The Hyperliquid governance process is voting to formally recognize roughly $1 billion of HYPE tokens held in the protocol’s Assistance Fund as permanently sidelined, clarifying the token’s effective supply. The proposal, driven by the Hyper Foundation, follows that these tokens are already stuck in a system address lacking a private key and seeks validator agreement to treat them as “burned”.
The move is intended to align reported supply metrics with the protocol’s operational state. It targets formal recognition rather than initiating an on-chain destruction transaction.
Assistance Fund mechanics and supply impact
The Assistance Fund automatically converts the bulk of protocol revenue into HYPE and routes those tokens to a designated system address. Protocol fee routing is reported between 93% and 99% of revenues; those repurchases accumulate in an address intentionally designed without an associated private key (0xfefefefefefefefefefefefefefefefefefefe). At current valuations the fund contains about $1 bn worth of HYPE, roughly 37 million tokens, which the proposal says represents more than 10% of circulating supply.
In this context, “burn” is a formal recognition that tokens will be removed from circulating-supply calculations rather than an on-chain destruction transaction. The vote does not produce a new burn transaction; it aims to bind validators to never authorize a protocol upgrade that could access the system address, thereby aligning reported supply metrics with the protocol’s operational state.
Governance vote, timeline and market implications
The governance process is a stake-weighted validator decision with specific deadlines. Validators must signal by December 21, 2025 at 04:00 UTC; a final stake-weighted consensus is scheduled for December 24, 2025 at 04:00 UTC. A “Yes” outcome would instruct indexers, exchanges and analytics to exclude the Assistance Fund HYPE from circulating and total supply figures on a lasting basis. Native Markets — the issuer of Hyperliquid’s USDH stablecoin — has said that 50% of USDH’s reserve yield, which is converted into HYPE and routed to the Assistance Fund, would also be formally recognized as burned if the vote passes.
Market and institutional implications cited by the proposal include reduced perceived selling pressure, a tighter effective supply and lower Fully Diluted Valuation (FDV) calculations. The change is presented as a step toward clearer on-chain economics that institutional investors demand; one referenced analysis estimated Hyperliquid generated $874 million in fees year-to-date and that 99% of those fees were used to repurchase HYPE. For traders and crypto treasuries, clearer supply metrics can affect risk models, treasury accounting and liquidity planning.
The measure relies on a social consensus enforced by validator commitments rather than a fresh technical action. That raises a governance risk vector: the permanence of the sidelining depends on continued validator alignment and the absence of a future protocol hard fork that reverses the status. Treasurers and institutional desks should factor that conditionality into execution and valuation decisions.
The vote aims to resolve ambiguity over 37 million HYPE held in an inaccessible address by formalizing their exclusion from supply figures. The next verified milestone is the final stake-weighted consensus on December 24, 2025 at 04:00 UTC, a step designed to sharpen price discovery and institutional comparability.
