Author: Four Pillars
Compiled by: Blockchain Vernacular
Key Points
HIP-3 has removed the technical barriers to launching new perpetual contract markets, enabling a demand-driven market creation model. This has shifted decentralized trading platforms (DEX) from a PvP dynamic of competing with centralized exchanges (CEX) to a PvE-style expansion path extending into non-crypto assets and real-world data.
The market is shifting from narrative-driven growth to cash flow-driven, sustainability-oriented valuation systems. Only a few projects with real income flowing to Tokens (like Hyperliquid and Pump.fun) may dominate the next cycle.
Prediction markets transform previously private or illegal gambling activities into public on-chain data and serialized data of collective expectations. This creates real-time probability signals and alternative data that financial institutions, data providers, and AI models can use as an information aggregation and probability estimation economic mechanism.
Regulation has created a divided system: prediction markets are becoming institutionalized in the West while being suppressed in Asia. This poses a major short-term constraint but also paves the way for prediction markets to evolve into 'infrastructure that converts collective belief into information and markets.'
1. How to Activate a New Growth Pattern in PvE Style with HIP-3
The business model of trading platforms is undergoing a transformation.
Centralized exchanges (CEX) maintain their position due to structural advantages based on institutional trust (fiat entry and exit, custody, and regulatory access). This makes them a natural entry point for institutional capital, providing stability in liquidity and operational reliability. However, the same regulatory obligations, internal controls, and custody infrastructure also incur high fixed costs. As a result, CEX's speed of experimentation and decision-making is slower, limiting their pace of innovation.
In contrast, decentralized trading platforms (DEX) grow through incentive structures. They coordinate rewards among LPs, traders, and builders natively on-chain. However, launching a new trading platform or market previously required teams to build matching engines, margin and clearing systems, and oracles from scratch. This resulted in a very high barrier to technical entry.
HIP-3 has removed this barrier.
Hyperliquid now allows anyone staking 500,000 HYPE to deploy their own perpetual contract market using the same CLOB engine, margin logic, and clearing system as the main site. The technical burden of building a trading platform has disappeared. Market creation has become a standardized on-chain deployment process that requires capital and reliable oracles, rather than an entire engineering team. The threshold has shifted from technical capability to capital and oracle design.
This change is not just about increased efficiency; it also alters the locus of innovation.
Builders can now experiment with different liquidity structures, fee designs, oracle definitions, and leverage limits without rebuilding the backend. The challenge is to identify the 'demand surface' (i.e., how many people want to speculate on something) and anchor it to reliable oracles. In practice, markets can now consist of three components: market + oracle + demand.
This expands the range of tradable assets.
As described by Ventuals founder Alvin Hsia, the 'Fat Head' consists of asset classes covered by traditional finance (index products, forex, commodities); the 'Chunky Middle' includes equity raises, real-world datasets, and commodity indices; while the 'Long Tail' extends to niche signals such as local real estate prices, product premiums, or cultural trend indices. Traditional finance cannot easily commoditize these data points, but on-chain settlement systems can. HIP-3 effectively opens the door to a demand-driven market creation model.
Source: X (@alvinhsia)
This transforms DEX from competitors of CEX into structurally entirely different entities.
HIP-3 is no longer about competing for fixed crypto-native liquidity (PvP dynamics), but allows DEX to expand into non-crypto assets and real-world data. This brings new traffic, new users, and new forms of demand—a PvE dynamic where market scale continuously increases rather than being redistributed. It also deepens revenue at the protocol layer.
A clear example is Hyperliquid's XYZ100 market, which surpassed $1.3 billion in cumulative trading volume within three weeks of launch, demonstrating the rapid scaling of new asset classes once infrastructure is standardized.
In short, CEX continues to provide stability and regulatory access, but HIP-3 based perpetual DEX has gained advantages in speed, experimentation, and asset expansion. They are not substitutes but rather entirely different growth paths. The competitive advantage of trading platforms will shift from backend engineering to market design and user experience, with leadership depending on which protocol can translate this into sustainable value.
2. Shifting from Narrative-Driven Valuation to Cash Flow-Driven Valuation
The 2025 market is fundamentally different from previous cycles.
The once abundant liquidity environment that boosted all assets has vanished. Capital is now flowing selectively. Prices reflect actual performance rather than narratives, and projects that cannot generate income are being naturally squeezed out. Most altcoins have yet to recover their 2021 peaks, while protocols with clear revenue demonstrate relative strength even during market pullbacks.
The arrival of institutional capital solidifies this transformation.
Traditional financial (TradFi) frameworks are being directly applied to the crypto space. Revenue, net profit, fee generation, user activity, and profit distribution are becoming the primary metrics for project evaluation. The market is moving away from valuations based on 'storytelling' or expected growth. Only those projects with real income flowing back to Tokens can achieve higher market valuations.
In this context, Uniswap's recent proposal to activate the Fee Switch is symbolic. A flagship DeFi protocol clearly chooses to link cash flow with Token value, signaling that fundamentals (rather than narratives) are now at the core of market pricing.
A clear set of frontrunners has emerged.
Hyperliquid (HYPE) and Pump.fun (PUMP) are typical cases:
Hyperliquid is the largest perpetual DEX by trading volume, open interest (OI), and number of traders. By November 2025, the cumulative trading volume reached $3.1 trillion, with an open interest of $9 billion. Notably, Hyperliquid allocates 99% of perpetual contract fees to buy back HYPE, directly linking the protocol's cash flow to Token value. The total buyback amount has reached 34.4 million HYPE (approximately $1.3 billion), accounting for about 10% of the circulating supply.
Pump.fun is the leading meme coin trading platform, generating approximately $1.1 billion in cumulative fees. Its buyback program has purchased about 830,000 SOL (around $165 million), equivalent to 10.3% of its (estimated) circulating value.
Other projects are also showing strong revenue momentum:
Aave (AAVE) and Jupiter (JUP) continue to generate stable and growing cash flows. Aave's annual revenue is projected to grow from $29.75 million in 2023 to $99.39 million in 2025. Jupiter's revenue growth is even more remarkable, soaring from $1.42 million in 2023 to $246 million in 2025.
Coinbase (COIN), despite being a listed stock, also benefits from the increasingly clear token issuance path of the Base chain. Coinbase is broadening its revenue structure: Q3 2025 subscription and service revenue reached $746.7 million (quarterly growth of 13.9%).
This shift is spreading from individual dApps to L1 and L2 ecosystems. Relying solely on technical expertise or investor endorsement is no longer sufficient. Chains with real users, real trades, and protocol-level revenue are gaining stronger market recognition. Core evaluation metrics are shifting to the sustainability of economic activity.
In summary, the market is undergoing a structural transformation. The market in 2026 may be reorganized around these performance-backed participants.
3. Quantifying Market Expectations through Prediction Markets
Prediction markets are an experiment that transforms previously private or illegal gambling activities into publicly available on-chain data. The core is that they quantify the probabilities assigned to future events by allowing people to stake real money based on their beliefs. This makes them not only a venue for bets but also an economic mechanism for aggregating information and estimating probabilities.
The prediction market has seen rapid growth since 2024: by October 2025, the weekly nominal trading volume is around $2.5 billion, with weekly trades exceeding 8 million. Polymarket holds a 70-75% share of the activity, while Kalshi's share has climbed to about 20% after obtaining CFTC approval and expanding into sports and political markets.
The uniqueness of prediction market data lies in the fact that polls, social media sentiment, and institutional research tend to react slowly and are costly. Prediction markets price expectations in real-time. For instance, Polymarket reflected the increase in the probability of Donald Trump's 2024 victory significantly earlier than traditional polls.
In fact, prediction markets create serialized data of collective expectations. These curves can serve as real-time probability signals for political, economic, sports, and technological events. Financial institutions and AI models are increasingly viewing these markets as alternative data sources for quantifying expectations.
Source: Grayscale Research
From an institutional perspective, prediction markets represent not 'gamification of data,' but 'financialization of uncertainty.' Since prices reflect consensus probabilities, macro traders can use them to manage risks. Kalshi has already provided markets linked to inflation, employment data, and interest rate decisions, attracting significant hedging interest.
As prediction markets mature, they create a new value chain: Market (producing signals) → Oracles (resolving outcomes) → Data (standardized datasets) → Applications (Finance, Media, AI Consumption).
The current obstacle is primarily regulatory:
Asia: Regions such as South Korea, Singapore, and Thailand mostly hold a prohibitive stance, classifying it as illegal gambling and penalizing users.
West: The U.S. regulates prediction markets as 'event contracts' under CFTC oversight. Kalshi operates legally with DCM approval, while Polymarket plans to re-enter the U.S. market in 2025 through the acquisition of QCX.
This regulatory disparity creates a split: the West is moving toward institutionalization, while Asia is suppressing. While this is a short-term limitation, in the long run, prediction markets will evolve into infrastructure that transforms collective belief into information. They will shift from 'markets that interpret information' to 'markets that produce information,' reinforcing a world where 'prices become the primary expression of collective expectations.'
