Kinetiq unveils Elysium L2 for Hyperliquid using HYPE as gas

Kinetiq, the protocol that controls roughly 82.5% of Hyperliquid’s liquid staking market, just announced it’s building an entirely new Layer 2 chain on top of the ecosystem. It’s called Elysium, and it wants to be the high-performance trading layer that Hyperliquid’s existing EVM environment hasn’t quite delivered.

The pitch: faster block times, higher throughput, and native integration with HyperCore, Hyperliquid’s on-chain orderbook engine. The gas token will be HYPE, keeping everything composable with the broader Hyperliquid stack. And for the tokenomics crowd, half of all sequencer fees will flow directly into KNTQ buybacks and burns.

What Elysium actually does

Elysium is designed as a purpose-built execution environment for trading. Its target feature set covers spot trading, a new breed of automated market makers called PropAMMs, token launches, and perpetual contracts.

Elysium’s sequencer fee model is structured with precision. Developers building on the chain receive 25% of fees. Another 25% goes to Kinetiq’s treasury. The remaining 50% funds KNTQ buybacks and burns, creating a deflationary loop tied directly to chain usage.

Elysium also plans to introduce native oracles built on optimized Layer 1 precompiles. Instead of relying on third-party oracle networks to feed price data into smart contracts, the chain would handle that natively at a lower level of the stack, which should mean faster and cheaper data feeds for DeFi applications.

Why Hyperliquid needs this

Hyperliquid carved out a dominant position in on-chain perpetual futures. Spot trading activity on the platform has dropped off, and the existing HyperEVM infrastructure hasn’t been able to sustain the kind of throughput and low-cost execution that traders expect. When gas fees spike during volatile periods, users leave.

Kinetiq’s position makes it a natural candidate to build this fix. With approximately 82.5% of the liquid staking market on Hyperliquid, it already functions as critical infrastructure for the ecosystem. Launching an L2 extends that role from passive staking into active execution.

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 ecosystem’s token economy.

Market reaction and competitive context

KNTQ surged approximately 30% following the announcement, as traders priced in both the new utility for the token and the deflationary pressure from the 50% buyback-and-burn mechanism.

Elysium is designed to channel liquidity and trading activity back into HyperCore rather than competing with it. That bidirectional flow, where the L2 improves the L1’s orderbook, means traders on Elysium would get fast execution while still benefiting from HyperCore’s deep liquidity pools.

For HYPE holders, Elysium represents a second major demand driver beyond the core perpetuals product. For KNTQ holders, the math is more straightforward: every dollar of sequencer fees generated means fifty cents of buying pressure and permanent supply reduction.

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