Hyperliquid, a decentralized platform, recently saw the submission of Hyperliquid Improvement Proposal 4 (HIP-4) on September 16th. This proposal, authored by four individuals including John Wang, the head of crypto at Kalshi, introduces the concept of “Event Perpetuals” to enable prediction markets on the platform’s order book infrastructure.
The existing infrastructure of Hyperliquid, specifically HIP-3 builder-deployed perpetuals, poses limitations for prediction market use cases. These limitations include the need for continuous oracle updates and restrictions on price changes to 1% per tick, making binary event resolution challenging.
Event Perpetuals aim to address these limitations by eliminating the requirement for continuous oracle feeds and funding payments. Instead, prices are determined solely by trading activity. These contracts settle with binary payoffs that reflect market-implied probabilities between 0 and 1, resolving instantly to either outcome upon event conclusion.
To illustrate the current limitations, the proposal uses NFL betting scenarios where sportsbook odds update in step functions during games. Under the constraints of HIP-3, settling a market from neutral to zero probability would take 50 minutes due to tick limitations, creating arbitrage opportunities for informed traders.
The proposal includes an oracle settling chart that highlights the asymmetric resolution problem. This chart shows rapid settlement towards 1.0 but gradual decay towards 0, underscoring the infrastructure challenges that prompted the introduction of Event Perpetuals.
Event Perpetuals are launched through single-price clearing auctions lasting approximately 15 minutes. The system evaluates all candidate prices to maximize matched volume, with tie-breaking favoring minimal imbalance and prices closest to 50%. The clearing mechanism diagram displays bid and ask distributions across price levels, with the system calculating optimal clearing prices to balance supply and demand.
Orders execute at the determined opening price before continuous trading commences. Builders deploy markets by staking 1 million HYPE tokens and can charge up to 50% additional fees above base rates. The infrastructure also supports market recycling, allowing new events to replace resolved markets within existing slots.
Event Perpetuals operate with 1x isolated margin only, requiring buyers to deposit collateral equal to their maximum potential loss. Trading occurs within price bands of 0.001 to 0.999, with resolution oracles posting final values during specified challenge windows for dispute resolution.
In conclusion, the introduction of Event Perpetuals on the Hyperliquid platform aims to enhance prediction market capabilities by addressing existing limitations and providing a more robust and efficient infrastructure for traders and users.