Critics of Hyperliquid’s recent stablecoin contest are raising significant concerns regarding the fairness of the process, especially after the team Native Markets emerged as the winner. Native Markets secured the opportunity to create a dollar-pegged stablecoin backed by one of the leading on-chain crypto futures exchanges, garnering over 68% of the vote. However, allegations have surfaced suggesting that Native Markets may have had an unfair advantage due to prior knowledge of the contest and possible insider support.
Insiders assert that Native Markets had been preparing for the contest for months before its announcement. There are claims that team members received covert assistance from Hyper Labs, the organization behind the Hyperliquid protocol, as well as the Hyper Foundation, an associated nonprofit. Such revelations threaten to undermine Hyperliquid’s reputation, jeopardizing the trust and goodwill it has cultivated since its launch in 2023.
While the Native Markets proposal garnered substantial support within the Hyperliquid community—partially due to co-founder Max Fiege’s role as an ecosystem investor and adviser—critics highlight the team’s relative inexperience in stablecoin creation compared to other competitors. Many of the rival bidders, such as New York-based fintech Paxos and USDe issuer Ethena, possess several years of experience, raising questions about why Native Markets was chosen.
Attempts to contact Native Markets’ co-founders regarding the allegations of prior knowledge or insider support were met with silence, as did outreach to multiple contacts close to the situation, many of whom declined to comment out of fear of repercussions. The ambiguity surrounding Native Markets’ incorporation adds to the concerns.
The contest itself, initiated on September 5, attracted nearly a dozen teams eager to partner with Hyperliquid, which has recently emerged as a significant player in the trading space, handling over $335 billion in trading volume in just the past month. A stablecoin sanctioned by Hyperliquid carries the potential for substantial demand and profit, making the stakes particularly high.
As proposals poured in, some observers noticed a disturbing trend: many of Hyperliquid’s validators seemed to favor Native Markets, disregarding other bids that could have been more advantageous for the protocol. Haseeb Qureshi, managing partner at crypto venture firm Dragonfly, noted on social media that validators appeared disinclined to consider any proposals aside from Native Markets, intimating that a “backroom deal” might have been established prior to the contest.
While Hyperliquid has not officially addressed the situation or the allegations suggesting this pre-existing bias, dissenting voices within the community highlight a classic battle of opportunity and fairness, raising ethical questions surrounding governance in crypto projects. Others, like Guy Young, CEO of Ethena Labs, have suggested that any prior awareness of the contest by Native Markets is simply part of the competitive nature of the industry.
Compounding frustrations, critics point to a series of peculiar circumstances surrounding Native Markets’ bid. Notably, the crypto wallet address submitted by Native Markets was funded hours prior to the contest’s public announcement, and their proposal was submitted a mere 90 minutes after the contest was opened—an unprecedented quickness compared to other teams who deliberated for days before finalizing their submissions.
A particularly notable figure among the co-founders is Mary-Catherine Lader, who recently left her position as COO of Uniswap Labs, fueling speculation that the groundwork for Native Markets’ entry may have been laid long before the contest officially began. Multiple attempts to engage her regarding these claims were also met with silence.
Despite the growing uproar, Hyperliquid has remained notably quiet on the allegations of favoritism, raising further questions regarding transparency and governance in the burgeoning decentralized finance landscape.
