Welcome to The Protocol, CoinDesk’s weekly wrap-up of the most important stories in cryptocurrency technology development. I’m Margaux Nijkerk, a reporter at CoinDesk.
In this issue:
- Hyperliquid Reveals HIP-3 Growth Mode, Cuts Fees by 90% to Boost New Markets
- Leading base DEX Aerodrome merges into Aero under major overhaul
- Cloudflare outage sends shockwaves through crypto, renewing Push for DePIN
- DYdX Governance approves buyback increase to 75% of protocol revenue
Network news
HYPERFLUID INTRODUCES HIP-3 SUGGESTIONS: On-chain decentralized exchange Hyperliquid introduced a feature that lets anyone permissionlessly deploy new markets for ultra-low fees in an effort to increase liquidity to encourage new market makers. The upgrade, called HIP-3 growth mode, reduces all-in taker fees by over 90% for newly launched markets and can be activated on a per-asset basis by deployers, permissionless and without centralized gatekeeping. During the upgrade, fees for all-in rates drop from the usual 0.045% to as low as 0.0045%-0.009%. At the highest stake and volume levels, fees can shrink even further, reaching 0.00144%-0.00288%, according to an official post. The upgrade essentially lowers barriers to entry and trading costs with the aim of deepening liquidity and expanding the asset offering on Hyperliquid, strengthening its position as a competitor to centralized avenues. Taker fees are fees charged to traders who remove liquidity from the market by executing orders that directly match existing orders in the order book. To qualify, deployers must set their fee scale – the portion of user trade fees they retain before any discounts, such as those from aligned stablecoin collateral – between 0 and 1. In addition, growth mode markets must avoid overlapping with existing validator-driven perpetuals, preventing “parasitic” volume, and must be separate assets. Excluded examples are crypto-perpetuals, crypto indices, ETFs and assets that closely follow existing markets such as PAXG-USDC gold perp. Growth mode, once turned on for an asset, is locked for 30 days before changes can be made, ensuring market stability. The announcement has spurred excitement on crypto social media, with users calling the growth mode “crazy bullish.” — Omkar Godbole Read more.
AERODROME PURSUES BIG OVERHAUL: Dromos Labs, the core developer behind decentralized exchanges (DEX) Aerodrome on Base and Velodrome on Optimism, announced a major overhaul of its decentralized exchange infrastructure with the launch of Aero, a unified trading system that will replace and merge its existing platforms across both networks, as well as expand to other Ethereum chains. Aerodrome is the leading exchange on Base by volume and fees, and with Aero’s expansion to the Ethereum mainnet in the second quarter of 2026, as well as Circle’s Arc, Dromos Labs aims to position the platform as a central liquidity hub for the wider ecosystem. Aero, which is set to bring faster and cheaper fees to the chain, will focus on Base as its central hub, while expanding liquidity and trading capabilities to other chains. “Just as the world came online, it is now coming on-chain. Aero is at the forefront of a financial system that is better, faster and cheaper than the incumbent,” said Alexander Cutler, CEO of Dromos Labs. — Margaux Nijkerk Read more.
CLOUDFLARE DISRUPTION RENEWS DECENTRALIZATION PUSH: Cloudflare experienced a major outage that translated into widespread service disruptions across thousands of websites and applications. Several large centralized crypto services rely on Cloudflare to help with heavy traffic. BitMEX faced an outage and there was also significant downtime for Telegram-linked blockchain Toncoin. But the fallout spread beyond crypto, with platforms like X and ChatGPT also going down, affecting millions of people. The episode came just weeks after Amazon Web Services (AWS) had an outage that removed access to major blockchains such as Coinbase’s Base chain as well as Infura, which runs a lot of blockchains. The outage sparked conversation about the need to decentralize the infrastructure to keep the Internet running. Some in the crypto world have called for DePIN to become more widely used to combat such problems. DePIN, or Decentralized Physical Infrastructure Networks, uses blockchain incentives to coordinate and reward people for building and maintaining real-world infrastructure. This can be anything from wireless networks to sensors to energy systems; the purpose is not to rely on a central company. Thus, users contribute hardware or services and earn tokens in return, creating an open, community-driven infrastructure layer. — Margaux Nijkerk Read more.
DYDX GOVERNANCE APPROVED BUYBACK INCREASE: The dYdX community voted for an updated buyback program on their governance forum. Under previous governance, 25% of net protocol revenue was allocated to repurchasing DYDX on the open market and then staking the tokens. New proposal #313, which 59.38% of the community approved, sets a course to raise the buyback award to 75% of net protocol fees. This marks a shift in how protocol revenue is distributed and indicates the community’s intent to tie token economic incentives more directly to platform performance. In addition to the 75%, protocol revenue sharing will include 5% to Treasury SubDAO and 5% to MegaVault. DYdX had already launched a buyback program in March 2025, and token emissions were scheduled to drop in June. The increased allocation is therefore part of a wider tokenomics refinement aimed at tightening circulating supply and increasing network security. – Margaux Nijkerk Read more.
In other news
- BlackRock’s spot bitcoin ETF, IBIT, recorded its biggest one-day outflow since trading in January 2024 during a month already marked by record outflows in November, according to Farside data. The ETF achieved $523.2 million in net withdrawals on Tuesday, although the price rose more than 1% as bitcoin rose above $93,000. Franklin Templeton’s ETF, EZBC, and Grayscale’s Bitcoin Mini Trust, BTC, brought in $10.8 million and $139.6 million in inflows, respectively. Still, exchange-traded funds saw net outflows of $372.8 million for a fifth consecutive trading day of net redemptions. November has produced just three days of net inflows, and bitcoin is trading near $90,000, down about 30% from its peak in October. The total net inflow since the launch is now DKK 58.2 billion. — James Van Straten Read more.
- Crypto exchange Kraken raised $800 million in fresh funding, including $200 in an investment from Citadel Securities, to accelerate its efforts to bring traditional financial markets onto blockchain infrastructure, the company said. The round was split over two tranches, with the lead led by institutional investors including Jane Street, DRW Venture Capital, HSG, Oppenheimer Alternative Investment Management and Tribe Capital. A follow-on investment of $200 million came from market-making giant Citadel Securities, which valued Kraken at $20 billion. Founded in 2011, Kraken operates a regulated trading platform offering spot and derivatives markets, tokenized assets, staking and payment services. Its infrastructure is vertically integrated – covering custody, clearing, matching, settlement and wallet services – enabling the company to roll out new financial products quickly while maintaining compliance standards. — Helen Braun Read more.
Legislation and policy
- US senators are in tight negotiations over the language to establish regulated crypto markets, and as they debate the details, Senator Elizabeth Warren is looking to continue to shed light on President Donald Trump’s personal crypto ties. The Massachusetts lawmaker, who is the ranking Democrat on the Senate Banking Committee and a frequent ally, Sen. Jack Reed, sent a letter to Treasury Secretary Scott Bessent and Attorney General Pam Bondi requesting information about reports that Trump-linked World Liberty Financial Inc. sold tokens to “North Korea, Russia and other illegal actors.” Warren and some other Democrats in both the Senate and the House of Representatives have targeted the president’s business dealings with WLFI, saying they pose a significant conflict of interest as his administration seeks crypto-friendly policies that would directly benefit Trump’s financial interests. — Jesse Hamilton Read more.
- Canada’s government managed to pass its federal budget in parliament, which – among many other things – would introduce a stablecoin policy. Parliament narrowly passed Prime Minister Mark Carney’s first budget earlier this week. Deep within the lengthy document is a section that will govern the issuance of stablecoins overseen by the Bank of Canada. There are still other procedural hurdles to specific provisions of the budget, but this marked a major victory for the new government. Echoing many of the points from the recent US law governing issuers of US dollar-backed stablecoins, issuers in Canada must maintain one-to-one reserves “consisting solely of the reference currency or other high-quality liquid assets”, allow immediate redemptions and meet a number of risk management, cyber security, disclosure and governance requirements in times of failure. The Bank of Canada will oversee and maintain the register of approved applicants. — Jesse Hamilton Read more.
Calendar
- 17.-22. November: Devconnect, Buenos Aires
- 11-13 Dec: Solana Breakpoint, Abu Dhabi
- 10.-12. February 2026: Consensus, Hong Kong
- 17.-21. February 2026: EthDenver, Denver
- March 30-Apr. 2, 2026: EthCC, Cannes
- 15-16 Apr. 2026: Paris Blockchain Week, Paris
- 5.-7. May 2026: Consensus, Miami
