Unfragmented Position: Actual testing of Hyperliquid HIP-4, treating "events" as spot trading

On Friday evening, the US stock market and CME futures closed one after another, with continuous influxes of market-moving information.

A trader stares at the screen, simultaneously making three judgments: he believes that war news will ferment over the weekend, and the probability of BTC dropping first and then rising is underestimated; he thinks the next Federal Reserve decision has not been priced in yet; he also wants to buy weekend gap insurance for his oil or precious metals positions.

The trouble is, these three actions usually require going to three different places: betting on longs and shorts at the futures exchange, predicting events in the prediction market, and hedging at the options exchange, with margins split into three parts. Cognition is clearly a whole, but positions are fragmented.

Hyperliquid’s new market framework, HIP-4, solves this disconnect.

What is HIP-4?

HIP-4 turns “outcomes” into tradable standardized assets, allowing judgments like “Will this happen?” or “Will a certain price reach a certain level at a certain time?” to be represented as standardized assets within Hyperliquid’s trading system. It launched on the Hyperliquid testnet on February 2.

Recently, a community member reverse-engineered the core contract of HIP-4 based on the deployed contracts on the testnet, giving us a glimpse of its architecture before mainnet launch.

Community’s simulation of HIP-4 frontend based on testnet contracts

HIP-4 adopts a two-layer structure. Trading occurs on HyperCore, while fund custody, prize pool management, and some settlement processes happen on HyperEVM. The former handles high-frequency matching, and the latter manages more complex prediction market logic, with clear division of responsibilities.

Through HIP-4, abstract “events” can be “transposed” into truly tradable assets.

For example, if someone creates a market “Who will win the 100-meter dash,” with event ID 9, and result 0 representing “Hypurr wins,” this outcome is mapped to a “#90” token on HyperCore, traded on the order book. Traders buy and sell it just like a spot asset.

Similarly, markets like “Will BTC hit a certain price within 15 minutes,” which resemble options, will be settled directly on HyperCore based on real-time price data at expiration, without external oracles.

However, the settlement rules for event contracts like “Who will win the 100-meter dash” are not yet fully clear.

Overlap with Polymarket user profiles

A study analyzing nearly 15,000 active Polymarket addresses found that some top traders are also active on Hyperliquid.

These overlapping users contributed about $1.43 billion in trading volume on Polymarket and hold approximately $189 million in contract positions on Hyperliquid, with about $29 million in margin usage. Their Hyperliquid accounts show a near-balanced distribution of longs and shorts, mainly trading mainstream assets like BTC and ETH; on Polymarket, they tend to hold positions on long-term events like elections and Federal Reserve decisions. Clearly, these are mature traders.

Today, these positions are still in two isolated systems. About $18.3 million in prediction market positions cannot enter the contract margin system. Based on the roughly 7x leverage used by these overlapping users on Hyperliquid, this theoretically corresponds to over $120 million in additional trading capacity.

Targeting TradFi’s Weaknesses, New Imagination for On-Chain Finance

HIP-4’s greater potential lies in composability.

The community has outlined several potential new product categories:

Weekend Gap Options: Traditional markets have a long gap from Friday close to Sunday open. HIP-4 can turn this gap into a weekend gap option. Traders holding positions in oil, silver, or stocks in HIP-3 can buy an option that pays out based on the difference between Friday’s close and Sunday’s open, hedging against sudden gaps.

Internal-External Price Deviations: Pay out when internal prices on HIP-3 exchange deviate significantly from external oracle prices, to hedge liquidation risks.

Funding Rate Options: Allow traders to hedge against negative funding rates.

These structured tools are what set HIP-4 apart from traditional prediction markets. The latter often lack natural counterparties, dominated by insider trading, with information leaks continuously harming retail traders and market makers.

In contrast, HIP-4’s structured products have inherent hedging needs, not just gambling functions. Market makers’ pricing logic, liquidity quality, and market depth will reach another level.

Cognition has never been linear, and neither should positions.

With the same account, same margin, and same settlement system, HIP-4 brings Hyperliquid closer to the vision of a “House of All Finance.”