Hyper Foundation Proposes Burning $900M Worth of HYPE

Hyperliquid validators are voting on whether to formally recognize more than $1 billion worth of HYPE tokens held in the protocol’s Assistance Fund as permanently burned and removed from both circulating and total supply. The proposal, put forward by the Hyper Foundation, does not destroy tokens onchain but asks validators to agree that these tokens are mathematically inaccessible and should no longer be counted in supply metrics.

This vote is about classification, not execution. The tokens already sit in a system address with no private key, meaning they cannot be moved without a hard fork. If approved, the vote would create binding social consensus among validators to never authorize a protocol upgrade that accesses these funds.

Worth noting, these tokens come from trading fees that are automatically converted into HYPE at the protocol level.

The key points of the proposal are:

• The Assistance Fund holds HYPE tokens that cannot be withdrawn.
• The system address controlling the fund has no private key.
• Funds are irretrievable unless the network undergoes a hard fork.
• Validators are being asked to agree that these tokens are permanently out of circulation.

By voting “Yes,” validators agree that the Assistance Fund tokens should be excluded from circulating and total supply calculations. No code changes or token transfers are required.

How Does the Assistance Fund Work?

The Assistance Fund is a core mechanism embedded directly into Hyperliquid’s layer-1 execution layer. It automatically converts a portion of trading fees into HYPE tokens. This process happens as part of block execution and does not rely on human intervention or governance decisions for each conversion.

Key characteristics of the Assistance Fund include:

• Fees are converted into HYPE automatically.
• Converted tokens are sent to a system address.
• The system address is similar to a zero address.
• No private key has ever existed for this address.

The system address used by the Assistance Fund is 0xfefefefefefefefefefefefefefefefefefefefe

Like Ethereum’s zero address, this address cannot sign transactions. There is no withdrawal function, no admin key, and no recovery mechanism built into the protocol. The Hyper Foundation states that the funds are mathematically irretrievable without a hard fork.

In practice, this means the Assistance Fund acts like a continuous buyback-and-burn system, even though the tokens are still visible onchain.

Why Does Hyperliquid Want to Recognize the Tokens as Burned?

While the Assistance Fund tokens cannot move, they are still counted in standard supply metrics. This creates confusion when calculating circulating supply, total supply, and market capitalization.

The proposal aims to remove this ambiguity.

According to the Hyper Foundation, formal recognition of these tokens as burned would:

• Clarify effective circulating supply
• Improve transparency for governance decisions
• Align reported supply with economic reality
• Reduce confusion for traders and analysts

The proposal does not reduce existing token quantities. It changes how fee-derived tokens are treated in reporting and governance contexts.

How Many HYPE Tokens are Involved?

There are two figures circulating, depending on the data source and valuation method.

Based on onchain balances, the Assistance Fund currently holds about 37 million HYPE tokens. This represents more than 13% of HYPE’s circulating supply of roughly 336.68 million tokens, according to CoinMarketCap.

At current market prices, the value of these holdings exceeds $900 million. Some estimates place the notional value much higher, depending on price assumptions, with broader references citing figures above $37 billion.

Regardless of valuation, the key point is that a significant portion of HYPE’s visible supply sits in an address that cannot be accessed.

What is the Validator Voting Pocess?

The governance process has three clear steps, with fixed deadlines.

Validators are required to:

• Signal intent on the governance forum by December 21 at 04:00 UTC
• State their position clearly by replying “Yes” or “No”
• Allow users to adjust staking choices before results are finalized

Users who stake HYPE can choose validators that align with their view. This staking alignment window remains open until December 24 at 04:00 UTC.

The final result will be determined by stake-weighted consensus. Once confirmed, the outcome becomes a binding social agreement among validators.

The Hyper Foundation has stated that no onchain action will follow the vote. 

If validators approve the proposal, the Assistance Fund HYPE tokens will be treated as burned for all governance and reporting purposes.

The practical effects include:

• Lower reported circulating supply
• Lower total supply figures
• Adjusted market capitalization calculations
• Clearer tokenomics for HYPE holders

Could this Create a Supply Shock?

In theory, yes. Removing a large portion of tokens from circulating and total supply calculations reduces visible supply. When demand remains constant, lower supply can support higher prices.

However, market conditions matter.

Recent price action shows HYPE under pressure. The token recently breached the $35 support level after holding that zone through five prior tests. Trading activity has declined, and broader market sentiment remains cautious.

Supply changes alone do not guarantee price increases. Liquidity, volume, and user activity also play major roles.

How Does This Relate to Hyperliquid’s Fee Structure?

Hyperliquid routes nearly all protocol fees through the Assistance Fund mechanism.

According to research by Cantor Fitzgerald:

• The protocol generated about $874 million in fees year-to-date.
• Roughly 99 percent of fees are routed to the Assistance Fund.
• These fees are used to repurchase HYPE automatically.

Cantor described Hyperliquid as returning nearly all fee revenue to tokenholders through automated repurchases. This structure steadily reduces circulating supply over time, even without formal burns.

Role of Other Hyperliquid Ecosystem Players

Some ecosystem participants also contribute indirectly to the Assistance Fund.

Native Markets, the issuer of the USDH stablecoin on Hyperliquid, has stated that:

• 50% of USDH reserve yield flows to the Assistance Fund.
• These contributions are converted into HYPE.
• If the vote passes, these tokens would also be treated as burned.

This shows how multiple parts of the ecosystem feed into the same supply-reducing mechanism.

How Large is Hyperliquid’s Market Presence?

Hyperliquid is one of the largest perpetual decentralized exchanges by volume.

Recent metrics include:

• Over $205 billion in trading volume over the past 30 days
• Third-largest perpetual DEX by volume
• Growing institutional and treasury interest

Two digital asset treasury firms hold notable HYPE positions:

• Hyperion DeFi holds about $42 million worth of HYPE
• Hyperliquid Strategies holds about $310 million worth of HYPE

Why is This Vote Happening Now?

The vote follows increased scrutiny of supply metrics as Hyperliquid’s volume and fee generation have grown.

As the Assistance Fund balance increased, questions emerged about whether these tokens should count toward supply. Leaving them included made metrics like market capitalization harder to interpret.

By formalizing treatment through validator consensus, Hyperliquid aims to reduce uncertainty without changing protocol code.

Discussion on Discord suggests that most validators intend to vote “Yes.”

The Hyper Foundation posted a message asking validators whether Assistance Fund HYPE should be “recognized as burned” and removed permanently from supply metrics. Early responses indicate broad support, though the final outcome depends on stake-weighted votes.

Conclusion

The Hyperliquid validator vote focuses on clarity, not mechanics. The Assistance Fund already functions as a one-way sink for HYPE tokens generated from trading fees. The proposed governance action asks validators to formally recognize these tokens as permanently inaccessible and exclude them from supply calculations.

If approved, the vote will align reported supply metrics with how the protocol already operates. It will not change balances, fee flows, or execution logic. It will provide clearer tokenomics for governance, analysis, and market participants.

Resources

1. Hyperliquid on X: Posts (December 2025)

2. Research by Cantor Fitzgerald: Report on Hyperliquid

3. Report by The Block: Hyper Foundation proposes removing $1 billion worth of HYPE tokens from circulating supply by zeroing out Hyperliquid's Assistance Fun

4. Hyperliquid docs: About Hyperliquid