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

Some infrastructure opens a new road.
Other infrastructure builds a better junction where the traffic is already flowing.
#Kinetiq ’s new #Layer2 network, #Elysium , makes me think of the second model.
At first glance, Elysium arrives with familiar promises: higher performance, greater throughput, and lower transaction costs.
None of that is especially surprising anymore. Somewhere in almost every new chain brochure, you will find the words “faster” and “cheaper.” 🙂
What makes Elysium more interesting is not simply the speed.
It is where that speed connects.
Rather than becoming an isolated island that pulls activity away from #Hyperliquid , Elysium is designed as an execution layer that works closely with HyperCore and aims to expand activity across the ecosystem.
And part of that activity is connected directly to the $KNTQ value capture mechanism.
That is where the story becomes much more interesting.
Why HyperEVM Feels Too Narrow Today
Hyperliquid has built an extremely strong trading infrastructure on the perpetuals side.
HyperEVM, however, has struggled to offer the same level of performance as a general purpose application layer.
Kinetiq’s manifesto highlights three problems: the complexity created by the dual block architecture, limited performance and throughput, and periods of congestion where a simple swap has cost as much as $20.
This is not merely a UX problem.
In a trading ecosystem, execution speed and cost also determine which applications are economically viable in the first place.
It is a little like putting a Ferrari engine into city traffic and then wondering why it cannot accelerate.
HyperCore may have a fast trading engine, but if the surrounding application layer cannot keep pace, the whole system cannot fully benefit from that speed.
Elysium is targeting precisely this bottleneck.
Kinetiq says the network is designed to deliver performance several orders of magnitude beyond HyperEVM at launch, with HyperCore block time parity as a longer term goal.
The full technical specifications are still to come, so declaring victory now would be premature.
But the target is clear:
A high performance execution environment built around trading.
The Gas Stays the Same
Elysium will use $HYPE as gas.
That sounds like a small implementation detail, but economically it matters.
Users do not need another gas asset.
Builders do not need to design around another token economy.
And transaction activity on Elysium remains tied to the existing Hyperliquid ecosystem.
In other words, a new shop is opening, but the currency stays in the same neighborhood.
This matters because one of the long running debates across #Web3 is whether Layer 2 networks add value to their underlying ecosystems or simply move economic activity away from them.
Elysium is trying to answer that question differently.
Perps Are Strong but Spot Is Still Hungry
When people think of Hyperliquid, perpetual trading usually comes first.
Spot has not reached the same level.
Kinetiq points to weaker recent spot activity and declining usage of HIP 2, Hyperliquid’s native orderbook bootstrapping mechanism.
Elysium aims to help close that gap.
The important part is not simply faster swaps.
Kinetiq specifically highlights PropAMMs, which require more active market making, frequent price updates, and sophisticated hedging.
All of these depend heavily on performance, data quality, and proximity to liquidity.
That is why Elysium’s close relationship with HyperCore may matter.
For a market maker, reducing the distance between where you quote and where you hedge can be a real economic advantage.
Hyperliquid Can Become a Native Market Data Layer
Another important piece is L1Read.
HyperEVM can already access limited HyperCore data through this precompile.
Elysium aims to extend that access and expose more HyperCore market data to builders and traders.
That means applications on Elysium could use Hyperliquid’s own market directly as a source of market data.
Kinetiq describes this as a native oracle approach.
For systems such as PropAMMs, the price itself is not the only thing that matters.
How fresh that price is matters too.
Trying to run fast market making with stale data is a little like choosing today’s umbrella using yesterday’s weather report.
Not Just a Launch but a Full Token Lifecycle
Creating a token is easy.
Turning it into a sustainable market is not.
Elysium proposes a longer path:
AMM → PropAMM → HyperCore Spot → HIP 3 Perps
A token can begin with long tail AMM liquidity, move toward deeper PropAMM liquidity, gain access to a HyperCore spot orderbook, and potentially expand into perpetuals through HIP 3.
Many launchpads open the door and effectively say, “the rest is yours.”
Elysium is trying to build the roads that come after the door.
That is what makes this more interesting than another token launch environment.
If successful, it could help keep liquidity and trading activity inside the same ecosystem as a token matures.
Where the Value Accretive L2 Claim Comes From
Kinetiq describes Elysium as:
“The first and only value accretive L2 in history.”
I prefer to treat absolute claims like that cautiously.
But the mechanism behind the slogan is worth examining.
Elysium sequencer fee revenue is planned to be distributed as follows:
25% Builders
25% Kinetiq Treasury
50% KNTQ open market purchases
All tokens purchased through that mechanism will be burned.
The economic path is simple:
More usage → more sequencer fees → more KNTQ purchases → more burn
At the same time, builders receive part of the economics generated by the blockspace they consume.
That matters because the model is not trying to reward only token holders or only builders.
It attempts to put builders, the treasury, and token holders inside the same economic loop.
A 50% Burn Is Not a Magic Wand
The 50% allocation is eye catching.
But percentages alone do not create value.
50% × low usage is still a small burn.
So the real question is not the percentage.
It is whether Elysium can create real blockspace demand.
Will builders come?
Will PropAMMs generate meaningful volume?
Will new tokens actually use this lifecycle?
Will traders choose Elysium?
If the answer becomes yes over time, the sequencer fee model could become a powerful value capture engine.
If not, a beautiful tokenomics diagram remains exactly that.
A beautiful tokenomics diagram.
Excel cells do not create economies by themselves. 🙂
The Question I Will Be Watching
When I previously looked at Kinetiq, my main question was how strongly the protocol’s economic activity could translate into value for KNTQ.
Elysium introduces a much more direct path.
Execution activity generates sequencer revenue, and half of that revenue is directed toward buyback and burn.
That is why Elysium’s most important innovation may not be faster blocks.
It may be the attempt to embed network usage into token value capture at the architectural level.
Elysium is still approaching launch, and the full technical specifications have not yet been published.
So today we have a strong design thesis, not long term performance evidence.
If real user demand, builder activity, PropAMM volume, and sequencer revenue materialize, Elysium could become more than a faster alternative to HyperEVM.
It could become a new economic layer connecting trading, token creation, and #DeFi activity inside Hyperliquid.
And that is where the real test of a value accretive L2 begins:
Not with how much activity it pulls toward itself, but with how much value that activity can return to the ecosystem it was built on.

Hyperliquid has built a serious trading ecosystem around $HYPE , HyperCore and its growing DeFi stack.
But scaling the EVM side for high-frequency activity creates a different problem.
HyperEVM is deliberately constrained so it can compose with HyperCore. Elysium is designed by #Kinetiq to provide a separate, high-performance EVM environment while staying tightly connected to the Hyperliquid ecosystem.
Elysium is currently pre-launch, but its proposed architecture is worth studying.
The chain uses $HYPE as native gas, meaning users do not need to acquire another token just to transact.
HYPE bridges in and out 1:1, keeping the economic experience tied to Hyperliquid.
The execution target is also significantly higher than the constrained HyperEVM environment, with a stated 300 Mgas/s target and 100 to 200 ms canonical blocks.
That matters for applications that need frequent execution, especially trading systems and professional market makers.
But the bigger story is composability.
Elysium is designed to connect application-level activity with HyperCore.
A token can move through a lifecycle from an AMM to a PropAMM, then into HyperCore Spot and eventually toward HIP-3 perpetual markets.
That gives builders a much clearer path from launching an asset to accessing deeper native Hyperliquid markets.
Then there is the fee model.
The proposed sequencer revenue split is:
25% Builders
25% Treasury
50% KNTQ buy and burn
This is where Elysium becomes more than an execution layer.
The model attempts to align the people building applications, the treasury supporting the ecosystem and KNTQ holders around the same source of activity.
More usage creates more sequencer fees.
A portion goes back to builders.
A portion supports the treasury.
And half is directed toward KNTQ buybacks and burns.
Kinetiq's documentation already describes KNTQ as the governance token through which protocol value accrues, alongside existing buyback and burn mechanisms.
I would not blindly call this a guaranteed "hyper-deflationary powerhouse."
That depends on actual adoption, fee revenue and future token economics.
But the mechanism is interesting because it gives KNTQ a defined connection to Elysium's economic activity.
For me, that is the real thesis.
Elysium is not trying to be another generic L2.
It is trying to become an execution layer specifically designed around the needs of the Hyperliquid ecosystem.
Faster execution.
HYPE-native gas.
HyperCore composability.
Better infrastructure for builders and traders.
And a fee model designed to send part of the value back toward KNTQ.
If that architecture works in production, Elysium could become an important piece of the next phase of Hyperliquid DeFi.
#Web3 #Hyperliquid #Elysium

Layer 2s are usually sold as scaling solutions. But scaling alone does not answer the more important question: where does the economic value created by that additional activity ultimately go?
That is what makes Kinetiq’s Elysium worth examining beyond the usual L2 narrative.
#Kinetiq describes Elysium as a Hyperliquid-aligned Layer 2 designed to address a specific problem: HyperEVM is useful for composability with HyperCore, but its deliberately constrained execution environment is not designed for sustained, high-frequency workloads. Kinetiq’s documentation puts the current target at 300 Mgas/s and 100–200 ms blocks for Elysium, compared with HyperEVM’s smaller execution blocks.
The interesting part is not simply making Hyperliquid faster. It is making additional activity economically useful to the ecosystem around it.
Why Hyperliquid Needs Another Execution Layer
Hyperliquid’s architecture creates an unusual opportunity. HyperCore already provides native trading infrastructure, but pushing intensive EVM activity directly into HyperEVM can run into throughput and execution constraints.
Elysium therefore takes a different approach: rather than replacing HyperCore, it sits alongside it.
Its architecture is an Arbitrum Orbit/Nitro-based L2 that settles to HyperEVM while remaining co-located with HyperCore. That distinction matters because Elysium is being designed around DeFi workloads that need speed without abandoning Hyperliquid-native liquidity and settlement.
HYPE Becomes the Gas Layer
One of Elysium’s simplest but most important decisions is using HYPE as its native gas token.
There is no requirement for users to acquire another ecosystem token simply to transact. $HYPE bridges into Elysium 1:1 as native gas and can withdraw 1:1.
That creates a cleaner economic relationship between the L2 and its underlying ecosystem.
Instead of creating an isolated gas economy, Elysium keeps HYPE at the center.
Built Around Trading, Not Just Transactions
Elysium’s bigger opportunity may be its focus on spot markets and PropAMMs.
High-frequency market makers need rapid execution, inexpensive transactions and reliable market data. Elysium targets those requirements while providing access to HyperCore information through its planned read layer.
The technical roadmap goes further: contracts will be able to access HyperCore order-book data, prices, balances and positions through a native precompile, while a separate writer mechanism is designed to let applications drive HyperCore trading actions.
That could make sophisticated market-making strategies considerably easier to build.
A Token Can Have a Lifecycle
Another interesting component is the proposed token lifecycle:
AMM → PropAMM → HyperCore Spot → HIP-3 Perps
The significance is not that every project automatically progresses through these stages. Rather, Elysium provides a connected pathway for projects to bootstrap liquidity, develop markets and potentially progress toward deeper #Hyperliquid -native markets.
Kinetiq’s documentation already describes permissionless token bridging and mechanisms allowing Elysium-native assets to move toward HyperCore spot markets.
The Economic Experiment: 25 / 25 / 50
This is where Elysium becomes particularly different from the conventional L2 model.
The proposed sequencer-fee allocation is:
25% → Builders25% → Treasury50% → KNTQ buybacks and burns
The first 25% rewards the applications generating activity. The second gives the ecosystem resources for continued development. The final 50% creates a direct link between Elysium usage and KNTQ supply reduction.
That produces an interesting feedback loop:
More useful applications → more transactions → more sequencer fees → more KNTQ purchased → more KNTQ removed from circulation.
Kinetiq’s existing documentation already identifies KNTQ as the protocol’s central value-accrual instrument and lists multiple buyback mechanisms.
My Take: The Mechanism Is Stronger Than the Hype
I think the most interesting aspect of Elysium is not the word “L2.” It is the alignment.
Traditional L2 economics can create situations where activity migrates away from an L1 while value capture remains concentrated at the execution layer. Elysium is attempting the opposite: use Hyperliquid’s native HYPE, leverage HyperCore infrastructure, create incentives for builders, and route half of sequencer revenue toward KNTQ buybacks and burns.
But there is an important reality check.
Deflationary mechanics do not automatically create economic value.
The burn becomes meaningful only if Elysium attracts sustained users, applications, trading volume and fee-generating activity. Likewise, ambitious throughput targets must ultimately survive real-world demand and production conditions. Kinetiq itself currently describes Elysium as pre-launch and notes that specifications may still change.
That is why I see #Elysium less as a finished victory and more as a fascinating economic and technical experiment.
If execution matches the thesis, Elysium could demonstrate that an L2 does not have to be an extraction layer sitting beside its parent chain.
It can be an amplifier.
And that may ultimately be the most important idea behind Elysium.