Author: diogenes(X)
Compiled by: Deep Tide TechFlow
Deep Tide Insights: Entropy's HIP-3 prediction market immediately went viral upon launch. As an investor, the author was initially very excited, considering it one of the rare, well-executed launches among recent new founders; its Anthropic market open interest surged from a few hundred thousand dollars to nearly $3 million. However, skepticism soon followed—"They just want to make another Ventuals." On the surface, this logic seems flawless: it's been tried before and didn't work, so what makes you special? But the author argues: Before Hyperliquid, no DEX had truly challenged centralized exchanges. It was the design differences between HLP and Hypercore that changed the outcome. Minor innovations in the details often determine success or failure.
Entropy's recent launch has been the talk of the town. As an investor, I felt extremely excited. I believe this is one of the most successful launches I've seen recently, especially for new ventures in the crypto space. The open interest for Entropy's Anthropic market has skyrocketed from an initial few hundred thousand dollars to nearly $3 million at the time of writing, far surpassing other markets I've seen. However, not everyone viewed this launch positively.
Apart from Jake Paul's controversial tweet (which predictably drew some criticism), an interesting point I heard on Twitter was: "Oh, these guys just want to do..." @ventuals "all over again." People naturally think, "Oh, this has been tried before, it didn't work. What makes them think they're special?"
This logic seems plausible at first glance. Einstein said, "Insanity is doing the same thing over and over again and expecting different results." However, ignoring nuance demonstrates great ignorance. There are countless examples where this thinking is completely wrong. Before Hyperliquid, no DEX had truly challenged centralized exchanges.
While DEXs improved over time, they still had limitations. Many people thought the same would happen with Hyperliquid. Hyperliquid revolutionized the game because its design allowed for launching liquidity in a sustainable way using HLP, and the Hypercore infrastructure was scalable enough to handle the trading volumes required by large exchanges. There are many other differences between Hyperliquid and its predecessors, but these two are its core innovations.
The point is: details matter. Seemingly small changes can have a significant impact on the outcome.
Now, let's examine Ventuals' issues, because they are numerous. Ventuals focused on pre-IPOs but had timeframes far exceeding what an IPO requires. Ventuals' Anthropic market launched in November 2025, at a time when Anthropic hadn't even filed for an IPO yet.
This led to a huge disparity between the price on Ventuals' market and the actual price of Anthropic in the secondary market. Given the limited supply of Anthropic's underlying asset (i.e., it was difficult for people to acquire), and Ventuals' underlying asset being partly from the secondary market and partly from other sources, this meant the funding rates on Ventuals' market were extremely volatile. Notably, the funding rate once reached as high as 8700%!
These funding rates were not arbitraged away because holders of the underlying market did not trust Ventuals' design, believing its market could not reflect the true value of these assets. Thus, a vicious cycle formed: an asset similar to Anthropic existed on the market, yet not quite Anthropic, with extreme volatility and extremely high holding costs. This situation, combined with an inability to attract liquidity providers, led to most of Ventuals' markets being acquired by Trade.
Now, let's look at Entropy. Entropy launched its Anthropic market the month after Anthropic filed its S-1; according to Fortune, the IPO is currently expected in October. Depending on the specific date in October, that's between one-and-a-half to two months from now. This window falls within a somewhat forgotten piece of Hyperliquid history. I'm accustomed to calling it the "pre-market wars."
During the "pre-market wars" period before token listings, exchanges like Hyperliquid engaged in fierce competition to get a head start by enabling trading on new tokens before they were widely available. By launching a market first and having the best liquidity, an exchange could become the primary venue for that token after its official launch. This meant most trading volume would flow through these exchanges, generating huge profits. Therefore, exchanges were even willing to operate at a loss to secure market dominance, much like how Costco sells hot dogs at a loss to attract more customers into the store to buy other profitable goods. Here, the "hot dog" refers to pre-listing liquidity, and the "other goods" refer to post-launch trading fees.
With few exceptions, Hyperliquid achieved a decisive victory in the pre-market wars. While it obviously didn't become the world's largest exchange, that wasn't the point. It went from an unknown small exchange to a top-four exchange, largely thanks to the pre-market wars. By launching markets with better liquidity earlier than its competitors, it captured a significant market share. This relied heavily on HLP itself. Entities wanting to harm Hyperliquid or profit from it (often both) would employ various means to manipulate prices or directly impact HLP itself (list of events). However, despite these challenges, Hyperliquid persevered and has become one of the most valuable projects of the past five years, potentially even the greatest project since Bitcoin's inception.
Hyperliquid's next logical step would naturally be to allow traditional asset markets. As the world's preeminent economic hegemon and issuer of the preferred foreign exchange currency, the United States holds the vast majority of these assets. Moreover, its regulators have historically been active and ready to send warning letters to any project that might be perceived as even slightly touching US companies or prices. Therefore, after solidifying its control over crypto assets, Hyperliquid would logically want decentralized third-party teams to manage these markets, while leveraging Hyperliquid's built-up infrastructure and user base. However, Hyperliquid does not provide support via HLP; any new team would have to create liquidity on its own.
Trade was the first company to deploy HIP3 at scale and the first to truly leverage liquidity. @sershokunin Trade successfully launched multiple stock markets and rapidly expanded liquidity through partners and trader distribution channels. Trade launched in mid-October 2025. By November 6th, Trade's XYZ100 (a Nasdaq 100 index-type product) had surpassed $1 billion in trading volume. Today, its open interest and daily trading volume are in the tens of billions.
While Trade flourished, Ventuals' product underperformed. Ventuals often entered markets ahead of Trade but failed to capture sufficient market share. Subsequently, when Trade launched competing products, it eroded Ventuals' market share.
Trade's core innovation and competitive advantage lay in extensive collaboration with market makers and traders to ensure trading volume, while also altering some mechanisms of its market operations to be closer to "economic gravity," or to make its markets reflect the true price of the assets.
Entropy adheres to two core ideas: First, that providing more direct liquidity (e.g., an HLP-like model) is beneficial for the long-term health and stability of its markets. Second, that establishing partnerships with distribution entities will become increasingly important. Liquidity and stability are crucial. This is also reflected in its vastly different design compared to Ventuals, especially regarding funding rates: Entropy's funding rates gravitate towards 10%, whereas Ventuals' rates grew exponentially.
In theory, these methodological and design differences should allow Entropy to help markets price stocks more accurately and effectively. It also allows both long and short traders to feel secure that their positions won't get liquidated due to funding in these less liquid pre-market environments (where traders suffer losses and may become prey for others if forced to close positions due to slippage).
Whether Entropy can win the pre-IPO competition first depends on its ability to build public confidence in its model and markets. This will likely require consistent execution and close collaboration with traders, ensuring they feel comfortable using its markets. Second, it depends on whether it can, on its own or through partners, engage in market pricing/market making, attempting to introduce a model akin to HLP (High-Liquidity Pricing) for pre-IPO trading, a model not yet applied at scale within HIP3.
At that point, perhaps a second truly successful HIP3 market could emerge. We might see it engage in genuine competition with Trade in emerging markets and in driving HIP3 forward.
