HypurrFi Isolated Lending Markets

HypurrFi is excited to introduce Isolated Lending Markets.

Isolated lending markets let users offer and accept loan terms directly with a set of assets outside of existing pools on HypurrFi. Above all, the goal is to unlock more liquidity for users and the Hyperliquid ecosystem, while protecting from the potential systemic risk of exotic collateral. For now, pairs are rolling out incrementally, based on asset and liquidity availability, and with fairly restrictive parameters – but read on for more insight into their longer-term role.

At time of publication there are LHYPE/USDXL and PURR/USDXL markets available. Deposit LYHYPE and borrow USDXL, deposit PURR and borrow USDXL or deposit USDXL and lend to borrowers for market-driven APY on your stablecoin.

In the current Hyperliquid meta, one important unlock for isolated markets will be lending against exotic assets like $LHYPE and memecoins like $BUDDY and $PURR. Longer term, isolated markets will also support assets such as tokenized yield strategies and other complex derivatives, creating a cascade of new liquidity options that will boost the entire Hyperliquid ecosystem.

Pools vs. Isolated Markets: Like Amazon vs. Ebay

The core of HypurrFi, like most lending platforms, is a lending “pool.” These pools offer lending and borrowing of a fixed set of assets at market rates, uniform for all borrowers and lenders. Assets deposited in the pool can all be used as pooled collateral for any borrowing done from the pool. You could compare it to Amazon: anyone can buy a product, and they’ll all get the same price.

Isolated lending markets on HypurrFi are more like eBay (or maybe an inverse eBay) with prospective borrowers providing specific collateral assets for a specific asset they’re hoping to borrow. These markets also lay out the collateral ratio they’re offering in exchange for a loan. Borrows are more like an individual product from a specific seller, in limited quantities (you can’t borrow more money than you can collateralize), and with trust and responsibility devolving to individual borrowers and lenders, but the logic for overcollateraliztion, rates, and liquidations still automated by the market contract. 

These loans are collateralized just like pooled markets, and protected by the same liquidation mechanisms. But assets are supplied as individual assets with their own risk for both lenders and borrowers. For example, With the HyperCore to HyperEVM transfer portal widening every day, that will soon mean any asset on Hyperliquid can be used in an isolated HypurrFi market. (Markets are more limited currently, based on liquidity, demand, and other considerations.)

Most importantly for the HypurrFi system as a whole, isolated markets let individuals make these judgment calls without giving other users, or the platform, pooled risk. 

Liquidations make (over)collateralized DeFi lending workable and safe, protecting lenders and the system from net losses from bad debt. But exotic assets can swing wildly enough to outrun a liquidation, leaving the lender with a loss. In a multilaterally shared pool, that loss can leave the protocol itself with bad debt, similar to the way attackers intentionally manipulate markets with flash loan or oracle attacks to extract funds. This is one reason HypurrFi, like other lending platforms, has a fixed set of assets available. 

Isolated markets mean that if a lender makes an excessively generous loan against a dodgy asset, they alone are at risk – but they can also reap outsized returns.

What Can I Do with Isolated Markets on HypurrFi? 

Isolated lending markets allow you to defy market consensus and get rewarded for it. This looks different for borrowers and lenders.

Borrowers will ultimately ask for loans and set their conditions, defining collateral levels. Community demand for listing these markets will be taken into account in an upcoming HypurrFi release (more soon). Borrowers’ end goals will ultimately determine demand and pricing. Borrowed funds should have a specific destination, whether it’s a real-world investment or a DeFi strategy, and prospective returns from a strategy have to outperform loan APR to make sense, so borrowers are in the best position to send demand signals to the market.

This structure enables strategy vaults on top of HypurrFi isolated markets. Borrowers can open vaults to depositors and then use the funds in a wide variety of yield-bearing activities, paying profits back to the depositors.

On top of strategic metrics, borrowers will have to judge their own faith in their collateral: if it drops too far against their loan, they risk liquidation. So particularly if you have long-term conviction about an asset, but it’s volatile in the short term, it might not be ideal collateral.

Lenders will be able to browse these offers – again, like eBay – and decide if they’re appealing. Even conservative lenders may be able to get comfortable with obscure assets collateralized on strict terms – high collateral and high interest. But while isolated, these markets are competitive with each other, so thesis-driven lenders willing to shoulder higher risk on obscure collateral are likely to dominate.

The Big Picture

Isolated markets on Hypurrfi are already extremely and immediately useful, above all, for people holding assets on Hyperliquid with market value, but limited present uses and unclear long-term prospects. Memecoins are the obvious example. You might not want to sell $PURR, because it’s such a foundational part of Hyperliquid and could continue growing in value long-term. Now you can borrow against it, turning some portion of your portfolio liquid and deploying it to other trades, or using the remainder to LP elsewhere for even greater returns.

All of that unlocked liquidity will mean another bump for the Hyperliquid ecosystem as a whole – more buying, more trading, more flows. That will be fueled by isolated risk shouldered by users who are comfortable with it – but every user will benefit.

Deposit and Borrow from HypurrFi lending markets on Hyperliquid here.

Become an expert and review technical and risk documentation here.

Join the community for discussion, memes, and troubleshooting here.

And follow us on X.