Felix (Liquity V2 Fork) - HYPE Stability Pool
Felix is a decentralized borrowing protocol built on Hyperliquid L1 that operates as an officially licensed Liquity V2 fork. Users deposit HYPE, UBTC, or LSTs as collateral to mint feUSD — a stablecoin pegged to $1. The HYPE Stability Pool allows feUSD holders to deposit and earn yield from borrower interest, upfront fees, and liquidation gains. For a detailed explanation of the underlying Liquity V2 mechanics (stability pool design, redemption logic, and liquidation process), see our Liquity V2 ETH Stability Pool report.
Key differences from Liquity V2:
- Deployed on Hyperliquid L1 (HyperEVM) instead of Ethereum mainnet
- Primary collateral is HYPE (Hyperliquid's native token) rather than ETH
- Additional collateral types: UBTC and HYPE LSTs (kHYPE, wstHYPE)
- Mints feUSD instead of BOLD
- System-wide mint caps to prevent over-leveraging (not in original Liquity V2)
- Admin controls for parameter adjustments and an emergency pause mechanism
- Uses Hyperliquid's Native Oracle with Pyth/Redstone as fallback (instead of Chainlink)
Felix was co-founded by Charlie (also founder of Anthias Labs, a risk monitoring firm). The protocol received an exclusive license from Liquity AG to deploy Liquity V2 on HyperEVM. Felix contributors come from Three Sigma, an auditing and engineering firm that has worked with zkSync and Maple. The protocol has grown to ~$440M TVL with ~$76M feUSD market cap, making it one of the largest native money market dApps on Hyperliquid.
Basic Information
Fundamentals
TVL
APR
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Liquidity
Not calculated yet
Liquidity analysis will be available soon
Strategy
The HYPE Stability Pool follows the same mechanics as Liquity V2's Stability Pool, adapted for the Hyperliquid ecosystem:
- Acquire feUSD
- Mint feUSD by depositing HYPE, UBTC, or LSTs as collateral and opening a borrowing position
- Or purchase feUSD on Hyperliquid DEX secondary markets
- Borrowers set their own interest rate — positions with the lowest rate are redeemed first when feUSD < $1
- Deposit feUSD into the HYPE Stability Pool
- Deposit feUSD to the HYPE-collateral Stability Pool
- Your feUSD backs liquidations of HYPE-collateralized borrowing positions
- Depositors receive ~70% of the interest generated from borrows against HYPE collateral
- Earn yield from three sources
- Streaming borrower interest: ~70% of interest paid by HYPE-collateral borrowers flows to Stability Pool depositors
- Upfront fees: A share of one-time fees charged when positions are opened
- Liquidation gains: When borrowing positions are liquidated, your feUSD absorbs the debt and you receive HYPE collateral at a discount — capturing the liquidation premium
- Withdraw anytime
- Withdraw feUSD from the Stability Pool at any time — no lock-up period
- Claim accumulated HYPE from liquidation gains separately
- Swap feUSD back to HYPE or other assets on Hyperliquid DEX
Yield Source
Yield sources mirror Liquity V2's Stability Pool model, adapted for HYPE collateral on Hyperliquid:
- Borrower interest (~70% share): Borrowers who mint feUSD against HYPE pay a user-set interest rate. Approximately 70% of this interest is distributed to HYPE Stability Pool depositors as streaming yield
- Upfront borrowing fees: One-time fees charged when borrowers open or adjust positions, partially distributed to Stability Pool depositors
- Liquidation premiums: When HYPE-collateralized positions fall below the minimum collateral ratio and are liquidated, Stability Pool depositors absorb the feUSD debt and receive the underlying HYPE at a discount — the premium is typically 5-10%+ depending on the liquidation penalty
Yield characteristics:
- Base APY: ~4-5% from streaming borrower interest under normal conditions
- Variable component: Liquidation gains are event-driven and can significantly boost returns during HYPE price drops
- Market-driven rates: Borrowers choose their own interest rate, creating a competitive market that adjusts to demand
- HYPE exposure: Liquidation gains are paid in HYPE, adding directional exposure to your portfolio
All yield is organic — derived from borrower demand and liquidation mechanics rather than token emissions or external incentives. This matches Liquity V2's sustainable yield design.
Strategy Limits
Deterministic Constraints
- Liquidation gains are paid in HYPE, not feUSD — you receive volatile collateral rather than stablecoins
- Yield depends on borrowing demand — low utilization means lower interest income
- System-wide mint caps limit total feUSD supply and may restrict new deposits during high demand
- Only available on Hyperliquid L1 (HyperEVM) — not on Ethereum mainnet
Probabilistic Constraints
- During sharp HYPE price drops, liquidation gains can be substantial but you receive a volatile asset at discounted prices that may continue declining
- feUSD may trade below $1 on secondary markets during low demand or market stress
- HYPE is a relatively newer L1 token — more volatile and less liquid than ETH, increasing liquidation frequency but also collateral risk
- Hyperliquid L1 is a newer chain with less battle-testing than Ethereum mainnet
Underlying Assets/Allocations
Risk Analysis
Potential Risks
As a Liquity V2 fork, Felix inherits the same Stability Pool risk profile with additional risks specific to the Hyperliquid deployment:
- HYPE Price Crash Risk - During sharp HYPE declines, your feUSD is converted to HYPE at a discount — if HYPE continues falling, the received collateral may be worth less than the feUSD absorbed
- Collateral Volatility Risk - HYPE is newer and more volatile than ETH; liquidation cascades may be more frequent and severe, with less market depth to absorb selling pressure
- Hyperliquid Chain Risk - Network congestion, validator issues, or chain-level bugs could delay liquidations or disrupt Stability Pool operations
- Smart Contract Risk - Despite audits by Dedaub, Coinspect, Recon, and Three Sigma, Felix's modifications to Liquity V2 (mint caps, admin controls, pause mechanism, custom oracles) introduce new code not covered by Liquity V2's original audits
- Oracle Risk - Multi-oracle setup (Hyperliquid Native + Pyth/Redstone fallback) with composed price paths for LSTs; oracle failures or stale prices could lead to incorrect liquidations or missed liquidations
- feUSD Depeg Risk - feUSD may trade below $1 on secondary markets during low demand; the redemption mechanism depends on sufficient arbitrageur activity on Hyperliquid
- Admin Key Risk - Unlike immutable Liquity V2, Felix has admin controls for parameter changes and emergency pause; compromised or misused admin keys could affect protocol operations
- LST Withdrawal Queue Risk - kHYPE has a 7-day withdrawal queue that can delay arbitrage and allow prices to drift, affecting liquidation accuracy for LST-collateralized positions
Risk Analysis (3rd Parties)
Summary
Felix's HYPE Stability Pool is a Liquity V2 fork deployed on Hyperliquid L1, offering ~4-5% base APY from borrower interest plus event-driven liquidation gains. The protocol holds an official Liquity AG license, has been audited by Dedaub, Coinspect, Recon, and Three Sigma, and maintains active risk monitoring via Hypernative and Anthias Labs. Felix adds safety features over Liquity V2 including mint caps, emergency pause, and admin controls. However, these same admin controls sacrifice Liquity V2's immutability guarantee. The primary additional risks versus Liquity V2 stem from HYPE being a newer, more volatile collateral asset than ETH, Hyperliquid being a less battle-tested chain than Ethereum, and the multi-oracle architecture introducing complexity. The protocol has grown rapidly to ~$440M TVL and ~$76M feUSD market cap. Users familiar with Liquity V2's Stability Pool model should carefully weigh the additional chain and collateral risks specific to the Hyperliquid deployment.
This protocol is an officially licensed Liquity V2 fork. See our Liquity V2 report for base protocol risk analysis.
Multiple Audits: Felix's smart contracts were audited by Dedaub (December 2024), Coinspect, and Recon. Additionally, Three Sigma conducted a focused price-feed audit (July 2025) finding 2 medium-severity issues (hidden USDC peg dependency and misaligned oracle deviation thresholds), both resolved. Certora performed formal verification on Liquity V2's core contracts. An active bug bounty is live on Immunefi.
Active Risk Monitoring: Felix integrates Hypernative for real-time security monitoring (analyzing mempool transactions and smart contracts for potential exploits) and Anthias Labs for ongoing monitoring of feUSD peg health, on-chain metrics, and DEX liquidity. This provides early warning capabilities beyond standard audit coverage.
Safety Additions Over Liquity V2: Felix added system-wide mint caps, admin parameter adjustment controls, an emergency pause mechanism, and Stability Pool safeguards — providing additional risk management levers not present in the immutable Liquity V2 base code.
HYPE Collateral Volatility: Unlike Liquity V2 on Ethereum (where ETH is the primary collateral), Felix uses HYPE — a newer, more volatile L1 token. HYPE has less market depth and trading history than ETH, meaning liquidation cascades could be more severe. kHYPE's 7-day withdrawal queue can delay arbitrage, allowing prices to drift below canonical value during stress.
Hyperliquid Chain Risk: Hyperliquid L1 is a significantly newer and less battle-tested chain than Ethereum. It has a smaller validator set, less decentralization, and less time in production. Network congestion could hamper timely liquidations — a critical dependency for Stability Pool safety. The entire Hyperliquid DeFi ecosystem is younger and less liquid than Ethereum's.
Admin Controls (Trade-Off): While Felix's admin controls (pause mechanism, parameter adjustments) provide safety benefits, they also introduce centralization risk not present in the immutable Liquity V2. Admin keys could theoretically be compromised or misused. This is a deliberate design trade-off: more operational flexibility at the cost of Liquity V2's immutability guarantee.
Oracle Complexity: Felix uses Hyperliquid's Native Oracle with Pyth and Redstone as fallbacks, plus composed price paths for LSTs (kHYPE, wstHYPE). Three Sigma's audit found medium-severity issues in oracle deviation thresholds and a hidden USDC peg dependency — both fixed, but the multi-oracle architecture with composed price feeds is inherently more complex than Liquity V2's Chainlink-based setup.