As the largest liquidity staking protocol on Hyperliquid, Kinetiq boasts a total value locked (TVL) exceeding $1 billion and has evolved into a key infrastructure layer within the ecosystem. Leveraging Hyperliquid's HIP-3 upgrade, Kinetiq is pioneering the "Exchange-as-a-Service" model through its Launch platform and flagship decentralized exchange (DEX) Markets, aiming to bring traditional asset classes on-chain. BlockBeats interviewed the Kinetiq team to gain insights into their roadmap. Discussions covered their transformation from a liquidity staking protocol to a comprehensive DeFi platform, the competitive landscape of HIP-3 exchanges, and their strategies for attracting institutional capital. We also explored the use of the newly launched $KNTQ token and how the protocol harmonizes incentives among developers, traders, and stakers. Full Interview: Founder Beliefs and Ecosystem Vision BlockBeats: Let's start from the beginning. In a tweet, you mentioned that your connection with Hyperliquid began in May 2023 after listening to a podcast by Jeff. What "foresight" or insights from that podcast inspired your belief? And what made you so confident in fully committing to the Hyperliquid ecosystem before it became mainstream consensus? Kinetiq: Yes, that podcast was called "Flirting with Models," and Jeff was one of the guests. It was this podcast that led us to Hyperliquid. The podcast was incredibly insightful, showcasing Jeff's exceptional talent, and the topic of Hyperliquid wasn't even mentioned until the latter half of the podcast. What attracted us most was that this perpetual DEX was built on its own blockchain. Over the past few years, we've gained a wealth of experience and a deep understanding of these protocols, and the fact that Hyperliquid is built on its own blockchain particularly piqued our interest. The rest is history. BlockBeats: Speaking of the broader ecosystem… Hyperliquid is facing increasing competition from emerging permanent decentralized exchanges (DEXs) like Lighter and Extended. As a core infrastructure builder, how do you view these challenges? What are Hyperliquid's core competitive advantages that ensure its long-term leadership? Kinetiq: We firmly believe that Hyperliquid's competitive advantage is sustainable, primarily based on the following factors: The network effect between Hyperliquid's market makers and order takers has been proven, with Hyperliquid achieving strong metrics across all timeframes, even after the genesis airdrop. While other permanent DEXs launched before the genesis airdrop briefly eroded Hyperliquid's market share, we noticed that Hyperliquid's market share quickly recovered to healthy growth once these competitors completed their genesis airdrops. We believe that the Hyperliquid core team's focus on optimizing core infrastructure and developing core products is the right strategy. This allows the core team to focus on ensuring Hyperliquid's technology scales far beyond its current size, while allowing other teams to build products on top of it, thus shifting the burden of business development from the core team to the community. Jeff, Iliens, and their team have demonstrated world-class execution and integrity, which we believe gives ecosystem participants—traders, creators, and builders—more confidence to participate long-term. No other ecosystem in the cryptocurrency space deserves our level of effort and commitment. Markets and the HIP-3 Ecosystem BlockBeats: Kinetiq recently announced the launch of "Markets," the first decentralized exchange (DEX) deployed through the Launch platform. Why is Kinetiq so focused on building its own HIP-3 DEX "reference implementation"? Is Markets intended to directly compete with other projects on Launch, or is it more of a showcase and guiding model for the ecosystem? Kinetiq: Kinetiq has always viewed HIP-3 as a key upgrade to Hyperliquid, transforming HyperCore from a product into a platform. HyperCore has demonstrated unprecedented commercial potential, and the addition of HIP-3 further unlocks its productization potential. Therefore, Kinetiq has been aiming to leverage HIP-3 to expand our core business beyond liquidity staking, thereby establishing a unique position in the global liquidity staking and even exchange landscape. This encompasses both Launch and Markets, both benefiting from the distribution capabilities Kinetiq has built for kHYPE. We do not believe Markets will directly compete with other HIP-3 products. In our view, the strength of most decentralized exchanges (DEXs) lies in their unique asset selection or unique collateral selection. Markets aims to be a general-purpose HIP-3 DEX covering traditional asset classes. We plan to differentiate ourselves through: • Asset Selection: We will incorporate the most sought-after assets into perpetual contracts.And it places great emphasis on the details of oracle construction. • Top-notch liquidity. • Top-notch user interface/user experience and user onboarding. • Cost competitiveness: Use USDH as collateral and enjoy Aligned Quote Asset discounts. BlockBeats: One of the main challenges facing the HIP-3 model is the risk of liquidity dispersion. With more and more exchanges launching the same stock perpetual contracts, how does Kinetiq plan to address this? Will its Launch platform provide direct support to participating exchanges, such as sharing liquidity solutions or market maker resources? Kinetiq: First, we maintain a pool of potential listed stock tickers, and the key metric we track is potential trading volume. We strive to ensure that every ticker listed on Markets has strong trading demand, which will naturally incentivize market makers to operate on Markets. Second, a certain degree of liquidity dispersion is unavoidable. Whenever we list a ticker, we are always committed to becoming the authoritative ticker for trading in all HIP-3 products tracking the same underlying asset. To alleviate liquidity constraints, we have established strong partnerships with market makers who have indicated their intention to provide ample liquidity in the market. Equity Perpetual Contracts and Institutional Capital BlockBeats: Your analysis of 24/7 trading in equity perpetual contracts shows that 30-55% of trading volume occurs outside of traditional trading hours. This is strong validation. Beyond cryptocurrency-native traders, do you think this is sufficient to attract significant interest and funding from Trading Finance (TradFi) participants? What are the key hurdles that need to be overcome? Kinetiq: We believe that perpetual contracts are a better leverage tool compared to options because they are a product with a delta of 1, and returns are based on price, without considering technical factors such as volatility and time decay (as is the case with options). This will be a key advantage in winning over retail investors in the future. We also believe that institutional investors have shown early interest in RWA perpetual contracts because they see the blockchain as a more efficient distribution channel for RWA assets (including spot and perpetual contracts). Key factors they focus on are often liquidity depth and oracle building. The latter is crucial because if oracles are poorly constructed and not backtested, multiple arbitrage/exploitation opportunities can arise. Therefore, oracle construction is a key workflow for Markets' launch. The main hurdle for both retail and institutional investors is the fear and lack of knowledge about the on-chain environment. Therefore, Markets will deploy a user experience that simplifies on-chain workflows as much as possible to make it user-friendly for Trading Finance (TradFi) users. BlockBeats: You've partnered with Hyperion DeFi to launch iHYPE, a permissioned platform with KYC/KYB compliant liquidity pools. Why is having a dedicated institutional gateway so important for decentralized protocols like Kinetiq? Do you envision iHYPE becoming the primary bridge for TradFi funds flowing into the Hyperliquid ecosystem? Kinetiq: Hyperliquid has achieved tremendous success in a short period, not only in terms of token price but also in its fundamental performance and yield. Its unique positioning lies in the fact that TradFi can easily evaluate it from a fundamental perspective. Therefore, Kinetiq's argument is that HYPE's DAT and ETF have greater potential compared to other projects. These DAT and ETFs ultimately need a compliant staking solution to generate more returns for shareholders. We believe iHYPE is the ideal choice. BlockBeats: You also partner with Native Markets to support $USDH. Why is a native stablecoin crucial to the success of the HyperCore perpetual coin market? How does the Kinetiq ecosystem plan to support and accelerate the adoption of USDH? Kinetiq: Kinetiq chose USDH as collateral for Markets and it is also the primary pricing asset for KNTQ (our governance token). We also built workflows to streamline the complex process of exchanging USDC for USDH on Markets, enabling users to seamlessly access Markets and use USDH. Ecosystem Sustainability BlockBeats: The Launch model relies on crowdfunding $500,000 in HYPE bonds, which introduces yield-seeking "hired capital." How do you ensure that the incentives for these crowdfunding participants are aligned with the builders' long-term growth vision? What mechanisms prevent capital outflow after the initial mining period ends? Kinetiq: Launch is designed to achieve a win-win situation for both deployers and stakers. Projects will be able to guarantee that at least 500,000 HYPE tokens will be staked within the period set at the start of the fundraising. After the initial period ends, the remaining tokens will continue to be staked. They can seek to renew their stake in the community, or even replace part of their community stake with their own. This is a flexible solution that allows them to gain community recognition and quasi-ownership early in their projects while overcoming any stake acquisition issues. We also encourage projects to reach a consensus with stakers to adopt a combination of tokens and revenue sharing. Again, Markets goes live before any Launch project, validating the effectiveness of the Launch model and demonstrating some market standards for revenue sharing.BlockBeats: Markets allocates 10% of its deployer rewards to kmHYPE holders, with the remaining 90% allocated to growth. What is the long-term vision behind this ratio? As the ecosystem matures, will we see KNTQ stakers (sKNTQ holders) begin receiving a direct fee share from all exchanges deployed through Launch? Kinetiq: KNTQ is at the heart of the Kinetiq protocol and is prioritized across all Kinetiq business lines; therefore, the value of all Kinetiq business lines flows to KNTQ holders through sKNTQ. We recently announced how sKNTQ will accumulate value across all aspects of the Kinetiq protocol: through programmatic buybacks of KNTQ from all revenue streams and by using 100% of KNTQ trading fees in HyperCore for trading. BlockBeats: Besides deploying exchanges, what other innovations do you anticipate developing on the Launch platform? Could we see it used to create new financial products, structured products, or even non-financial applications leveraging the HIP-3 framework? Kinetiq: Launch's vision is to be a permissionless LST infrastructure that supports HIP-3 for deployers looking to launch decentralized exchanges (DEXs). You can think of Launch as a combination of Shopify and Kickstarter; it's an off-the-shelf platform that allows the creation of permissionless LSTs with the option to enable HIP-3, giving protocols complete control over their distribution without having to build a separate staking protocol or LST from scratch. and leverage Kinetiq's security expertise, making it ridiculously capital efficient compared to any possible alternatives. Financial/structured products would most likely be built with kHYPE as it has a strong existing distribution with stakers and ample integrations within the Hyperliquid ecosystem. BlockBeats: BlockBeats has a large and passionate audience in the Chinese-speaking world. Many of them are deeply invested in the Hyperliquid ecosystem. What is your message to the builders, traders, and HYPE holders in this community? Are there any plans to engage more directly with the Chinese market? Kinetiq: First, we would like to thank all the friends who support Hyperliquid and Kinetiq. Kinetiq is not just an LST project; we are a group of builders specifically developing high-quality products tailored to Hyperliquid's needs. We place great emphasis on user experience, and feedback can be submitted on our Discord. We also welcome other Hyperliquid builders to contact us.