Hyperliquid Proposes Treating $1B in HYPE as Burned — Here’s Why It Matters

Andrew Chen
Hyperliquid

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  • Hyper Foundation proposes classifying Assistance Fund HYPE as inaccessible
  • The move does not change supply, but clarifies governance treatment
  • Institutional interest is growing around Hyperliquid’s fee-driven model

The Hyper Foundation has introduced a proposal that could reshape how the market interprets HYPE’s supply. The initiative calls for a validator vote to formally recognize tokens held in Hyperliquid’s Assistance Fund system address as permanently inaccessible, effectively excluding them from circulating and total supply calculations.

The proposal does not change the protocol’s code or reduce the existing token count. Instead, it seeks a binding social consensus that these funds will never be accessed, even through future protocol upgrades.

How the Assistance Fund Works

The Assistance Fund is a built-in mechanism within Hyperliquid’s layer-1 execution environment. It automatically converts protocol trading fees into HYPE tokens and sends them to a designated system address. That address was intentionally created without private keys or control mechanisms, making the tokens unreachable without a network-level hard fork.

At present, the wallet holds roughly $1 billion worth of HYPE. According to the Hyper Foundation, the design was always meant to make these tokens non-spendable.

The validator vote is intended to formalize that understanding. By approving the proposal, validators would agree to treat the Assistance Fund balance as effectively burned for governance and supply-tracking purposes.

“Burned” in Accounting, Not in Code

While the proposal uses the term “burned,” it does not destroy tokens or alter issuance. Instead, it clarifies how fee-derived HYPE should be counted. The goal is to remove ambiguity around Hyperliquid’s effective supply, particularly as the protocol gains more institutional attention.

Native Markets, the issuer of the Hyperliquid-native stablecoin USDH, highlighted that half of USDH’s reserve yield flows into the Assistance Fund and is converted into HYPE. If the vote passes, those ongoing contributions would also be formally recognized as inaccessible, reinforcing the model.

Institutional Attention on Fee-Driven Tokenomics

Hyperliquid’s approach has drawn growing interest from financial firms analyzing protocol-native treasuries. In recent research, Cantor Fitzgerald described Hyperliquid as a system that returns nearly all of its fee revenue to tokenholders through automated HYPE repurchases.

Cantor estimates the protocol generated approximately $874 million in fees year-to-date in 2025, with about 99% routed through the Assistance Fund. While those flows have been associated with a shrinking effective supply, the foundation’s proposal makes clear that these balances were never intended to be recoverable.

Aligning Metrics With Design

Rather than introducing new scarcity, the vote aims to align supply metrics with how the protocol already operates. As Hyperliquid continues to rank among the top perpetual DEXs by volume and attracts dedicated digital asset treasury firms, clearer supply accounting may become increasingly important for investors evaluating HYPE’s long-term structure.

Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.

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