kinetiq

Why Kinetiq’s New Layer 2 Could Change the Economics of Hyperliquid DeFi
Layer 2s were supposed to solve a simple problem: make blockchain applications faster and cheaper.
But another question has become increasingly important:
Where does the value created by an L2 actually go?
Kinetiq’s Elysium approaches that question differently.
Rather than positioning another execution layer as a destination competing with its underlying network, Elysium is being designed specifically around Hyperliquid, with HyperCore connectivity at its foundation.
Kinetiq describes it as “the first, and only value accretive L2 in history.”
That is an ambitious claim.
But the interesting part is not the slogan.
It is the architecture and economic model behind it.
Why Hyperliquid Needs Elysium
Hyperliquid has already established a powerful onchain trading environment through HyperCore.
According to Kinetiq, however, the growth of Hyperliquid DeFi has exposed significant limitations in HyperEVM.
The manifesto points specifically to its dual block architecture, limited performance and throughput, and the resulting difficulty for both traders and builders.
The problem becomes particularly obvious when transaction demand increases.
Kinetiq states that simple swaps on HyperEVM have reached costs of as much as $20, describing this as unsustainable for new users.
That creates a difficult situation.
Hyperliquid has sophisticated traders and substantial economic activity, but the general purpose environment surrounding HyperCore has struggled to provide the execution experience required to support the next wave of applications.
Kinetiq’s answer is not to abandon Hyperliquid.
It is to build a specialized environment around it.
That environment is Elysium.
$HYPE Becomes the Gas
One of Elysium’s simplest decisions could also be one of its most important.
$HYPE will be the gas token.
Kinetiq describes this as providing “zero net-new asset friction.”
Instead of introducing another gas asset and creating another isolated economic system, Elysium remains connected to Hyperliquid’s native asset.
The architecture therefore aims to make Elysium feel less like a separate blockchain and more like an additional execution environment within the Hyperliquid ecosystem.
🔹For builders, that means fewer unnecessary asset boundaries.
🔹For users, it means one less token economy to navigate.
🔹And for Hyperliquid, it creates another environment where $HYPE has utility.
Of course, greater utility should not automatically be interpreted as guaranteed price appreciation.
The actual economic effect depends on how much activity Elysium attracts and how much $HYPE is ultimately consumed as gas.
That distinction matters.
Supercharging Hyperliquid Spot Trading
This may be one of Elysium’s most consequential objectives.
Hyperliquid is widely recognized for perpetual futures, but Kinetiq argues that its spot markets remain underutilized.
The manifesto points to several indicators.
Hyperliquid’s weekly spot volume share against Binance has fallen to a 15 month low.
Monthly spot volume is described as being at its second lowest level since launch.
And HIP 2, Hyperliquid’s native orderbook bootstrapping mechanism, is also described as being at its lowest point since Q4 2024.
The conclusion from Kinetiq is straightforward:
Hyperliquid needs a more competitive spot environment.
Elysium is designed to address that through substantially higher performance and throughput, with eventual block time parity with HyperCore.
Kinetiq describes the Day 1 production environment as “orders of magnitude more performant than HyperEVM.”
If that performance materializes, it could enable trading applications that are difficult or impractical to operate on the existing HyperEVM environment.
🔹And that matters because liquidity attracts liquidity.
🔹Better execution can encourage more applications.
🔹More applications can create more markets.
🔹More markets can attract more traders.
🔹And more traders can deepen the overall ecosystem.
Why PropAMMs Matter
The PropAMM opportunity is particularly interesting.
Kinetiq points to Solana’s spot market activity, arguing that PropAMMs there consistently generate volumes many times larger than HyperCore’s spot markets.
Elysium is designed to make PropAMMs more attractive by combining high performance execution with proximity to HyperCore.
But the more interesting component may be the oracle infrastructure.
Kinetiq says its customization of the L1Read precompile can provide PropAMMs with “a free oracle” featuring top of block freshness.
That could create a distinctive environment for market makers.
A PropAMM operating close to HyperCore can potentially hedge against Hyperliquid liquidity and pricing while accessing highly current market information.
This is more than simply adding another AMM.
It is an attempt to connect automated market making directly to Hyperliquid’s existing trading infrastructure.
Hyperliquid Becomes the Native Oracle
Another important Elysium innovation is its treatment of the L1Read precompile.
Kinetiq says Elysium will leverage and adapt L1Read so that Hyperliquid pricing and liquidity can become the native oracle infrastructure for the ecosystem.
The current HyperEVM implementation exposes BBO information.
Elysium intends to customize L1Read to expose additional information that traders and builders can use.
This could have significant implications.
An oracle is not merely a data feed.
It is infrastructure that determines what applications can safely and efficiently build around market information.
If Hyperliquid’s own market data becomes deeply integrated into Elysium’s execution environment, developers could construct applications around the same liquidity and pricing infrastructure that already powers Hyperliquid’s trading ecosystem.
That creates a much tighter relationship between the L2 and the underlying L1.
A Native Token Lifecycle
Perhaps the most compelling builder proposition is Elysium’s approach to token generation.
Kinetiq argues that launching tokens within the Hyperliquid ecosystem has historically been difficult, whether on HyperCore or HyperEVM.
Elysium is designed to change that.
A token could potentially move through an entire lifecycle:
Long tail AMM
↓
Elysium PropAMM
↓
HyperCore Spot
↓
HIP 3 Perpetuals
This is enabled by four characteristics Kinetiq highlights:
🔹Co location with HyperCore.
🔹A high performance EVM environment.
🔹Access to HIP 3 permissionless perpetual deployments.
🔹And deep connectivity between these components.
This creates something more significant than a token launchpad.
It creates a potential market lifecycle.
A new token can begin with liquidity discovery, progress into deeper market making, potentially reach a HyperCore spot orderbook and eventually access perpetual markets.
Kinetiq describes this composability as an “Elysium specific offering.”
If executed as designed, this could give builders a clearer path from token creation to mature financial markets without forcing them to stitch together completely separate ecosystems.
The Most Important Part: Sequencer Fees
This is where Elysium’s economic design becomes particularly interesting.
Kinetiq proposes the following distribution of sequencer fees:
25% → Builders
25% → Treasury
50% → KNTQ
The builder allocation is directed toward applications consuming Elysium blockspace and can be used for incentives, rebates and other growth mechanisms.
The treasury allocation goes toward Kinetiq’s operations.
The remaining 50% is used for programmatic purchases of KNTQ on the open market.
And Kinetiq makes the mechanism explicit:
“100% of the purchased KNTQ will be burned.”
The tokens are sent to the Hyperliquid Assistance Fund.
This creates a potential economic loop:
Elysium activity
↓
Sequencer fees
↓
25% Builders + 25% Treasury + 50% KNTQ
↓
KNTQ market purchases
↓
KNTQ permanently removed through the burn mechanism
This is the central reason the value accretive thesis is interesting.
Aligning Builders, Users and KNTQ
Traditional L2 economics can create a separation between the execution layer and the underlying network.
An L2 can attract users, capture fees and build its own economic moat.
Elysium is attempting to reverse that relationship.
The proposed model directs economic activity toward three destinations.
Builders receive incentives to create applications.
The treasury receives resources to maintain and grow the ecosystem.
And KNTQ holders receive the largest allocation through buybacks and burns.
Kinetiq summarizes the intended alignment clearly:
“Elysium’s success is Hyperliquid’s success.”
That is the core thesis.
The more valuable Elysium becomes as an execution environment, the more blockspace it should theoretically consume.
More blockspace generates more sequencer fees.
And 50% of those fees are designed to flow into KNTQ purchases and burns.
But there is an important analytical caveat.
The mechanism itself does not guarantee value creation.
The 50% allocation becomes economically meaningful only when Elysium generates meaningful sequencer revenue.
That means the real test begins after launch.
🔹Transaction volume.
🔹Active users.
🔹Spot trading volume.
🔹PropAMM activity.
🔹$HYPE gas consumption.
🔹Sequencer revenue.
🔹And actual KNTQ purchased and burned.
These will matter more than the headline percentages.
Why Elysium Is Different
The most interesting distinction is therefore not simply that Elysium is an L2.
🔹It is the relationship it is designed to have with Hyperliquid.
🔹Elysium uses $HYPE as gas.
🔹It is designed to be co located with HyperCore.
🔹It brings Hyperliquid market data directly into the execution environment.
🔹It targets the spot trading problem.
🔹It supports PropAMMs.
🔹It creates a potential lifecycle for new tokens.
And its sequencer economics are designed to return half of the generated fees toward KNTQ buybacks and burns.
This is why the phrase “value accretive L2” deserves attention.
The proposition is not that Elysium will automatically create value simply because it exists.
The proposition is that economic activity on Elysium is designed to reinforce the ecosystem around it rather than extract value away from it.
That is a much more interesting experiment.
The Real Question Is Adoption
Elysium’s manifesto presents a compelling technical and economic thesis.
But the thesis still has to survive contact with the market.
Can developers build on it?
Can traders find better execution and deeper liquidity?
Can #Elysium make Hyperliquid spot markets substantially more competitive?
Will PropAMMs generate meaningful volume?
Will the token lifecycle actually encourage more projects to launch and mature within Hyperliquid?
And ultimately, will the resulting sequencer revenue be large enough for KNTQ buybacks and burns to become a meaningful source of value capture?
Those are the questions I will be watching.
The most important thing about Elysium may therefore not be that it promises to make Hyperliquid faster.
It is that Kinetiq is attempting to design an execution layer where growth, infrastructure and token economics point in the same direction.
If the architecture delivers and the market adopts it, Elysium could become more than an L2.
It could become an additional economic engine for the Hyperliquid ecosystem.
And that is the experiment worth watching.
#Web3 #Hyperliquid #Kinetiq

Nigeria has become one of the clearest examples of growing real-world crypto demand. Chainalysis’ 2025 Global Crypto Adoption Index ranked Nigeria 6th globally overall and 3rd for DeFi value received.
For users in markets like this, blockchain infrastructure is not merely a technical discussion. Speed, transaction costs, liquidity and composability directly affect the experience.
That is the context in which Elysium caught my attention.
#Kinetiq is proposing a purpose-built Layer 2 designed around Hyperliquid, addressing what it describes as HyperEVM bottlenecks while maintaining close connectivity with HyperCore. Rather than building another isolated chain competing for liquidity, the thesis is to expand what can happen within the Hyperliquid ecosystem.
Kinetiq calls this a new era for Hyperliquid, and there are several reasons why.
Why Hyperliquid Needs Elysium
HyperEVM opened the door to general-purpose applications, but Kinetiq points to challenges including its dual-block architecture, limited throughput and high transaction costs. The manifesto notes that simple swaps have reached around $20 during periods of congestion.
That creates friction for builders and traders.
Elysium is designed to provide a higher-performance environment while remaining closely connected to HyperCore. If it delivers as proposed, developers can gain better infrastructure without abandoning the liquidity and markets that make Hyperliquid valuable.
This is where the #Hyperliquid and #Layer2 narratives begin to intersect.
Supercharging Spot Trading
Hyperliquid is best known for perpetuals, while its spot market has significant room for growth. Elysium aims to address this by creating an environment suited to high-performance spot applications and professional market makers.
Its customized L1Read precompile is particularly interesting. By exposing HyperCore information to applications on Elysium, builders can potentially use Hyperliquid pricing and liquidity as native infrastructure.
This could make PropAMMs more attractive while creating new opportunities across #defi .
HYPE as Gas
One practical decision is making $HYPE the gas token for Elysium.
Users would not need to acquire another asset simply to interact with the network. That reduces friction while strengthening the connection between Elysium and the broader Hyperliquid economy.
The bigger question, however, is adoption. HYPE as gas is useful only if Elysium provides the performance and applications that give users a reason to transact there.
A Connected Token Lifecycle
Elysium also proposes a more complete path for launching and growing tokens.
A project could potentially bootstrap liquidity through an AMM, develop deeper liquidity through PropAMMs, move toward a HyperCore spot order book, and eventually access HIP-3 permissionless perpetual deployments.
AMM → PropAMM → HyperCore Spot → HIP-3 Perps
The important part is not simply having these components. It is connecting them into one potential growth path.
The Sequencer Fee Model
The most compelling part of Elysium, in my view, is its proposed sequencer fee structure:
25% Builders | 25% Treasury | 50% KNTQ
The builder allocation can support incentives and rebates. The treasury receives 25% for operations, while 50% is directed toward programmatic KNTQ purchases. The purchased KNTQ is then burned through the Hyperliquid Assistance Fund.
That creates a proposed cycle:
Elysium activity → Sequencer fees → KNTQ purchases → KNTQ burned
This mechanism is why Kinetiq describes Elysium as value-accretive. Instead of an L2 simply extracting activity from its underlying ecosystem, part of the proposed economic value flows toward builders, Kinetiq and KNTQ.
Still, “hyper-deflationary” should not be treated as a guarantee of price appreciation. Burns matter only when supported by genuine demand and sustained network activity.
My Take
What makes Elysium interesting is its ecosystem-specific design. It is being built around HyperCore liquidity, HYPE, spot markets and HIP-3 perps rather than trying to create another disconnected DeFi destination.
The thesis is compelling, but execution will determine everything. Builders must come, traders must use it, liquidity must deepen and transaction activity must become substantial.
If those pieces align, Elysium could demonstrate that an L2 can expand an existing ecosystem while creating mechanisms designed to return economic value to its participants.
For me, that is the experiment worth watching as #Elysium moves toward launch, and why this development matters for #Web3 .
References:
Kinetiq (Website): https://kinetiq.xyz/Kinetiq (Documentation): kinetiq.xyz/docsChainalysis (The 2025 Global Crypto Adoption Index): https://www.chainalysis.com/blog/2025-global-crypto-adoption-index/Hyperliquid Docs (Interacting with HyperCore): https://hyperliquid.gitbook.io/hyperliquid-docs/for-developers/hyperevm/interacting-with-hypercore