kinetiq claims that the block speed and throughput at the launch of Elysium will be several orders of magnitude higher than HyperEVM, with the long-term goal of bringing block time close to HyperCore. Clearly, Kinetiq aims to create an execution environment that allows high-frequency spot trading, automated market making, and applications that require continuous state updates.

A more critical part is the connection between Elysium and HyperCore.

The existing L1 Read precompiled contracts on HyperEVM allow smart contracts to read HyperCore data, but the order book information visible is mainly the best bid and ask prices. Elysium plans to transform L1 Read to provide developers with richer market depth and fresh quotes close to the top of the block.

For ordinary traders, this is just a few more order book levels to read. For market makers, the significance is completely different. It can continuously quote in Elysium's AMM while reading HyperCore's depth and prices to complete hedging.

Kinetiq views Prop AMM as the first type of application that Elysium needs to attract. This type of AMM uses proprietary funds from professional market makers for quoting and is highly sensitive to latency and hedging efficiency. According to Kinetiq's disclosed data, the spot volume handled by Prop AMM on Solana has long been far higher than that on HyperCore. Elysium aims to replicate this portion of spot trading demand that Hyperliquid missed.

Restructuring the Token Lifecycle

Hyperliquid's current shortcomings in spot trading go far beyond trading speed.

To issue spot assets on HyperCore, one must participate in Ticker auctions and rebuild the order book; when issuing tokens on HyperEVM, developers must find their own launch platforms, AMMs, and market makers. Even if new coins gain attention in the short term, it is difficult to continue sending this liquidity into HyperCore. Spot and perpetual contracts appear to belong to the same ecosystem, but they actually follow two separate paths.

Elysium proposes a complete pipeline: new coins are first generated on Elysium, completing a cold start through long-tail AMM; after liquidity expands, they enter Prop AMM; then a HyperCore spot order book is established; finally, the perpetual contract market is launched with HIP-3.

This is what Kinetiq refers to as a "value-accruing L2." L2s on Ethereum are often criticized for capturing mainnet activity and fees, while Elysium attempts to send new on-chain activities back to HyperCore. It uses HYPE as gas, establishes spot markets on HyperCore, and derivatives return to HIP-3. The more active Elysium is, the more trading volume HyperCore theoretically gains.

Kinetiq's token KNTQ also has a separate value capture path. Elysium's sequencer revenue plan allocates 25% to applications consuming block space, 25% to the Kinetiq treasury, and the remaining 50% for repurchasing KNTQ from the public market, which is then sent to the Hyperliquid Assistance Fund for destruction.

Supporting Complex Application Scenarios

Among Elysium's potential use cases, memes are just the easiest to understand. What can truly test the limits of this chain is a new type of Perp DEX with complex settlement logic, such as PaperTrade.

We previously introduced PaperTrade. It reads Hyperliquid order book prices, allowing users to settle profits and losses directly with public LP pools. Trades do not enter HyperCore matching; profit queues, LP balances, and the minting logic of PAPER tokens all operate within HyperEVM smart contracts.

This design inherently relies on high-frequency state updates. Every opening, closing, profit queuing, and subsequent payment requires on-chain execution, while HyperEVM's slow transaction confirmations and high gas can directly undermine the product experience. A more realistic issue is that any high-performance chain that connects to external price oracles can replicate PaperTrade's mechanism, providing lower gas and more aggressive token incentives. PaperTrade chose Hyperliquid, relying on native quotes and native users; however, HyperEVM's performance is undermining these two advantages.

Elysium offers another possibility. PaperTrade can continue to read HyperCore prices, utilizing the expanded L1 Read to obtain richer order book information while placing settlement and token logic into a faster execution environment. It does not need to leave Hyperliquid to seek performance, nor does it have to hand over the most critical price source to external oracles.

No wonder Kinetiq's founder Omnia specifically mentioned PaperTrade after the release of Elysium: "It has a home now."

Similar opportunities will also arise in options, automated trading, and lending protocols that require real-time hedging. HyperCore already has the most active on-chain traders and depth; what Elysium aims to do is enable developers to run more complex financial logic alongside this liquidity.