HyperLiquid Faces Criticism Over Centralization Concerns
The layer-1 blockchain HyperLiquid has been at the center of controversy following a series of concerns raised by Kam Benbrik, an employee at ChorusOne. The issues stem from HyperLiquid’s use of closed-source code, which Benbrik claims "jails" node operators and undermines decentralization.
Decentralization Concerns
Benbrik initially published his findings on social media platforms, highlighting the potential risks associated with a lack of decentralization. According to Benbrik, if a single entity controls 1/3 of the stake in HyperLiquid’s network, they can halt the chain entirely. If this entity were to control 2/3 of the stake, they would have complete control over the network.
HyperLiquid uses a unique approach to staking, where 81% of the total staked HYPE is controlled by a single entity. This has raised concerns among observers, who fear that such concentration of power could lead to negative outcomes.
Foundation Delegation Program
In response to the criticism, HyperLiquid announced a Foundation Delegation Program aimed at supporting high-performing validators and enhancing decentralization within its network. However, some experts remain skeptical about the effectiveness of this initiative in addressing the underlying issues.
While the program may provide additional incentives for validators, it does not address the fundamental issue of closed-source code, which remains a significant concern among node operators and observers.
Closed-Source Code
HyperLiquid’s use of closed-source code has been cited as one of the primary concerns surrounding decentralization. Benbrik argues that this approach "jails" node operators by limiting their ability to modify or contribute to the codebase.
In response, HyperLiquid stated that open sourcing is important but acknowledged that the node code is currently closed source. The company added that projects typically open source once development has reached a stable state and emphasized that its code is secure enough for public release.
However, some experts have questioned this reasoning, pointing out that other blockchain projects have successfully implemented open-source code while maintaining security and stability.
Impact on HYPE Token
The controversy surrounding HyperLiquid’s centralization concerns has had a significant impact on the price of its native token, HYPE. After rising from $3.57 to $33.5 in the weeks following its launch, HYPE has since slumped to $21.49.
The 15.37% drop in value over the past 24 hours alone suggests that investors are increasingly concerned about the potential risks associated with HyperLiquid’s centralized architecture.
Conclusion
HyperLiquid faces a significant challenge as it navigates the controversy surrounding its centralization concerns. While the company has attempted to address these issues through its Foundation Delegation Program and promises of future open-sourcing, many experts remain skeptical about the effectiveness of these measures.
As the debate continues, one thing is clear: HyperLiquid’s reputation as a decentralized blockchain platform hangs in the balance. The implications of this controversy extend far beyond the company itself, raising questions about the long-term viability of layer-1 blockchains with centralized architectures.