The Hyperliquid Testnet debate: A neutral take
As a validator who did not participate in the Hyperliquid testnet, we’ve been following the recent debate with great interest. The discussions raise some keys points about testnet best practices and approaches to validator selection.
Here’s our thoughts about what worked and what could be improved.
To set the scene
Hyperliquid represents an interesting case study in protocol launch dynamics. They’ve built a successful product with over $350M in their HLP (Hyperliquid Liquidity Pool)
Hyperliquid, an highly-performant L1 with a spot & perps DEX as its flagship product, initially prioritised its product and shipping fast over decentralization.
After the HYPE token TGE, an event that rewarded Hyperliquid’s users heavily, the team has shifted its focus to decentralization and expanding its valset.
The testnet program to select these validators took a new approach to validator selection which, along with problems encountered by validators, sparked the debate.
Key Points of Contention
1. Selection process
- Unclear criteria for the selection of some of the validators
- Performance-based criteria in a challenging and unclear environment
2. Technical challenges
- Closed source code
- Limited documentation
- Centralized API dependencies
- Geographic constraints (Tokyo location requirement)
3. Tokenomics
- Emergence of a black market for testnet HYPE
What Worked
- Merit-Based opportunities: Hyperliquid testnet allowed newer, competent validators to prove themselves by outperforming rather than reputation alone.
- Stress testing: The challenging conditions helped identify capable operators.
- Community engagement: The process encouraged direct user participation in the selection process by airdropping HYPE tokens on testnet ( which are needed by validators) as well as mainet.
What Could Be Improved
- Documentation and Communication:
- Clear geographic requirements, if any, from the start
- More detailed documentation
2. Technical Infrastructure:
- Reduce dependence on centralized APIs
3. Fairness:
- Take further action to prevent a testnet tokens black market. And while this is difficult to achieve, making testnet HYPE airdrop non-transferable could have reduced the effects.
Conclusion
The Hyperliquid debate highlights a great learning opportunity when addressing decentralization for future chains.
It is our opinion that, while track record and reputation-based systems have served the industry well, there’s a good case to be made for exploring new approaches that prioritise performance and have direct engagement with the chain’s community.
Regardless of which approach a team chooses, engaging with concerned parties, listening to their feedbacks and working closely together should always be the priority.
