In the context of a recent market-wide correction, the native token HYPE of the leading decentralized derivatives exchange (Perp DEX) Hyperliquid remains stable at a high position. The biggest catalyst behind this is its official launch of Hyperliquid Improvement Proposal 4 (HIP-4) at the beginning of February 2026. This proposal aims to introduce a brand new derivatives primitive called "Outcome Trading," marking Hyperliquid's official entry into the prediction market and the broader non-linear derivatives space. This article will delve into the technical principles of HIP-4, its far-reaching impact on the Hyperliquid ecosystem, its unique market positioning, and how it aims to reshape the future landscape of on-chain derivatives.

1. Deconstructing HIP-4: What is "Outcome Trading"?

"Outcome Trading" is the core of the HIP-4 proposal, introducing a brand new contract type—"Outcome Contracts." Compared to the perpetual contracts we are familiar with, "Outcome Contracts" are almost entirely the opposite in design philosophy, aimed at providing traders with a safer, purer tool for betting on the outcomes of future events.

In simple terms, perpetual contracts are complex leveraged tools used for price speculation, while "Outcome Contracts" are simple tools used for trading specific "yes/no" or results within a predefined range. For instance, users can trade on whether "Team A will win the match?" or "Will the BTC price surpass $100,000 by the end of March?" The fully collateralized and non-liquidating nature means users don't have to worry about additional losses due to market volatility, significantly lowering the participation threshold and risk.

2. Technical Principles: Why Custom Contracts for "Outcomes"?

Since Hyperliquid has already achieved a "permissionless" perpetual contract market through HIP-3, why not use it directly for trading predictive events? The answer lies in the fundamental logical "incompatibility" of the standard perpetual contract mechanism and the nature of prediction markets.

1. Price Mechanism Mismatch: Perpetual contracts rely on externally fed spot prices from oracles to calculate funding rates to peg their price. However, the results of prediction markets are often binary and instantaneous (e.g., election outcomes), where probabilities jump directly from one value to 0 or 1, without a continuous price curve to track. Therefore, the funding rate mechanism is useless in this scenario.
2. Security Limitations Become Barriers: To prevent market manipulation and severe fluctuations, Hyperliquid's perpetual contracts impose limits on single price movements (e.g., 1%). This safety design becomes a fatal flaw in prediction markets. When the outcome of an event is revealed and the price needs to jump from 50% to 100% instantly, this restriction could result in price adjustments taking almost an hour, creating a significant risk-free arbitrage opportunity for those who know the outcome in advance, severely undermining market fairness.

To address these issues, HIP-4's "Outcome Contracts" implement several key architectural innovations:

• Abandoning Continuous Oracles and Funding Rates: The contract price is entirely determined by the trades of buyers and sellers before settlement, freely floating within a predefined range (e.g., 0.001 to 0.999). Only at the end of the event will a single, authoritative "Resolution Oracle" issue the final result for a one-time settlement of the market.
• 1x Independent Margin: Contracts prohibit leverage and each market's margin is calculated independently. This greatly reduces user risk and strictly confines the potential risks of new products within a single market, preventing risks from spilling over into the user's other asset portfolios.
• Slot Reuse: Creating a HIP-4 market requires staking a large amount of HYPE tokens. Considering the one-time nature of prediction markets, HIP-4 developed a "slot reuse" mechanism. After a market event settles, the on-chain resources it occupied can be immediately released for deploying a new event market, greatly enhancing the efficiency of capital and platform resources.

3. Ecosystem Synergy: How HIP-4 Empowers the Hyperliquid Empire?

The launch of HIP-4 holds significance beyond merely adding a new feature. Its true power lies in its **"composability,"** which strongly empowers the Hyperliquid token economic model, forming its core advantage over standalone predictive market platforms like Polymarket.

1. Composability: From "Event Exchange" to "On-Chain Derivatives Empire"

"Outcome Contracts," like perpetual contracts, run natively on Hyperliquid's self-developed Layer 1 blockchain—HyperCore. This means that these two distinct derivatives can be composed within the same margin account, creating infinite strategic possibilities. For example:

A trader holds a long position in an ETH perpetual contract but worries about potential severe short-term market corrections. They can simultaneously buy an "Outcome Contract" stating "ETH price will drop below $4000 within a week" as a hedge. The system automatically recognizes that the overall risk exposure of the account has reduced, thus freeing up some margin and improving capital efficiency.

In this way, Hyperliquid transforms complex structured product strategies into an on-chain native, universally accessible "Lego block." This evolution means Hyperliquid is no longer just a Perp DEX, but is advancing toward a "on-chain derivatives super factory" capable of providing comprehensive, composable solutions.

2. The "Eternal Engine" Flywheel of $HYPE

The launch of HIP-4 adds a new, powerful engine to the already strong value capture flywheel of the $HYPE token:

• Volume-Driven Buyback: The Hyperliquid protocol allocates up to 97% of trading fee revenue for repurchasing and burning $HYPE tokens on the open market. HIP-4 introduces new trading scenarios that will greatly increase the platform's overall trading volume, directly boosting fee revenue and the amount of $HYPE being repurchased and burned.
• USDH Stablecoin Synergy: All contracts under HIP-4 will be priced and settled using Hyperliquid's upcoming native stablecoin USDH. This will significantly increase the use cases and demand for USDH. The returns generated by USDH's reserve assets (mainly US Treasury bonds) will again be used for buying back $HYPE, creating a second growth flywheel.

This dual-driven token economic model (More Products → More Trading Volume → More Fees → More Buybacks; More Products → More USDH Demand → More Reserve Income → More Buybacks) provides a solid fundamental support for the long-term value of $HYPE.

4. Market Landscape and Future Outlook

The launch of HIP-4 inevitably pits Hyperliquid against existing prediction market leader Polymarket. However, Hyperliquid has chosen a distinctly different development path.

• Elite Curation vs. Laissez-Faire: Polymarket employs a UGC (user-generated content) model, where anyone can inexpensively create markets encompassing a wide array of content, albeit with varying quality. In contrast, Hyperliquid adopts a high-threshold "builder" model, requiring a substantial stake of HYPE tokens to create markets. This ensures that market creators are serious, professional teams inclined to launch higher quality markets with financial attributes, capable of attracting significant liquidity.
• Protocol Value Capture vs. User Growth Priority: Polymarket takes a zero-fee Web2 growth approach, aiming to rapidly capture market share. Conversely, Hyperliquid has been committed since day one to building a crypto-native, sustainable economic cycle where market creators can share trading fees, making the HYPE token a "business operating license" with direct value support.

Moreover, one of the authors of the HIP-4 proposal comes from Kalshi, a centralized prediction market regulated by the CFTC in the United States. This "strong alliance" suggests that Hyperliquid aims not to disrupt, but to seek collaboration and differentiated coexistence. Kalshi can leverage Hyperliquid's technological foundation to reach global DeFi users, while Hyperliquid can gain valuable compliance experience and credibility.

Risks and Challenges

Despite the promising outlook, HIP-4 faces significant challenges:

1. Oracle Risks: The settlement of prediction markets is heavily reliant on the accuracy and resistance to manipulation of oracles. Hyperliquid requires an extremely robust "Resolution Oracle" solution to ensure market credibility.
2. Regulatory Uncertainty: Prediction markets, especially those involving sports and politics, face stringent regulatory scrutiny globally, and may be classified as illegal gambling.
3. Market Demand Ceiling: The total scale and activity of prediction markets largely depend on global hot events (such as US elections or the World Cup). The true, sustained demand in "quiet" years is still subject to market validation.

5. In-Depth Analysis: The Strategic Significance of HIP-4 for the Hyperliquid Ecosystem

The Transformation from a Single Product to an Ecosystem Platform

The development trajectory of Hyperliquid clearly reflects an evolution from a single perpetual contract exchange to a diverse derivatives ecosystem platform. HIP-3 introduced a permissionless market creation mechanism, while HIP-4 further expands the product dimension of the platform by introducing "Outcome Contracts," a brand-new derivatives primitive.

The deeper logic behind this evolution is that the essence of the derivatives market is pricing and hedging uncertainty. Perpetual contracts address the pricing issue of "continuous price movements," while "Outcome Contracts" tackle the pricing issue of "discrete events." Together, Hyperliquid is constructing a comprehensive platform capable of covering nearly all derivatives trading needs.

Revolutionary Improvements in User Experience

Compared to traditional prediction market platforms (like Polymarket), the user experience improvements brought by HIP-4 are revolutionary:

• No Liquidation Risk: Users no longer need to worry about being forcibly liquidated due to market fluctuations, which is a tremendous psychological advantage for risk-averse investors.
• Fully Collateralized Transparency: The user's maximum loss is known and predictable, which starkly contrasts with traditional leveraged trading.
• Convenience of Composite Trading: The ability to perform composite trading of perpetual and outcome contracts on the same platform and account significantly reduces the complexity of strategy execution.

Self-Reinforcing Token Economics

HIP-4 strengthens the value capture capability of the $HYPE token through the following mechanisms:

1. Economic Threshold for Market Creation: Creating HIP-4 markets requires staking 1 million HYPE tokens, directly increasing demand for HYPE.
2. Fee Sharing Mechanism: Market creators can share up to 50% of trading fees, incentivizing the creation of more high-quality markets.
3. Accelerated Token Burn: More trading volume means more fee income, and the Hyperliquid protocol allocates 97% of fees for repurchasing and burning HYPE, forming a self-reinforcing deflationary mechanism.

6. How to Participate in the Hyperliquid Ecosystem: AiCoin as Your Guide

As a leading platform in the Web3 data analysis field, AiCoin is committed to providing global users with the most professional trading guidance and data support for Hyperliquid. If you are interested in HIP-4 and the Hyperliquid ecosystem, we have prepared comprehensive support for you.

Quick Start Trading on Hyperliquid

Step 1: Use the AiCoin Exclusive Invitation Code

To thank AiCoin users for their trust, we have secured exclusive trading fee discounts for you. By registering with our invitation code, you can enjoy additional fee discounts:

Invitation Code: AiCOIN88

Registration Link:

https://app.hyperliquid.xyz/join/AICOIN88

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Step 2: Fund and Trade

Hyperliquid supports multiple funding methods, including direct deposits of USDC or cross-chain bridging. The platform's zero gas fee feature means you need not worry about network fees, allowing you to focus on executing trading strategies.

Exclusive Benefits on the AiCoin Platform

As an AiCoin user, you can enjoy the following exclusive benefits:

AiCoin's Content Ecosystem

To help you better understand and participate in the Hyperliquid ecosystem, AiCoin has prepared a series of in-depth content:

• "Hyperliquid Risk Management Guide": Detailed explanation of core concepts like leverage, liquidation, and margin, along with 5 major risk management strategies.
• "Complete Hyperliquid User Guide": Comprehensive guidance covering account setup, wallet connection, fund deposits, order types, trading execution, and more.
• "HIP-4 In-Depth Analysis Series": This article and other thematic writings to help you understand Hyperliquid’s latest developments.

All of this content is freely accessible on the AiCoin official website, with no subscription fees required.

Join the AiCoin Community

Connect with other Hyperliquid traders and data analysis enthusiasts to share trading experiences and market insights:

Official Telegram Community: t.me/aicoincn

AiCoin Chinese Twitter (X): https://x.com/AiCoinzh

Wealth Creation Group:

https://www.aicoin.com/link/chat?cid=10013

Conclusion

Hyperliquid’s entry into the predictive market through HIP-4 aims not simply to replicate Polymarket but rather to upgrade its platform from a single perpetual contract exchange to a one-stop, all-category on-chain derivatives infrastructure by introducing "Outcome Contracts," a completely new and composable derivatives primitive. This strategic move not only enriches its product matrix but also builds a robust value moat for its native token $HYPE through a powerful token economic model.

Despite facing multiple challenges such as oracles, regulatory issues, and market demand, Hyperliquid's clear vision, outstanding product iteration speed, and commitment to building open financial infrastructure make it one of the most noteworthy projects in the current crypto world. HIP-4 is a vital step in its grand blueprint, and the "Outcome Trading" era it opens may truly define the next generation of on-chain finance.

If you are ready to explore the opportunities that Hyperliquid and HIP-4 bring, AiCoin is prepared to offer you comprehensive support and guidance. Start your Hyperliquid journey now using the invitation code AICOIN88 and join tens of thousands of users engaging in data-driven trading on the AiCoin platform.

📖 Zero-Basis Entry! A Hyperliquid First Trade Tutorial with Detailed Graphics
https://www.aicoin.com/zh-Hans/article/510225
 

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