Hyperliquid is a proof-of-stake blockchain, which means users delegate HYPE to validators who run the network.

With proof-of-stake, you also have builders creating liquid staking tokens, aka LSTs. They act as a transferable and tradeable receipt for assets locked with validators.

The most popular liquid staking token in the world is stETH, aka staked ETH, for the Ethereum blockchain.

The goal for LSTs generally is to solve the “locked asset” issue, so as the name suggests, you stay liquid with a token usable in DeFi while still earning network rewards.

In the Hyperliquid ecosystem, LSTs have more use cases, so in this post, we’ll go through the major choices, their use cases, and the dangers of some special LSTs.

To be clear, there is always smart contract risk, so we won’t repeat this for each.

kHYPE by Kinetiq

Biggest LST on Hyperliquid with 78% market share.

Well integrated in all protocols, and it even has a direct KHYPE/USDH market on HyperCore.

Of course, these secondary markets come with some slippage compared to the regular unstaking period, which is what you’d expect the price to be for “instant unstaking”. Usually, it’s 7 days to unstake, and you have to claim the unstaked tokens.

KHYPE is yield-bearing, so the amount of KHYPE you have in your wallet stays constant but the trading ratio and the underlying HYPE it represents continues to grow. So, it’s more like wstETH than stETH.

It uses smart contracts with the CoreWriter to manage staking and unstaking, not an EOA (externally owned account).

Kinetiq is currently running season 2 of points, and kHYPE holders and users do qualify for it but the rewards are heavily weighted to Markets usage so the extra yield from points value isn’t high.

For full documentation on kHYPE, head over here.

stHYPE by Valantis

Used to be the dominant player until kHYPE launched, and now stands at ~15%.

Initially, it was developed by Thunderhead, and it was very much like the stETH but for HYPE, so the stHYPE name is quite fitting.

It has evolved, and it’s more specific to Hyperliquid now.

First of all, it is now using CoreWriter smart contracts rather than an EOA.

It is rebasing AND yield-bearing. So, your wallet can show both stHYPE and wstHYPE at the same time. When you use it in DeFi protocols, it will be wstHYPE but within your wallet, you can see stHYPE too.

We’re not huge fans of this dual architecture; it makes for worse accounting, and it makes a difference for tax purposes usually. 

We think yield-bearing is generally superior on all fronts. Small difference, but it does matter for us.

One positive is that you can select the validator to assign your stake to, which is an upgrade kHYPE is still pending.

And now the biggest difference is that stHYPE is HyENA’s stake for making USDE a permissionless quote asset and for deploying their HIP-3 DEX.

Upsides: Increased yield provided by Ethena.

Downsides:

It’s still widely usable in DeFi, and there is the first points program live from Valantis.

You have to judge if the extra yield is worth the extra risk.

Documentation for stHYPE here.

beHYPE by Hyperbeat

With ~1.7% market share, it’s the last one we’ll mention as a general LST. It also uses CoreWriter, it allows you to choose the validator of your choice, and it is yield-bearing.

It is also pretty well integrated in DeFi protocols.

Points program has finished from Hyperbeat, so there are no official extra incentives now.

Official docs here.

HIP-3 liquid staking tokens

Specific to Hyperliquid, there are two major LSTs that serve HIP-3 deployers that we will talk about.

They come with extra risks and extra rewards, specifically:

The biggest issue with these tokens, in our opinion, is that they often are actually illiquid staking tokens.

They are not well integrated in DeFi, they don’t have great secondary market liquidity, and even unstaking often comes with a higher risk of a liquidity crunch.

You have to carefully weigh the upsides vs the risks before allocating any capital to them.

vHYPE by Valantis

It has over 1M HYPE staked at the moment, live points program, but incentives are weighted to traders more than stakers now.

Lacking in DeFi integrations compared to the major LSTs.

Official vHYPE docs here.

kmHYPE by Kinetiq

Comes with a 888k cap, so no more than 888k can exist. It is Kinetiq’s stake for Markets’ HIP-3 deployment.

The extra rewards are kPoints (it was a major kPoints recipient until Markets went live), and 10% of the gross revenue from all Markets trading.

It also lacks in DeFi integrations compared to the majors but it does have an isolated pool on HyperLend where you can borrow WHYPE against kmHYPE, and decent liquidity instantly swap kmHYPE to other tokens.

Official kmHYPE docs here.

Vaults, yield, looping

Not exactly a “liquid staking token”, more a tokenized vault token, but the focus is still to have a liquid token that accrues yield from staking and other DeFi activities.

Quick rundown of the options:

There are some more options out there, but their TVL and usage are so low that we don’t think it’s worth mentioning at the moment.

Institutional LST

One final kind of LST, also by Kinetiq is iHYPE, aka institutional staked HYPE.

It comes with more features required by institutions to liquid stake their holdings, and it’s not open to everyone.

We don’t have a static approach to liquid staking, and we readjust our holdings depending on what we think delivers the best risk-adjusted rewards.

When HyperEVM launched, and stHYPE was the only option, we went with it and manually looped to increase our yield, given the extremely favorable borrow rate on HyperLend for HYPE.

This helped us get more HyperLend points, too.

Once kHYPE went live, we switched to it because at the time, stHYPE did not offer points, and it seemed to be set aside by Thunderhead, with no improvements to it.

But we quickly saw vkHYPE is the easiest way to get an outsized amount of kPoints and better yield, so for most of Kinetiq season 1, we stayed with vkHYPE, with one detour.

We allocated a percentage to vHYPE from Ventuals for one week… Initially, we thought it would stay a fixed part of our allocation, but we no longer believed the team has the quality to execute on its plans, after seeing how vHYPE was launched.

Once that was over, we decided to stay in vkHYPE because we didn’t see any other opportunities. 

It turned out to be a very good decision because season 2 for kPoints started right away even though it was not announced officially until later on.

Once Markets was announced and kmHYPE launched, we had a decision to make.

If we stayed in vkHYPE, we got some points and slightly above native yield, but with some extra swings.

With kmHYPE, we would get the native yield. So the comparison was about kPoints and the 10% of revenue Markets could generate.

We thought kmHYPE would come with a solid amount of kPoints given that Markets is an important revenue source for Kinetiq in the long-term, at least until Markets trading started.

So, we switched to kmHYPE, and that turned out to be the right decision.

The status right now: Trading on Markets generates the most kPoints, so holding kmHYPE is not that rewarding in terms of points. We did think about whether or not it makes sense to switch to something else, but there’s no clear big opportunity, at least in our opinion.

Valantis has a points program for stHYPE, so that’s an option. We don’t think vkHYPE or simple kHYPE are realistic options unless you plan to borrow against kHYPE.

We don’t plan to do that, so our LST of choice at this point in time is kmHYPE.

In the very long run, without points and incentives, we will probably allocate to a mix of kHYPE and certain HIP-3 LSTs, depending on their rewards.

What should you do if you just start off now? If it’s not trading at a high premium on secondary markets, kmHYPE is still a solid option (you cannot mint more). Should be fine for low amounts with good r/r considering kPoints value.

If you want to stay as liquid as possible and perhaps do some looping, kHYPE seems like the best option, and you can also do higher amounts.

Looking into the potential points value and extra yield for stHYPE is also not bad.