Hyperliquid Governance Vote Seeks to Shut Down $1B Assistance Fund Permanently

Hyperliquid’s on-chain governance is a plan to permanently set aside about 40 million HYPE tokens, worth almost a billion dollars, by declaring them effectively destroyed and excluding them from total and circulating supply calculations. 

The came up with this idea to make the status of tokens that are already stuck in a system address official. If Block confirmers and delegated token holders agree, it might make HYPE’s long-term supply profile tighter.

Proposal Targets Assistance Fund

The Assistance Fund is a system-level pool that has traditionally built up HYPE by taking a share of Hyperliquid’s through an automated purchaseback mechanism built into the project’s layer-1 execution environment.

The tokens are stored in a public system address without a . This means they can’t be recovered mathematically without a major protocol upgrade or a hard fork.

The current governance plan doesn’t move any tokens on-chain. Instead, it tries to get everyone to agree that the protocol will never allow an upgrade to get back the balance of the Assistance Fund. A “yes” vote would mean that more than 10% of prospective supply is permanently burnt and removed from future supply and valuation models.

How the Vote Works

A weighted Block confirmer vote is underway until December 24, with an initial deadline of December 21 for Block confirmers to share their views on the governance forum.

Token holders have been urged to give their stake to Block confirmers whose viewpoint they support before the final cutoff. This has turned the process into a proxy struggle over who controls Hyperliquid’s monetary foundation.

The Foundation has made it clear that no code changes are needed if the measure passes because the tokens are already locked and can’t be recovered. This makes the vote more about formal recognition than a technical burn. 

If authorised, the Assistance Fund’s balance would no longer be accessible for awards, or emergency bailouts. This would take away a policy tool that some community members had viewn as a securety net during really poor market conditions.

Analysts Weigh Supply and Governance Impact

later than a year of heated discussion regarding token economics, analysts who have followed Hyperliquid’s past arguments over supply cutbacks and the design of its Assistance Fund argue that the proposal would solidify a more deflationary approach.

According to research notes from companies that reviewed prior ideas, the Assistance Fund is at the heart of economic model. 

The idea was that fee revenue and purchasebacks would assist the fund grow while also harmonising the interests of traders, Block confirmers, and long-term holders. One research group said that steps to tighten supply limits could make investors feel better about the risk of having too much money tied up in large, protocol-controlled amounts. 

However, they also said that permanently sidelining the Assistance Fund would take away the flexibility that might be needed in future times of stress.

They think that the current vote is a “real stress test” of Hyperliquid’s governance. It will demonstrate whether Block confirmers’ decisions align with the community’s overall views or are influenced by major stakeholders and closely related groups.