Hyper Foundation's Hype token burn governance plan may destroy more than 10% of the token supply.

Hyper Foundation is advancing a governance initiative that will formally burn popular tokens and permanently tighten on-chain supply, pending validator approval.

Hyper Foundation seeks to classify aid fund hype as burned funds.

The Hyper Foundation has introduced a governance proposal to treat all hype stored in the Hyperliquid Aid Fund as permanently removed from circulation. The plan was announced on [date], December 17, 2025, requiring validators to formally recognize that these tokens have in fact been burned and should not be counted in circulating or total supply.

According to the proposal, validators will vote on whether to acknowledge that the tokens in the hype aid fund are unusable. Additionally, the Foundation emphasized that these tokens are locked in a system address that has never been controlled by a private key. Therefore, no on-chain transaction is needed to change their status.

As a result, the validators’ decision will focus on accounting and governance rather than technical execution. However, the outcome will affect long-term expectations regarding the HYPE supply and the protocol’s economic design.

How the aid fund operates and why the tokens are unusable

The aid fund is sourced from automated mechanisms embedded in the Hyperliquid L1 execution layer. Transaction fees generated within the protocol are converted into HYPE and then routed to a public system address. This address has no associated private key, so unless a protocol-level change is made, the accumulated balance cannot be accessed.

In practice, this address already functions as a burn destination, since neither the Hyper Foundation nor validators can transfer these tokens under current rules. Nevertheless, the new proposal aims to establish a binding social consensus that no future upgrade will unlock these funds, thereby providing the market with a stronger guarantee of long-term scarcity.

A “yes” vote will confirm that the protocol will never authorize an upgrade to access the aid fund balance. The Foundation stated that no software modification is required, as these tokens are mathematically irreversible; the issue is solely their classification in supply metrics.

Community estimates indicate that the aid fund holds approximately 37 million hype. Based on these figures, the balance represents over 10% of the current HYPE circulating supply, and if excluded, will also be removed from future total supply calculations.

Validation process and governance decision dates

The decision will be made through a stake-weighted validator process lasting several days. Validators must first declare their intended vote on the governance forum by December 21, 2025, 04:00 UTC. This early signaling phase is intended to give delegators a clear understanding of validator positions.

Afterwards, token holders can delegate their staked tokens to the validators they support. Delegation will remain open until December 24, 2025, 04:00 UTC. The final result will be determined and tallied based on validator stake.

If the validator vote to burn the proposal passes, the aid fund HYPE will be considered permanently burned tokens for all official calculations. However, if the measure fails, these tokens will remain unusable but will continue to be counted in total supply metrics.

The Foundation emphasized that this vote is intended to clarify whether the aid fund balance should be permanently excluded from supply. The Foundation also stressed that regardless of the outcome, unless a future governance process explicitly authorizes a protocol change, these tokens will remain locked in the same unspendable address.

Impact on HYPE tokenomics and future proposals

Approving the current hype token burn plan would effectively cement a stricter supply model for HYPE. Even under extreme market or technical conditions, the aid fund balance could no longer be used for grants, development programs, or emergency interventions.

Furthermore, this move continues the previous community debate around supply reduction. In September 2025, another supply reduction proposal suggested reducing HYPE’s total supply by 45%. That initiative did not progress, but it highlighted ongoing social interest in stronger deflationary pressure.

The new approach focuses on clarifying how the existing aid fund balance is treated in the economic model. Nevertheless, it still marks a broader shift toward emphasizing long-term scarcity and a predictable tokenomics model, rather than retaining large reserves for discretionary use.

The Foundation also noted that the outcome of this vote could serve as a reference for future governance initiatives regarding token issuance, fee allocation, and other token design mechanisms. However, any subsequent changes would require a separate proposal and validator approval.

Growth of Hyperliquid and the role of transaction fees

Hyperliquid emerged in 2025 as the on-chain perpetual contract trading platform with the highest trading volume and fee revenue. Due to the protocol’s automatic conversion mechanism, a significant portion of collected fees is continuously used to purchase HYPE tokens, with a substantial share flowing directly into the aid fund.

As Hyperliquid’s usage expands, this mechanism has steadily increased the aid fund’s balance. As a result, the accumulated tokens have become an important component of the asset’s overall supply structure. The Foundation believes that clarifying the status of these tokens is essential for building a transparent economic model.

Over time, this mechanism of value automatically flowing into the fund has been crucial to the evolution of HYPE’s supply dynamics. In addition, by deciding whether these tokens are part of active supply or have been effectively removed, the validator community will help define how future market participants interpret HYPE’s scarcity.

In summary, the latest governance proposal from Hyper Foundation aims to coordinate social consensus, economic models, and on-chain mechanisms around the aid fund. The outcome of the validator vote will determine whether more than 10% of HYPE tokens are formally and permanently removed from circulation.