What to expect from Kinetiq's upcoming Hyperliquid L2

Yesterday, Kinetiq, Hyperliquide’s Largest Liquid Staking Provider announced the Elyséethe next and very first Hyperliquide L2.

Elysium intends to revive two areas of Hyperliquidity: DeFi, which, according to Kinetiq, has been held back by the performance of HyperEVM, and spot markets, of which weekly share against Binance recently fell to its lowest level in 15 months.

These are real problems to solve.

HyperEVM uses a double block architecture: Small blocks (designed for transactions) arrive every second with a gas limit of 3 million, while larger blocks of 30 million gas (designed for compute-intensive activities like contract deployments) arrive approximately once per minute. This is an intentionally conservative design that Hyperliquid believes will improve over time, although this will come at the cost of current compromises. For example, amid the revival of the HyperEVM meme this weekend, the average gas would have rose from about 0.15 Gwei to 60 Gwei in two days: 400x.

Kinetiq sees these design choices as a limitation to the expansion of DeFi applications around HyperCore and believes a faster, more performant environment can change that.

The same opportunity extends to the spot. As Kinetiq co-founder Omnia explained in a recent interview with “When change happens“Hyperliquid has “categorically” won over the on-chain players, so it makes sense that its small team continues to prioritize HyperCore. Spot matters less today, but ultimately matters if Hyperliquid is actually going to host “all of finance.”

Kinetiq believes Elysium can help fill this gap. His argument goes beyond simply creating a place for faster exchange. Elysium will be designed around PropAMMs, AMMs managed by professional market makers who have become important sources of liquidity on Solana, while providing them with richer access to HyperCore market data. Combined with Kinetiq’s broader stack, the idea is to create a full lifecycle for new assets: launching a token on an Elysium AMM, moving it to PropAMM liquidity, establishing a HyperCore point book, then eventually adding a HIP-3 perp.

Beyond this vision, details remain limited. We know that Elysium:

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Use HYPE as gas
Be built on the OP stack
Install on HyperEVM and sit closely next to HyperCore
And that sequencer fees will be distributed in three ways: 50% to buy and burn KNTQ, 25% for builders and 25% for Kinetiq treasury.

We’re still waiting on technical specifications and launch partners, which is important given that Elysium is coming to an interesting point in Kinetiq’s evolution as it faces a contraction in its core business.

When I last wrote about the protocol in June, kHYPE’s supply had fallen by approximately 41.5 million to its peak in August 2025 at 14.6 M at the end of May. Today it sits around 13.9 million, another 5% decline and about 67% below the peak.

I attribute this largely to the broader awareness DeFi has had with AI and exploit the riskand the downstream effect this had on the utility of LSTs. If DeFi opportunities no longer justify adding smart contracts and no longer exploit the risk of using LSTs, their advantage disappears. Simply stake natively and accept the no-stake delay or don’t stake at all.

But long before the specter of AI loomed so large over DeFi, Kinetiq had expanded beyond liquid staking. It has been operating Markets.xyz, Kinetiq’s own HIP-3 deployer and trading front end, since the start of the year and recently launched Launch to enable teams to crowdsource HIP-3 deployments (although adoption remained low). While Markets.xyz markets have struggled, like everyone else, to break the Trade.xyz liquidity gap, the front end appears to have found a much stronger path forward. Omnia says several hundred users now sign up to Markets.xyz each day, with Kinetiq increasingly acting as a distribution layer (which it can do thanks to building codes) for Trade’s markets rather than trying to beat Trade head-on.

This may actually be Kinetiq’s most compelling position today: owning a significant share of the HIP-3 user relationship. Elysium could naturally partner with this distribution, giving Kinetiq more tokens, spot markets, DeFi applications, and HIP-3 products to offer to these users.

But the distribution only reaches Elysium so far. It still comes up against two of the same forces that shaped Kinetiq’s evolution in the first place.

Elysium can solve the performance constraints of HyperEVM, but it cannot solve the broader risk/reward problem of DeFi. What made kHYPE less compelling still weighs on the applications Elysium attracts.
The second is punctual. Here, Kinetiq has a more interesting answer because its existing front-end can provide some distribution and its broader stack can help bootstrap an asset from launch to spot and eventually perps. But PropAMMs still need market makers, hedges and, most importantly, order flow.

And that means competing for liquidity with ecosystems like Solana that have a rich meme economy, professional market makers and huge flow of existing orders. The Élysée can maybe offer better plumbing and Kinetiq can provide a few users, but convincing liquidity to form around an entirely new execution environment is a much more difficult problem than simply making that environment performant.

However, Elysium constitutes Kinetiq’s most ambitious action to date to increase its real estate in Hyperliquide. This is one of the first native teams in the ecosystem and has already helped catalyze expansion at various points in Hyperliquid’s lifecycle. So I expect something significant to come from this effort, regardless of what ultimately happens to the L2 itself.

At worst, Elysium could serve as a third-party technical testing ground whose best features could eventually inform a more capable HyperEVM. At best, this could solve the problems that Kinetiq correctly identified and bring Hyperliquid significantly closer to hosting all of finance. Which outcome seems most likely should become much clearer once we see the launch partners and, more importantly, how closely Hyperliquid itself embraces Elysium. Let’s see what happens.