An Analysis of Kinetiq Protocol
Powering Liquid Staking and the Exchange-as-a-Service Model
Overview Thesis
I. Early Traction and Institutional Positioning in Liquid Staking
Kinetiq has emerged as the dominant liquid staking layer for the Hyperliquid ecosystem, rapidly capturing $880 million in TVL and over 8,200 unique holders in the span of several weeks. Kinetiq’s early growth and ecosystem dominance resembles that of similar liquid staking protocols in other major ecosystems like Lido (Ethereum) and Jito (Solana), positioning Kinetiq as an early leader in a historically winner-take-most market. With the release of iHYPE, Kinetiq also unveils the first native institutionally-focused liquid staking solution on Hyperliquid, designed specifically to meet the rapidly-growing institutional interest in HYPE.
II. Kinetiq Launch Platform: Pioneering the Exchange-as-a-Service (EaaS) Model
Kinetiq’s newest Launch product offers crowdfunding solutions for developers looking to build custom perpetuals exchanges via Hyperliquid’s HIP-3 deployment system. This dramatically lowers the barriers to entry for builders looking to launch perps exchanges, offers diversified yield opportunities to LPs, and suggests meaningful revenue capture by Kinetiq downstream of successful exchange creation.
III. Perpetuals Thesis and New Market Revenue Potential
Perps have emerged as one of the most powerful crypto primitives, offering a uniquely flexible substrate for financial experimentation, speculation, and synthetic asset creation. With the rollout of builder-deployed perps via Hyperliquid’s HIP-3 and now Kinetiq’s Launch platform, the EaaS model is becoming a powerful unlock as the technical challenges of creating new markets falls to near zero. Kinetiq’s early and dominant position in this niche positions it to capture meaningful downstream revenue as an increasing array of long-tail perp markets are created. As the design space for permissionless markets opens up, Kinetiq stands to benefit from the trading volume and fee flows that follow.
IV. Deferred Monetization for Early Protocol Growth
Kinetiq currently generates minimal fee revenue in an effort to prioritize early protocol adoption, charging only a 0.1% unstaking fee on withdrawals from its native dApp. As the protocol matures, it’s well positioned to activate multiple revenue streams from both its liquid staking and EaaS segments. With early dominance in both niches on Hyperliquid, Kinetiq is structurally positioned to accrue meaningful protocol revenue as usage scales and the long-tail of perps markets expands.
Protocol Overview
Kinetiq is a non-custodial liquid staking protocol built on Hyperliquid. It allows users to stake their HYPE tokens and receive kHYPE, a liquid staking derivative that accrues staking yield while simultaneously remaining composable across DeFi on HyperEVM. The protocol abstracts validator selection and staking complexity for users, unlocking passive 2.2% APY while opening the door for additional yield opportunities in other DeFi applications. While not currently operating with any active fee switches beyond unstaking fees, Kinetiq’s design clearly builds multiple hooks for eventual monetization should it adopt similar revenue models to those employed by other liquid staking protocols.
At the core of Kinetiq’s infrastructure is StakeHub, a dynamic validator selection system that continuously reallocates a user’s HYPE across the highest-performing validators based on uptime, rewards, longevity, and decentralization metrics. Rather than requiring users to choose or manage HyperEVM validators, the protocol handles delegation programmatically through its merit-based points system. In doing so, it allows for continuous optimization of validator distribution and helps enhance the resilience and decentralization of the Hyperliquid network itself.
Kinetiq also launched with an Earn module, a native vault product that allows kHYPE holders to generate additional returns by deploying their tokens into automated DeFi strategies (receiving the vkHYPE token). These strategies are developed and curated by Seven Seas Capital, a risk manager affiliated with Veda Labs that currently manages over $4.2 billion in TVL. The module levies a 2% annual platform fee on the vault, but the entirety of this presumably flows back to Veda and Seven Seas Capital as the vault curators, and it remains unclear if Kinetiq retains any portion of this platform fee for its own treasury. Yield from these strategies is delivered without forfeiting liquidity and accrues from liquidity provisioning on Curve and leveraged lending on protocols like Hyperlend and Felix. Users who deposit into the Earn vault also accrue kPoints, creating an internal incentive system ahead of the presumed Kinetiq token launch.
Despite early momentum, Kinetiq will need to show healthy capital retention post incentives. The protocol’s monetization also remains in an early stage, with most available fee switches inactive and little revenue currently accruing to the protocol as a result. Sustained success will depend on Kinetiq’s ability to capture meaningful revenue from its core business segments, as well as its ability to attract a number of high-quality exchange deployers capable of generating meaningful trading volume.
Liquid Staking Analysis
The liquid staking market for each major ecosystem has generally proved to be a winner-take-most market. This is reflected across different networks where market-leading protocols like Lido on Ethereum and Jito on Solana command significantly more than 50% of the liquid staking market share. This dominance likely stems from strong network effects, liquidity aggregation, and integrator preference for standardized collateral, which tends to reward early traction and reinforce protocol stickiness over time.
Kinetiq is positioned to follow a similar pattern. As one of the first liquid staking solution built natively for Hyperliquid, Kinetiq stands to benefit from an early-mover advantage, early product-market fit, multiple vectors for revenue capture, and growing DeFi integrations via kHYPE. Kinetiq launched with deep support across Hyperliquid DeFi, as virtually every major HyperEVM protocol integrated or announced support for kHYPE from day one. This included lending markets offering kHYPE as collateral (e.g., Felix with $380 million TVL, Hyperlend with $425 million TVL); leveraged yield platforms enabling strategies with kHYPE (e.g., HypurrFi with $160 million TVL); stablecoin yield protocols accepting kHYPE (e.g. Hyperdrive with $30 million TVL); and Curve, which immediately provides deep liquidity for kHYPE trading pairs. In effect, Kinetiq entered into an ecosystem ready to treat kHYPE as a first-class asset. This strong positioning should help it carve out an early moat in what has historically been a winner-take-most market, though the defensibility of Kinetiq’s market position will need to be monitored.
With most fee switches still inactive apart from a 0.1% unstaking fee, Kinetiq’s latest revenue numbers are not yet consequential, annualizing $12.7 million in fees but only $90k in protocol revenue. Furthermore, unstaking fees act as volatile measurements since they depend on decisions made by the end user and therefore don’t provide forecastable revenue from usage volumes.
Protocol Fees and Revenue (source: DefiLlama)
(Data as of August 5, 2025)
Despite current metrics, comparative analysis with other liquid staking market leaders on other networks suggests substantial untapped monetization potential for the protocol upon further fee switch activation. Making several assumptions and using market data from Lido and Jito as comparative benchmarks, Kinetiq’s potential annualized revenue can be modeled under a more typical fee structure.
Liquid Staking Protocol Comps (source: DefiLlama, Artemis, ASXN)
(Data as of August 5, 2025)
Using the current share of total HYPE staked (43.1%) and applying the average liquid staking share from Ethereum and Solana comps results in roughly $1.3 billion in total assets staked by liquid staking protocols on Hyperliquid. A conservative blended market share from the leading protocols (Lido and Jito) can be applied, suggesting Kinetiq might hold a 70% share of the liquid staking market on Hyperliquid over the long term. This predicates on its ability to maintain its early traction and market share in a historically winner-take-most market. The result yields a theoretical $900 million in TVL for the protocol (current TVL sits at $1.2 billion, but this accounts for the rise of competitors and some possible capital attrition from expired incentives). Applying the average protocol revenue-to-TVL ratio from Lido and Jito of ~0.6% suggests a potential $5.4 million in annualized protocol revenue. While this model makes several notable assumptions, it stands to highlight the meaningful revenue capture Kinetiq may realize should it activate fee switches in a similar way to legacy protocols.
iHYPE: Institutional-Grade Liquid Staking
To capture rising institutional interest in the Hyperliquid ecosystem, Kinetiq has developed iHYPE, the first institutional-grade liquid staking solution on HyperEVM. iHYPE is essentially a compliant wrapper around Kinetiq’s staking service, integrating KYC/AML and regulated custody so that funds, asset managers, and even public companies can stake HYPE within their legal mandates. HYPE staked via iHYPE is delegated only to a curated set of high-quality validators and comes with institutional reporting standards. The product was built in collaboration with major trading and custody partners (including IMC Trading and Flowdesk) to ensure end-to-end institutional support from acquisition to custody to staking.
This offering directly addresses a growing trend of institutions accumulating HYPE as a strategic asset, several of which have announced so publicly (Hyperion, HYLQ Strategy Corp, Lion Group, etc.). Recently, Hyperion became the first publicly-listed company to acquire iHYPE by staking HYPE through Kinetiq. FlowDesk has since followed suit.
Kinetiq has preemptively solved the compliance hurdle, positioning itself to onboard significant institutional capital into Hyperliquid, and has so far received substantial inbound from funds and allocators looking for compliant ways to participate in Hyperliquid’s continued growth. This institutional interest in liquid staking will likely accelerate among the growing number of digital asset treasury participants as well as the latest legislation confirming liquid staking falls outside the scope of traditional security laws.
Launch: A New EaaS Platform
Kinetiq’s newest product, Launch, introduces a powerful new exchange-as-a-service model to the Hyperliquid ecosystem, significantly lowering the barriers to entry for builders to deploy their own perps exchanges on top of the HIP-3 infrastructure. By leveraging Kinteiq’s liquid staking architecture, Launch allows builders to crowdfund the required 1 million HYPE stake (~$38 million at current prices) through isolated staking pools. Each deployment mints exchange-specific LSTs (“exLSTs”) giving contributors direct exposure to the performance and fees of the specific exchange they back.
Crucially, Launch employs a risk isolation approach via exLSTs. While traditional liquid staking tokens pool all assets together and share risk across all participants, this poses issues in the context of exchange deployment where different operators may have varying risk profiles and levels of expertise. Kinetiq solves this by creating isolated pools for each exchange deployed, whereby contributors receive different exHYPE tokens specific to each deployment. The result is isolated risk, as slashing events only affect a specific exchange's staking pool and returns are based solely on each exchange’s performance.
The goal of the Launch platform is to effectively separate capital from expertise: exchange deployers can focus on market creation, user acquisition, and oracle/feed management while Kinetiq provides the technical stack, including risk isolation systems, market monitoring dashboards, and automated trading fee distribution to participants. This suggests a new class of builders will be able to launch bespoke perps markets for a variety of assets, while simultaneously unlocking a new yield primitive for HYPE holders as they look to share in the revenue of the exchanges they back. Importantly, Kinetiq also stands to earn meaningful revenue downstream of this exchange creation, possessing a variety of fee switches from which it could earn a substantial take-rate on all trading activity.
While the actual trading fees and Kinetiq’s take-rate are unknown at this time, data shows that applications are able to earn meaningful revenue via integration with Hyperliquid’s HIP-3. Phantom wallet notably introduced native Hyperliquid perps trading into its frontend one month ago and has seen over $1.5 million in fees (at a 0.05% take-rate) since.
Cumulative Builder Fees via HIP-3 Integration (source: Allium)
(Data as of August 5, 2025)
As designated by the HIP-3 framework, deployers of Hyperliquid’s perps infrastructure can optionally configure additional fees on top of Hyperliquid’s base fee rate. Deployers can then set a fee share up to 50% of this total configured fee, with Hyperliquid earning the remaining portion of the total fee rate. On average, this has translated to a roughly 0.03% take-rate for most applications with meaningful volume building via HIP-3. Using this take-rate as a base assumption, we can derive a theoretical revenue model for Kinetiq’s Launch platform under varying assumptions of the number of exchanges launched. At a high level, the protocol fee-revenue earned from the platform can be modeled by:
Protocol Revenue = ∑(Exchange(x) Volume × Exchange Take-Rate × Kinetiq Revenue Share)
Launch Platform Projected Revenue Model
This revenue model makes several crude assumptions. Under a base case, it assumes 10 successfully launched exchanges trading an average of $15 million in daily volume, the historical average HIP-3 builder take-rate of 0.03%, and a Kinetiq revenue-sharing take-rate of 20%, yielding a theoretical $1.3 million in annualized protocol revenue for Kinetiq. Under a bull case, it assumes 20 successfully launched exchanges trading an average of $25 million in daily volume, an exchange take-rate of 0.05%, and a Kinetiq revenue-sharing take-rate of 20%, yielding a theoretical $7.2 million in annualized protocol revenue. For both cases it assumes Kinetiq takes a 20% revenue share of each partner exchange’s fees. Presumably, this is a relatively modest figure considering the platform’s value-add in crowdfunding the exchange, theoretically giving it substantial bargaining power in its revenue-sharing terms.
Revenue capture will ultimately depend heavily on the protocol’s fee framework, which has yet to be announced: e.g., will the price to rent stake be a fixed rate, an algorithmic rate, or some arbitrary rate related to the success of the underlying HIP-3 market? The success of the protocol to capture trading fees will also be dictated by 1) whether or not markets are created that users actually want to trade at scale, and 2) that these markets are successful at creating channels for distribution to onboard users successfully. As it stands, without any available fee information and despite many crude assumptions in the EaaS structure, the financial model importantly illustrates the ability Kinetiq has to generate revenue from the EaaS segment downstream of successful exchange launches.
As for the Launch roadmap, Kinetiq is currently deploying a testnet of the platform and its components, as well as working with select teams to collaboratively launch the first few exchanges. The team is also defining a multi-layered governance framework that will be used for protocol and exchange-specific decisions going forward.
The Perpetuals Thesis: Expanding Markets for Long-Tail Assets
While still in testnet, HIP-3 significantly lowers the barrier to launching perps markets by exposing the underlying exchange infrastructure (matching engine, margin system, and settlement) to external builders. With this, the exchange layer has been somewhat commoditized, meaning the bottleneck is no longer technical but rather the ability to source demand and a reliable data feed for specific assets.
My perspective is that this unlocks a design space for market creation spanning an entire spectrum of potential long-tail assets. This would suggest we are only scratching the surface of what forms of perps markets we may see, and for what combinations of underlying assets they might support (e.g., private company valuations, carbon credits, compute pricing, real estate indices, etc.). Moreover, perps function as a powerful substrate for trading RWAs onchain (vs. their tokenized counterparts) since they don’t require wrapping and custody of assets, only reliable price oracles to track underlying asset prices. Taken together, this suggests we will likely see a further exploration of new perps markets to trade the value of many traditional assets in addition to non-traditional counterparts.
At a high level, Kinetiq is positioning itself as a commercialization layer for HIP-3. The Launch platform seeks to accelerate the EaaS model for perps markets and is particularly valuable for long-tail asset markets where developers often lack the capital requirements necessary and the capacity to build low-latency trading systems. As HIP-3 unleashes a continued wave of bottom-up market creation, Kinetiq is structurally positioned in the value-capture layer for projects seeking accelerated market entry.
Structural Risks
Kinetiq faces several inherent risks in its attempt to dominate liquid staking on Hyperliquid, successfully grow its EaaS business, and ultimately capture revenue downstream of these initiatives
Projected Competition
Although the liquid staking market has historically been a winner-take-most market, Kinetiq’s underlying infrastructure is not inherently defensible or non-forkable. Competitors may emerge (e.g. stHYPE) for alternative LSTs on the HyperEVM offering more aggressive validator strategies or differentiated DeFi integrations. If Hyperliquid’s governance introduces protocol-native LSTs or modifies fee incentives to further support native staking, Kinetiq’s moat could weaken.
While Launch is the first to operationalize the EaaS model on Hyperliquid, its architecture is also inherently replicable. By building on an open-source primitive, its core components do not rely on proprietary access or exclusive rights, making the model potentially vulnerable to clones offering differentiation in fee structure, UX, or incentive design.
Fee Incentive Misalignment With HyperCore Staking
Currently, Hyperliquid offers trading fee discounts only to users who stake HYPE natively through HyperCore. Many of the largest HYPE holders and Hyperliquid traders fundamentally gain more from vanilla staking on HyperCore than the capital efficiency they would gain from an LST like kHYPE. This fee incentive structure suggests millions of HYPE are more likely to remain in native staking on HyperCore than in liquid staking solutions on the HyperEVM like Kinetiq.
This implies a reduced TAM for kHYPE, somewhat limited growth and usage of liquid staking on HyperEVM, and weakened composability and DeFi participation from large HYPE holders. Going forward, the allocation of much of this HYPE into liquid-staking solutions like Kinetiq may depend heavily on whether or not liquid stakers will also be able to take part in fee discounts, though this would likely require community governance, LST vetting, and security frameworks in place.
Monetization Uncertainty and Token Value Accrual
Kinetiq’s deferred monetization has arguably been strategic to prioritize protocol adoption, but it introduces uncertainty around the timing, structure, and sustainability of future fee flows. If Kinetiq fails to successfully activate more fee switches across its core products (liquid staking, vaults, and Launch) it may struggle to build durable protocol revenue or justify meaningful token valuation upon launch.
Future monetization is also dependent on third-party usage: staking flows into kHYPE, vault use by Hyperliquid DeFi users, and trading activity on builder-deployed exchanges. Each of these revenue levers is contingent on sustained ecosystem participation and any stagnation in usage could impact Kinetiq’s ability to generate protocol-level fees.
Post-Incentive TVL Attrition Risk
While effective for bootstrapping adoption, the current incentives offered via Kinetiq’s Earn vault (e.g., kPoints for an anticipated airdrop) may attract some level of mercenary capital that exists once rewards diminish or more lucrative opportunities arise elsewhere in the Hyperliquid ecosystem. Sustained protocol success will require converting short-term incentive participants into long-term, utility-driven stakeholders through product stickiness, competitive yields, and deep integration into the broader HYPE ecosystem.
Launch: Low Partnership Traction and Liquidity
Kinetiq’s Launch platform is still in its earliest stages of rollout with no meaningful exchange launches or traction to date. The platform’s success hinges on onboarding high-quality deployers who can curate compelling markets, attract traders, and sustain meaningful trading volume. In the absence of strong initial exchange launches, Launch faces the risk of being perceived as experimental or underutilized.
Additionally, Launch relies on a crowdfunding model to bootstrap the required HYPE stake per exchange, and without sufficient contributor interest, exchange deployments may stall, leaving capital idle in fragmented exLST pools or discouraging future deployers entirely. This creates somewhat of a chicken-and-egg dilemma: deployers will seek the potential for liquidity and users to justify their effort, but contributors and traders are unlikely to engage until there’s visible success or economic upside.
Until proven otherwise, Launch faces material go-to-market risk. It must demonstrate the viability of its crowdfunding architecture, the value of exchange-specific yield, and its ability to generate non-trivial trading activity across a diverse set of long-tail markets. Failure to do so would limit Kinetiq’s growth beyond its core liquid staking business.
Positioning for Hyperliquid’s Next Growth Phase
At a high level, Kinetiq is positioning itself as a dual growth engine on Hyperliquid, anchoring liquidity through liquid staking while simultaneously pioneering the exchange-as-a-service model with Launch. Its early traction, deep DeFi integrations, and institutional-ready offerings provide a strong foundation for potential dominance in what have historically been winner-take-most markets. While monetization remains largely deferred and competitive risks loom, the leverage of liquid staking leadership and downstream revenue from builder-deployed exchanges suggest the protocol could experience fulfilling growth. If it can successfully activate fee switches and sustain adoption beyond incentive cycles, Kinetiq could be very well-placed to become a valuable revenue-generating protocol within the Hyperliquid ecosystem.