Hyperliquid co-founder: ADL will not transfer profits and losses to HLP; its treatment of users and HLP is completely symmetrical.
TL;DR
Hyperliquid co-founder Jeff clarifies that the ADL mechanism does not transfer profits and losses to HLP, ensuring symmetrical treatment for users and HLP, and will not impact $653 million in revenue. ADL serves as a backup liquidation method during high volatility to maintain market integrity.
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On December 10, Hyperliquid co-founder Jeff published an article refuting the claim that "ADL (Automatic Liquidation) transfers profits and losses to HLP (Hyperliquidity Provider)." Jeff stated that the ADL mechanism does not transfer profits and losses to HLP, its treatment of users and HLP is completely symmetrical, and ADL will not destroy the $653 million in revenue.
On November 28, Hyperliquid launched its Automated Deleveraging (ADL) liquidation system across all its major perpetual contract markets to ensure orderly market operation during periods of high market volatility, particularly when liquidity tightens or large positions are nearing liquidation. ADL acts as a backup liquidation method when insurance premiums cannot fully absorb losses from liquidated positions. In such cases, positions held by highly leveraged traders with high unrealized profits may be partially or fully reduced to cover funding gaps. Hyperliquid emphasizes that ADL will only be triggered under exceptional circumstances and is designed to maintain market integrity by preventing cascading defaults that could disrupt the entire ecosystem.