Hyperliquid Audit Exposes Overstated Concerns and Centralization Fears

Hyperliquid's governance structure has been under scrutiny for its perceived centralization and lack of decentralization. The platform, which clears over $200 billion in monthly volume and holds around 70% of on-chain perpetuals volume, is secured by 27 validators.

Initially, the foundation ran all 27 validators at launch, but since then, registration has become permissionless, and the largest stakes have formed the active set. As of June, foundation-run validators hold approximately 49.3% of staked HYPE, with the remaining 50.7% distributed among 22 other operators.

The loudest criticism against Hyperliquid is that the foundation can jail validators at will, but an audit reveals this claim to be inaccurate. The protocol documentation shows that jailing is peer-triggered for latency and reliability failures, with no automatic slashing involved.

Another concern is forced upgrades, which are indeed a reality on Hyperliquid. However, this is not unique to the platform, as other chains also face similar coordination challenges.

The most significant issue facing Hyperliquid's decentralization efforts is its closed-source node software. Despite promises to open the code when it reaches stability, the foundation has yet to do so, leaving validators trusting the team without independent verification.