2026 Encryption Major Shift: It's Better to Make Real Money than Just Tell Stories

null

Author: Four Pillars

Compilation: Vernacular Blockchain

Key Points

HIP-3 removes the technical barriers to launching new perpetual contract markets and implements a demand-driven market creation model. This transforms decentralized trading platforms (DEX) from a stock game (PvP) dynamic with centralized trading platforms (CEX) to a PvE expansion path that extends to non-crypto assets and real-world data.

The market is shifting from narrative-driven growth to a cash flow-driven, sustainability-oriented valuation system. Only a few projects with real income flowing into Tokens (such as Hyperliquid and Pump.fun) may dominate the next cycle.

The prediction market transforms previously private or illegal gambling activities into public on-chain data and serialized data of collective expectations. This creates real-time probability signals and alternative data that financial institutions, data providers, and AI models can use as an economic mechanism for information aggregation and probability estimation.

Regulation has created a fragmented system: prediction markets are becoming institutionalized in the West, while being suppressed in Asia. This constitutes a major short-term constraint, but also paves the way for prediction markets to evolve into “infrastructures that convert collective beliefs into information and markets.”

1. How to Activate a New Growth Pattern in PvE Style for HIP-3

The business model of trading platforms is undergoing a transformation.

Centralized Exchange (CEX) maintains its position due to its structural advantages based on institutional trust (fiat on-ramps, custody, and regulatory access). This makes it a natural entry point for institutional capital and provides stability in terms of liquidity and operational reliability. However, the same regulatory obligations, internal controls, and custody infrastructure also result in high fixed costs. As a result, the experimentation and decision-making speed of CEX are slower, limiting its pace of innovation.

In contrast, decentralized exchanges (DEX) grow through incentive structures. They natively coordinate rewards between LPs, traders, and builders on-chain. However, in the past, launching a new trading platform or market required teams to build matching engines, margin and clearing systems, and oracles from scratch. This created a very high technical barrier to entry.

HIP-3 removed this barrier.

Hyperliquid now allows anyone who stakes 500,000 HYPE to deploy their own perpetual contract market using the same CLOB engine, margin logic, and liquidation system as the main site. The technical burden of building a trading platform has vanished. Market creation has become a standardized on-chain deployment process that requires capital and reliable oracles, rather than an entire engineering team. The threshold has shifted from technical capability to capital and oracle design.

This change is not just an improvement in efficiency; it also changes the locus of innovation.

Builders can now experiment with different liquidity structures, fee designs, oracle definitions, and leverage limits without having to rebuild the backend. The challenge has become identifying the “demand surface” (i.e., how many people want to speculate on something) and anchoring it to reliable oracles. In fact, the market can now consist of three components: market + oracle + demand.

This expands the scope of marketable assets.

As described by Alvin Hsia, the founder of Ventuals, the “Fat Head” consists of asset classes that are already covered by traditional finance (index products, foreign exchange, commodities); the “Chunky Middle” includes equity raised, real-world datasets, and commodity indices; while the “Long Tail” extends to niche signals such as local real estate prices, product premiums, or cultural trend indices. Traditional finance cannot easily commoditize these data points, but on-chain settlement systems can. HIP-3 actually opens up a demand-driven market creation model.

Source: X (@alvinhsia)

This transforms DEX from a competitor of CEX into a structurally completely different entity.

HIP-3 is no longer focused on competing for fixed crypto-native liquidity (PvP dynamics), but allows DEX expansion into non-crypto assets and real-world data. This brings new traffic, new users, and new forms of demand—a PvE dynamic where the market size continues to grow rather than being redistributed. It also deepens revenue at the protocol layer.

A clear example is Hyperliquid's XYZ100 market, which surpassed a cumulative trading volume of 1.3 billion dollars within three weeks of launch, demonstrating the rapid scaling of new asset classes once the infrastructure is standardized.

In short, CEX continues to offer stability and regulatory access, but the perpetual DEX based on HIP-3 has gained advantages in speed, experimentation, and asset expansion. They are not substitutes but rather distinctly different growth paths. The competitive advantage of trading platforms will shift from backend engineering to market design and user experience, and leadership will depend on which protocol can translate this into sustainable value.

2. Shift from narrative-driven valuation to cash flow-driven valuation

The market in 2025 is fundamentally different from previous cycles.

The once abundant liquidity environment that boosted all assets has disappeared. Capital is now flowing selectively. Prices reflect actual performance more than narratives, and projects that cannot generate income are being naturally squeezed out. Most altcoins have yet to recover their 2021 highs, while protocols with clear revenue have shown relative strength even during market corrections.

The arrival of institutional capital has solidified this transformation.

The traditional financial (TradFi) framework is being directly applied to the cryptocurrency sector. Revenue, net profit, expense generation, user activity, and profit distribution are becoming the primary indicators for project evaluation. The market is moving away from relying on “storytelling” or anticipated growth for valuation. Only those projects that have real revenue flowing back to the Token can achieve higher market valuations.

In this context, Uniswap's recent activation of the proposal for the Fee Switch is symbolic. A flagship DeFi protocol explicitly chooses to link cash flow to token value, signaling that the fundamentals (rather than narratives) are now at the core of market pricing.

A number of clear frontrunners have emerged.

Hyperliquid (HYPE) and Pump.fun (PUMP) are typical cases:

Hyperliquid is the largest perpetual DEX in terms of trading volume, open interest (OI), and number of traders. As of November 2025, the cumulative trading volume has reached $3.1 trillion, with an open interest of $9 billion. It is worth noting that Hyperliquid uses 99% of the perpetual contract transaction fees to buy back HYPE, directly linking the protocol's cash flow to the Token's value. The total buyback amount has reached 34.4 million HYPE (approximately $1.3 billion), accounting for about 10% of the circulating supply.

Pump.fun is a leading meme coin trading platform, generating approximately $1.1 billion in cumulative fees. Its buyback program has purchased around 830,000 SOL (approximately $165 million), accounting for 10.3% of its (estimated) circulating value.

Other projects also demonstrate strong revenue momentum:

Aave (AAVE) and Jupiter (JUP) continue to generate stable and increasing cash flow. Aave's annual revenue is projected to grow from $29.75 million in 2023 to $99.39 million in 2025. Jupiter's revenue growth is even more remarkable, surging from $1.42 million in 2023 to $246 million in 2025.

Coinbase (COIN), despite being a publicly listed stock, benefits from the increasingly clear path of token issuance on the Base chain. Coinbase has broadened its revenue structure: subscription and service revenue reached $746.7 million in Q3 2025 (a quarter-over-quarter increase of 13.9%).

This transformation is spreading from individual dApps to L1 and L2 ecosystems. It is no longer sufficient to rely solely on technical expertise or investor endorsements. Chains with real users, real transactions, and protocol-level revenue are gaining stronger market recognition. The core evaluation metrics are shifting towards the sustainability of economic activities.

In summary, the market is undergoing a structural transformation. The market in 2026 may be reorganized around these performance-supported participants.

3. Quantifying market expectations through predictive markets

Prediction markets are an experiment that transforms previously private or illegal betting activities into public on-chain data. The core idea is that they quantify people's beliefs about the probability of future events by having them invest real money. This makes them not only venues for betting but also economic mechanisms for aggregating information and estimating probabilities.

The prediction market has grown rapidly since 2024: by October 2025, the weekly nominal transaction volume is approximately $2.5 billion, with over 8 million weekly trades. Polymarket holds a 70–75% share of the activity, while Kalshi's share has climbed to around 20% after receiving CFTC approval and expanding into sports and political markets.

The uniqueness of prediction market data lies in the fact that polls, social media sentiment, and institutional research are often slow to react and costly. Prediction markets, on the other hand, price expectations in real-time. For example, Polymarket significantly reflects the increased probability of Donald Trump's victory in 2024 well ahead of traditional polls.

In fact, prediction markets create serialized data of collective expectations. These curves can serve as real-time probability signals for political, economic, sports, and technological events. Financial institutions and AI models are increasingly viewing these markets as an alternative data source for quantifying expectations (Alt-data).

Source: Grayscale Research

From an institutional perspective, the prediction market represents not “gamified data”, but rather “financialization of uncertainty”. Since prices reflect consensus probabilities, macro traders can use it to manage risk. Kalshi has already provided markets linked to inflation, employment data, and interest rate decisions, attracting a significant amount of hedging interest.

With the maturity of prediction markets, it has created a new value chain: Market (generating signals) → Oracle (resolving outcomes) → Data (standardized datasets) → Applications (finance, media, AI consumption).

The main barrier currently is regulation:

Asia: Regions such as South Korea, Singapore, and Thailand generally take a prohibitive stance, classifying it as illegal gambling and penalizing users.

Western: The United States regards prediction markets as “event contracts” regulated by the CFTC. Kalshi operates legally with a DCM license, while Polymarket plans to re-enter the U.S. market in 2025 through the acquisition of QCX.

This regulatory divergence has led to a split: the West is moving towards institutionalization, while Asia is facing repression. Although this is a short-term limitation, in the long run, it is predicted that markets will evolve into infrastructures that convert collective beliefs into information. They will shift from being “markets that interpret information” to “markets that produce information,” reinforcing a world where “price becomes the primary means of expressing collective expectations.”