A governance proposal launched by the Hyper Foundation on December 17, 2025, seeks to permanently sideline roughly $1 billion worth of HYPE held in Hyperliquid’s Assistance Fund, a pool estimated at 37 million HYPE or about 13.7% of the circulating supply. The Hyperliquid governance vote aims to reclassify that token pool as non‑circulating rather than execute an on‑chain burn, a move intended to clarify supply metrics and reinforce a deflationary narrative. The initiative centers on a supply‑status change to support clearer accounting and a tighter tokenomics profile.
Mechanism and timeline of Hyperliquid governance vote
The proposal does not perform a conventional on‑chain destruction; instead it requests a binding governance decision to treat tokens held at system address 0xfefefefefefefefefefefefefefefefefefefefefefe as permanently inaccessible. That address currently lacks a private key, making the tokens mathematically unreachable except via a protocol‑level hard fork, and the change would formalize their non‑circulating status through social consensus rather than cryptographic erasure.
Validators are asked to signal intent by December 21, 2025 at 04:00 UTC, with token holders aligning stake until the final tally on December 24, 2025 at 04:00 UTC, and the outcome requires a two‑thirds majority of staked tokens to pass. In this context, a token burn is being proposed as a formal reclassification of status—treating the assets as non‑circulating—rather than as an on‑chain eradication event.
Tokenomics, governance and institutional implications
Historically, the Assistance Fund has been the primary source of HYPE buybacks, receiving between 93% and 100% of trading‑fee inflows for open‑market purchases designed to manage supply. The present proposal represents a strategic departure from continuous market intervention toward a definitive supply adjustment by excluding the fund from circulating and total supply calculations. The initiative advances two stated objectives: to entrench a more restrictive, demonstrably deflationary tokenomics model and to remove ambiguity around circulating supply metrics—an issue of rising importance for institutional counterparties assessing custody, valuation and market‑manipulation risk.
Proponents argue the reclassification will lower the effective Fully Diluted Valuation (FDV) and increase perceived scarcity, thereby strengthening HYPE’s functional roles in governance, staking and fee‑discount mechanisms. Fully Diluted Valuation (FDV) is the market value calculated if all existing tokens were considered outstanding. By clarifying supply accounting, the Foundation expects to reduce the regulatory and operational uncertainties that can deter institutional allocation, such as risk of unforeseen token unlocks or unclear treasury access.
The proposal shifts the mechanism of legitimacy from an on‑chain cryptographic action to a governance‑level social consensus among validators; access to the tokens would still be technically possible only through a hard fork. That design raises operational considerations for custodians and VASP operators evaluating counterparty and jurisdictional risk, record‑keeping practices and contingency plans should a governance reversal or protocol change be attempted in the future.
The vote reinterprets a treasury control problem as a governance decision intended to produce a lasting supply contraction and greater transparency. Its approval or rejection will materially affect token accounting, perceived scarcity and institutional appetites for HYPE. Next verified milestone: the validators’ and stakers’ decision that will determine whether the Assistance Fund is formally excluded from circulating supply.