Transparency and Risks

We at Thunderhead are committed to being fully transparent and honest with our users.

Note: The details provided are subject to change as Hyperliquid is still finalising

Introduction

The crypto industry as a whole is riddled with opaque mechanisms that hide the risk-level, source of rewards, and fund management/custody practices. With stHYPE you can be assured that you can get a complete understanding of how the system works, along with the risks and how they are mitigated.

System Overview

At a high level, users stake HYPE into a smart contract that transfers them back stHYPE. This HYPE is then staked onto Hyperliquid network validators. These Hyperliquid validators validate blocks for the network and earn rewards from doing so. These rewards accrue to users by their stHYPE balances increasing. At any time, stHYPE is backed 1:1 by native HYPE and can be redeemed or unstaked. Both the unstaking period and rewards are determined by the decentralized Hyperliquid network. stHYPE holders have veto rights over the protocol's multi-sig. Any proposal created by this multi-sig can be vetoed by stHYPE holders. This makes stHYPE non-custodial (HYPE) can only go to validators or back to users).

Protocol Constraints

Rewards

The rewards users earn are determined by the Hyperliquid protocol. The Hyperliquid network emits a % of rewards emissions. Validators earn a pro-rata share of this depending on how many blocks they produce; all validators will essentially earn all the same rewards. stHYPE rewards come solely from protocol issued rewards - there is no lending or trading involved.

Unstake Time

As is a liquid staking token so you can transfer stHYPE, use it in DeFi and potentially sell it elsewhere. stHYPE is always backed 1:1 by native HYPE, so at anytime you can unstake, some unstaked will be instanst if enough liquidity is avalible otherwise there will be an unstaking period which is determined by the Hyperliquid protocol.

Validator Redemptions

Validators will bound their redemption and executor addresses to the Output smart contract. This ensures that stakedHYPE deposits staked onto validators can only be returned to the stHYPE smart contracts.

Risks

Smart Contract Risk

There is a risk that stHYPE contracts contains a vulnerability. However, the code is open-sourced, audited by top tier auditors, well-tested, and heavily internally reviewed. While we do our very best to ensure safety for our users, we cannot guarantee that there is no risk of fund loss. In the highly unlikely scenario that there is a smart contract exploit, the funds in the liquidity pool and the output contract would be at risk, which is a portion of the total amount staked. The remainder would be staked onto the validators, which are not subject to smart contract risk until unstaked.

Potential Slashing Risk

Hyperliquid is a Proof-of-Stake network. This means that validators can be slashed if they underperform, go offline, or misbehave. To mitigate this only professional, top performing validators will operate within the stHYPE protocol.