Hyperliquid Fights Back Against Lack of Decentralization Complaints

Hyperliquid tried to pour cold water on a blazing row about its security and centralized control today.

In response to criticism of handling of the addition of new validators to the Hyperliquid decentralized exchange (DEX) for perpetual futures, the Hyper Foundation tried to ease concerns that its recent expansion from four to 16 validators wasn’t transparent, and even that some validators bought their seats.

The latest issue began with a Jan. 7 X post by Kam Benbrik, an employee of node operator Chorus One, which runs a Hyperliquid node. Benbrik said “validators face significant challenges” because of the chain’s lack of decentralization.

In a Jan. 8 X post, the Hyperliquid account refuted what it described as “some misconceptions [that] have emerged regarding validators.”

It did so with some success as the HYPE token, which dropped from its Jan. 7 high of $26.12 to $20.81, nearly regained $24 before dropping to $23 at press time.

Clarification

Specifically, Hyperliquid’s post attempted to clarify several things, beginning with the accusation that new validators had been allowed to buy their seat, and that there still weren’t enough of them.

“All validators qualified based on testnet performance,” it said. “There is no way to buy a seat at the table,” according to the post. “Claims otherwise undermine the efforts of the validators who dedicated time and effort to understanding the system. As with all blockchains as they mature, the validator set will increase over time.”

The statement led to calls for the criteria by which validators were judged to be released.

North Korea worries

The number of validators has been a sore point since Dec. 22, when reports emerged that North Korean hackers were doing a test run against Hyperliquid, presumably for an all-out assault on potential security weaknesses.

There were only four validators at the time, and with a two-thirds supermajority needed to make changes, only three validators would have to have been compromised.

HYPE was at a $34.96 all-time high that day and has been going steadily downhill. So has Hyperliquid’s total value locked, which is down from $3.44 billion on Dec. 17 to $2.06 billion on Jan. 8.

Even with 16 validators, there is still a big problem, Benbrik wrote.

The five Hyper Foundation validators together control more than 81% of the staked HYPE.

“If a single entity controls 1/3 of the stake, they can halt the chain,” he said. “If they control 2/3 of the stake, they control the network entirely.”

While the number of validators will continue to increase, a previously announced Foundation Delegation Program will divvy out some of its staked tokens to support high-performing validators, increasing decentralization.

Call for transparency

Another big transparency complaint was that the node code is closed source, which Benbrik complained leads to validators being “jailed” and their stake slashed with a penalty. A node is a computer with a full copy of a blockchain.

Hyper replied, “yes, the node code is currently closed source. Open sourcing is important. Projects open source once development is in a stable state.”

It will be open-source when “it’s secure to do so,” it added.