Unchained – Uneasy Money: Hyperliquid's Dilemma After 10/10: Protect Itself or Its Users?

Episode 954, November 21, 2025

Episode Overview

In this episode of "Uneasy Money"—hosted on the Unchained Podcast feed—DeFi OGs Kane Warrick, Luca Netz, and Taylor Monahan discuss the fallout from the infamous "10/10" Hyperliquid liquidation event and dig into broader questions about decentralized trading venue design, risk, and incentive alignment. Along the way, they reflect on the return of crypto ICOs, the psychological and market impacts of airdrops versus token sales, and the risks in novel yield protocols like Athena. The conversation is candid, technical, and laced with first-hand builder war stories.

Key Discussion Points and Insights

1. The Return of the ICO Meta

[03:07 – 19:03]

• ICOs Resurgence: The hosts remark on the recent surge in ICOs, comparing modern launches (e.g., Mega ETH, Monad, Aztec) to the wild 2017–2018 era.
• Coinbase’s Involvement: Coinbase's foray into ICO facilitation adds regulatory legitimacy and perceived safety for participants, but also raises expectations about downside risk.
  • "Coinbase doing it feels like you're safe and that you're not going to get like popped four years from now… If I'm not allowed to do it, then, like, what are you doing letting this huge hundred billion dollar publicly traded company, you know, enabling me to do it." – Luca Netz, [05:01]
• Valuation Creep: New ICOs are priced far higher (FDVs in the hundreds of millions or billions), cutting out the life-changing multiples accessible in the early days.
  • "This is the equivalent of like an IPO that some like OpenAI IPOs at a trillion dollars and it's like, cool, okay… there isn't that kind of early stage sense of you're getting in at a cheap price." – Kane Warrick, [08:02]
• Historic Anecdotes: They give a detailed breakdown of the EOS and Gnosis ICO mechanisms, including Dutch auctions and bizarrely protracted fundraising.
• Mechanism Evolution: New launch platforms (Sonar, Echo), designed by veterans like Kobe, attempt to mitigate some of the perverse incentives (gas wars, FOMO).

2. Airdrop vs. ICO – The Pudgy Penguins Example

[15:17 – 19:10]

• Luca Netz, as the founder of Pudgy Penguins, discusses the rationale for Pengu’s airdrop launch versus doing an ICO.
  • "The story of pudgy penguins is that it's the mascot and based crypto and the People's Coin… conceptualized through the form of generosity… not taking." – Luca Netz, [15:46]
• Aligning a token’s launch with its narrative and values is as important as mechanics and fundraising optimization.

3. Psychoeconomics and User Behavior in Token Distributions

[21:30 – 23:56]

• The difference between receiving a token for free (airdrop) versus having skin in the game (ICO participation) influences user mindset, loyalty, and willingness to hold.
  • "The difference there is that you have bought a thing… you, you feel like you made a good investment that went up and therefore you want to hold on to it versus someone gave you free money…" – Kane Warrick, [22:01]

4. The Spectacle and Risks of Early ICOs

[26:17 – 28:13]

• Much of the capital raised during early ICOs was in ETH, subject to wild price swings, which threatened project runway and led to existential crises for teams.
  • "We raised 30,000 ETH at $980. By the time we got to 2018, if we had done nothing, it's worth $3 million." – Kane Warrick, [27:59]
• The necessity of rapid iteration and aggressive risk-taking to stay relevant in crypto, even at the expense of financial runway.
  • "You gotta put it all on the line, because if not the community, the space will chew you up and spit you out." – Luca Netz, [30:37]

5. The Hyperliquid 10/10 Crisis: Systemic Risk and Venue Design

[32:46 – 49:06]

• Event Recap: The "10/10" event saw cascading liquidations across exchanges, with Hyperliquid’s design prioritizing the exchange’s viability over user protection.
  • "They made a decision, Hyper Liquid made a decision to protect the venue, to protect the exchange at the expense of traders…" – Kane Warrick, [34:44]
• The Human Toll: Well-known traders, such as "The White Whale," left Hyperliquid, citing the devastation the event wrought for them and their followers.
  • "Across the industry, everyone's doing victory laps, there's zero bad debt, the liquidations process flawlessly… but like, there's like dead bodies everywhere, pros." – Taylor Monahan, [36:54]
  • "This is the first time in crypto that I have multiple people message me saying, it's over for me. Right? Can I have money? Can you loan me money?" – Luca Netz, [40:05]
• Design Dilemma: There’s a tension: Protecting the protocol from catastrophic failure often comes at the expense of user experience and fairness.
• Alternate Approaches: Some venues (e.g., Drift) use softer, time-weighted liquidations and oracle-based safeguards, but at the risk of introducing technical fragility or bad debt.
• Market Impacts and Incentives: Price wicks often induce cascading, unfair liquidations—raising fundamental issues of "real price" discovery in fast, thin markets.

6. Competition & Evolution in Venue Design

[49:06 – 54:15]

• Hyperliquid’s Position: Still has no serious like-for-like competitor, but the team’s bias towards protocol safety could prove a future liability.
  • "I think this is what is going to be really interesting, right, is like, okay, so now 1010 has happened. A bunch of people lost big time. Moving forward, there is some amount of competition in this space, right? Hyper Liquid, they sprinted and blew this market open… Some of those [upstarts] are going to be good enough on the technicals and… innovative…" – Taylor Monahan, [49:08]
• Design Arms Race: The cycle of innovation, fork-and-tweak, and user migration is inevitable; new venues may win user trust with stronger user protections, but risk collapse if under-designed.
  • "There will be an exchange, I promise you, that turns up and says we are so much better for our users… and we haven’t really thought it through… This exchange will last for like [minutes]." – Kane Warrick, [51:00]

7. Yield-Bearing Stablecoins and Multicoin’s INA Bet

[54:15 – 67:39]

• Multicoin on INA: The crew discusses Multicoin Capital’s investment in INA (Athena), a tokenized eth-basis trade product, marking a departure from their "back the killer, not the leader" VC playbook.
  • "It’s quite funny to me that multicoin chose to invest in INA over trying to fund an INA killer because that was their M.O. for a really long time." – Kane Warrick, [56:26]
• INA/Yield Protocol Risk: The inherent risks in delta-neutral basis products, especially during market dislocations (duration/maturity mismatch, ad-hoc hedging unwind, exchange risk).
  • "They need to unwind those positions. So even though in theory all the money’s there… what happens if there is some huge ADL event… ADL means: we don’t have enough money to pay the winners…" – Kane Warrick, [64:02]
• Duration/Redemption Risk Parallels: Just like with Lido (stETH), there are scenarios where users may need instant liquidity but underlying assets are illiquid or slow to exit.

Notable Quotes & Memorable Moments

• On ICOs shifting from open-for-all to exclusive, high-priced sales:
  "ICOs, crazy times." – Kane Warrick, [13:05]

• On High-Stakes Crypto Building:
  "I will plow this thing into the ground. And he was just like, I don’t even know what to say. You're cy[cho]." – Kane Warrick, [29:33]
  "You gotta put it all on the line… the space will chew you up and spit you out. You don't have years to figure it out." – Luca Netz, [30:37]

• On the fairness of liquidations after 10/10:
  "How is that an exchange? How if you're an exchange, how is that not your biggest priority to make sure that doesn't happen again, like, what priority is bigger than that, Kane?" – Luca Netz, [43:06]

• On the protocol vs. user protection tradeoff:
  "If there's a 5% chance that the exchange blows up… or a 5% chance that a bunch of my best customers have their brains blown out, [the founder’s] like, yeah, sorry about your brains." – Kane Warrick, [48:30]

Important Timestamps & Segments

• [03:07] – ICO Meta Returns: Price discussion, sale mechanics, Coinbase entry
• [08:48] – Explainer: EOS and Gnosis ICOs, Dutch Auctions
• [15:17] – Pudgy Penguins: Why airdrop, not ICO?
• [21:30] – Psychological difference between airdrop & ICO participation
• [26:17] – The runway risks of raising in ETH, founder war stories
• [32:46] – Hyperliquid’s 10/10 event: cascade, system design, user impact
• [36:54] – The human toll: testimonials, DMs, forced sales
• [43:06] – Demanding exchange accountability for unfair liquidations
• [49:08] – Venue competition, potential for user-driven design pivots
• [54:15] – Multicoin's INA bet, yield stablecoin risks, basis trade mechanics

Tone & Language

The hosts are seasoned, blunt, and frequently self-deprecating, using crypto-native jargon and recounting their own hard lessons with humor and candor.

Takeaway

This episode provides a granular, inside-the-arena look at how the wildest events in onchain trading impact both builders and users—and lays bare the trade-offs and realities of designing protocols in a ruthlessly efficient, pathologically risky, and still human DeFi ecosystem.