Kinetiq, the protocol controlling 82.5% of Hyperliquid's liquid staking market, announced Elysium, a Layer 2 chain using HYPE as gas. Half of all sequencer fees will fund KNTQ buybacks and burns, creating a deflationary loop tied directly to chain usage.
Kinetiq unveiled Elysium, a Hyperliquid Layer 2 using HYPE as gas, with 50% of sequencer fees funding KNTQ buybacks and burns.
The protocol, which controls roughly 82.5% of Hyperliquid's liquid staking market, announced the launch on X, stating Elysium will deliver faster block times and higher throughput than the existing HyperEVM environment. KNTQ rose approximately 30% following the announcement.
Elysium's sequencer fee model allocates 25% to developer incentives, 25% to the Kinetiq treasury, and 50% to programmatic KNTQ purchases on the open market, with purchased tokens sent to the Hyperliquid Assistance Fund for burning. The chain will support spot trading, PropAMM deployment, token launches via long-tail AMMs, and perpetual contracts through HIP-3. Native oracles built on optimized Layer 1 precompiles will feed Hyperliquid market data directly into smart contracts, replacing third-party oracle networks with lower-level data feeds.
For HYPE holders, Elysium represents a second major demand driver beyond Hyperliquid's core perpetuals product. For KNTQ holders, every dollar of sequencer fees generated means fifty cents of buying pressure and permanent supply reduction. Elysium is expected to go live soon, with technical specifications for developers and traders to be announced shortly.
Hyperliquid carved out a dominant position in on-chain perpetual futures, but spot trading activity has dropped off and the existing HyperEVM infrastructure has struggled to sustain the throughput and low-cost execution traders expect. When gas fees spike during volatile periods, users leave. Kinetiq's position as critical infrastructure makes it a natural candidate to build the fix.
The choice to use HYPE as the gas token rather than launching a new chain-specific token keeps demand for HYPE intact and avoids fragmenting the token economy. Elysium is designed to channel liquidity and trading activity back into HyperCore rather than competing with it — traders on Elysium would get fast execution while still benefiting from HyperCore's deep liquidity pools.
HYPE traded at $80.86, up 3.15% in the last 24 hours, according to KuCoin data. The launch positions Hyperliquid to evolve from a high-performance trading platform into a broader financial network covering asset issuance, spot trading, derivatives, and DeFi infrastructure. For the broader L2 sector, Elysium's fee model inverts the typical value-extraction dynamic — instead of siphoning activity from the main chain, it routes revenue back into the ecosystem through token burns and developer incentives.
This article is for informational purposes only and does not constitute investment advice.
