HypurrSpace Episode #3

1. USDC (Circle) Support for HyperEVM Ecosystem

USDH Vote and Community Sentiment

During Hyperliquid's USDH vote, a strong community sentiment emerged advocating for converting USDC to Hyperliquid's native stablecoin USDH.

Currently, most HyperCore futures/spot trading uses USDC as collateral. However, when using USDC, all reserve revenue from the stablecoin's collateral (US Treasury bonds) goes to Circle. In other words, profits are flowing out of the Hyperliquid ecosystem.

Therefore, when the USDH ticker was announced, most teams proposed that a portion of reserve revenue be sent to the AF (Assistance Fund) for HYPE buybacks. Native Markets, which won the USDH ticker, sends 50% of collateral revenue to AF and uses the remaining 50% for ecosystem development.

Circle's Hyperliquid Support Announcement

Following the USDH ticker issue, Circle (USDC) also announced support for Hyperliquid.

Native USDC & CCTP V2 Support for HyperEVM Chain

This was a significant development as HyperEVM previously lacked native USDC support. CCTP doesn't use a lock-and-mint bridging solution; instead, it burns USDC on the source chain and mints an equivalent amount on the destination chain, providing a more secure and efficient bridging experience.

HyperEVM App Support & Incentive Program

Day 1 Partners:

Hyperbeat
Across
Felix
Hyperdrive
Hyperlend
Stargate
Wormhole

Felix is one of the projects benefiting from this support. When borrowing USDC using UBTC, HYPE, or kHYPE (PT) as collateral, the borrow APY is reduced.

HYPE purchases and validator operations were also mentioned.

2. Are HyperEVM's DeFi Protocols and Strategies Safe?

Recent DeFi Ecosystem Incidents

The DeFi ecosystem has experienced a series of negative events recently.

Balancer Hack

Stream Finance Incident

Infinite minting loop issue between Elixer and Stream
Stream's external fund manager reported $93M in losses
Risk curator Hyperithm liquidated all assets linked to xUSD

As a result of these events, liquidity in Morpho's xUSD/USDC pool completely evaporated as users rushed to withdraw their funds.

Compounding the issue, while xUSD's market price declined, curators of lending protocols like Morpho, Euler, and Lista maintained hardcoded oracle prices, which prevented the normal liquidation process from functioning properly.

Under normal market conditions, liquidations should trigger when collateral value drops below required thresholds. However, the hardcoded oracle prices prevented these liquidations from executing, causing unrealized losses to accumulate across the system. Early actors who recognized the risk managed to withdraw successfully, while later participants—whether attracted by high interest rates or delayed in their response—found themselves unable to access their funds.

Impact on HyperEVM Ecosystem?

Morpho is integrated into HyperEVM through Felix and Hyperbeat.

Felix operates directly as a curator
Other curators operate through Hyperbeat
- Relend Network, RE7 Labs, MEV Capital, Hyperithm, Gauntlet

This incident was not a problem with lending projects like Morpho or Euler themselves, but rather with curators using hardcoded oracle prices.

Therefore, the Hyperbeat platform itself is not problematic (since it uses Morpho directly), but the oracle settings, collateral stability, and vault strategies of the curators mentioned above should be reviewed for potential issues.

Felix's Safety Claims

Felix stated that they are safe:

Utilization of @redstone_defi as our price feed provider
Utilization of redemption rate for all staked assets to avoid unnecessary liquidations due to temporary wicks
Protocol logic / smart contract, core team, liquidity, and volatility reviews for all assets onboarded to Felix Vanilla and Felix CDP
Multiple risk tranches of vaults for lenders of different risk appetites (Felix Frontier vaults vs Felix Flagship vaults)
Multiple monitoring systems for community and team to review and monitor risk across Felix