Felix is a decentralized money market protocol built on Hyperliquid's EVM (HyperEVM), functioning as an authorized fork of the Liquity V2 protocol specifically designed for the Hyperliquid L1 ecosystem. Launched on April 8, 2025, Felix reached $100 million in total value locked within one week and crossed $1 billion TVL by September 2025, making it one of the largest native protocols on HyperEVM. As of Q4 2025, Felix maintains approximately $360-440 million in TVL across its CDP and Vanilla Markets, offering users the ability to mint the feUSD stablecoin against HYPE, kHYPE, BTC, and UBTC collateral while earning yield through stability pools and traditional lending markets.
The protocol addresses a critical challenge in DeFi lending: enabling users to unlock liquidity from their crypto holdings without selling assets or dealing with volatile interest rates. Felix introduces user-set interest rates for CDP borrowers, allowing them to choose their own borrowing costs while managing redemption risk—a departure from traditional utilization-based rate curves used by protocols like Aave. This model creates arbitrage opportunities that drive rates lower than typical market borrow rates while maintaining feUSD's dollar peg through redemption mechanisms.
Felix operates through three core product lines that serve distinct user needs. The CDP market allows leverage traders and yield farmers to mint feUSD at personalized interest rates, with the minimum borrow amount set at 2,000 feUSD per position. Vanilla Markets provide traditional variable-rate lending for assets like USDT0, USDe, USDhl, and HYPE using Morpho's smart contract standard, catering to users who prefer direct asset exposure without redemption mechanics. Felix Vaults offer yield opportunities through stability pools where depositors earn returns from liquidation premiums, protocol fees, and potential Felix incentives.
What Makes Felix Different From Aave and Other Lending Protocols?
Felix differentiates itself through its dual-market structure and user-controlled interest rates. Unlike Aave's utilization-based rates that fluctuate with supply and demand, Felix CDP borrowers set their own interest rates, accepting redemption risk in exchange for potentially lower costs. Historical data shows Felix's median CDP rates have been lower than comparable USDC borrow rates on Aave or Morpho.
The protocol implements a 40% loan-to-value ratio on most collateral types, significantly more conservative than Aave's typical 80-85% LTV. This lower leverage threshold reduces liquidation risk during volatile markets but limits capital efficiency for borrowers. Felix charges no minting or redemption fees on CDP positions, while protocol-level fees (with 25% going to operations) apply to certain actions like early interest rate changes before cooldown expiry.
Felix's stability pool mechanism provides a unique value proposition absent in Aave. When liquidations occur, stability pool depositors absorb borrower debt by burning feUSD and receive the liquidated collateral plus a 5% bonus. This creates yield opportunities during market downturns, with depositors effectively buying HYPE or BTC at a discount. During the protocol's first months in 2025, stability pools proved particularly lucrative for depositors who captured liquidation premiums during volatile periods.
How Felix Works: From Collateral Deposit to feUSD Minting
Users interact with Felix by connecting a compatible wallet (MetaMask, WalletConnect) to the HyperEVM network and depositing approved collateral. For CDP positions, borrowers select their collateral type (HYPE, kHYPE, BTC, or UBTC), deposit the desired amount, and specify how much feUSD to mint while maintaining a collateralization ratio above the liquidation threshold (typically 110-120% depending on collateral).
The technical innovation lies in the user-set interest rate mechanism. Borrowers adjust a slider to set their preferred annual interest rate, understanding that lower rates place them first in the redemption queue when feUSD trades below $1. When redemptions occur, the protocol cancels debt from the lowest-rate positions first, seizing corresponding collateral to restore the peg. This creates a dynamic where borrowers must balance cost savings against redemption risk, with active users frequently adjusting rates based on market conditions.
Behind the scenes, Felix smart contracts interact directly with Hyperliquid's native order books through HyperEVM for oracle-free pricing, minimizing external dependencies that plague cross-chain protocols. Transactions typically confirm within 1-2 seconds on HyperEVM's dual-block architecture, with small blocks processing at 1-second intervals. The protocol uses LST/underlying price feeds for liquid staking tokens like kHYPE and wstHYPE, with deviation thresholds set at 0.5% to mitigate oracle frontrunning attacks.
Supported Networks: HyperEVM Native Deployment
Felix operates exclusively on Hyperliquid's HyperEVM network, making it a single-chain protocol as of Q4 2025. HyperEVM launched on February 18, 2025, as an EVM-compatible execution layer secured by Hyperliquid's HyperBFT consensus mechanism. The network achieved over $3 billion in total TVL across all protocols by mid-2025, with 100+ teams building on the platform.
Felix benefits from HyperEVM's unique integration with Hyperliquid's central limit order book (CLOB), enabling seamless interaction between DeFi protocols and the exchange's deep liquidity. Users can mint feUSD through Felix and immediately deploy it for margin trading on Hyperliquid perpetuals or swap it on HyperSwap DEX without bridging to other networks. This vertical integration reduces friction and gas costs compared to multi-chain deployments.
The team has not announced plans to expand to additional blockchain networks. The protocol's architecture is purpose-built for HyperEVM's infrastructure, particularly its oracle-free pricing feeds and direct CLOB integration. Users must bridge assets to Hyperliquid before interacting with Felix, typically using the official Hyperliquid bridge from Ethereum or Arbitrum.
What Does It Actually Cost to Use Felix in 2025?
Felix's fee structure varies between its CDP and Vanilla Markets. For CDP positions, users pay no upfront minting fees and no redemption fees when closing positions. The primary cost is the self-selected interest rate, which historically has ranged from 2-8% annually depending on user risk tolerance and market conditions. Borrowers who change interest rates before the cooldown period expires pay small adjustment fees redistributed to stability pool depositors.
Vanilla Markets operate on variable interest rates determined by utilization curves similar to Aave. As of Q4 2025, HYPE borrow rates fluctuate between 4-12% depending on pool utilization, while stablecoin lending yields range from 3-7%. The protocol collects a portion of interest paid as protocol fees. Borrowers against HYPE, kHYPE, or UBTC collateral in Vanilla Markets have received USDC incentive rewards to bootstrap liquidity, offsetting effective borrowing costs.
Network gas fees on HyperEVM are negligible compared to Ethereum mainnet. A typical CDP position opening costs approximately $0.10-0.30 in gas fees as of November 2025, while Vanilla Market deposits and borrows range from $0.05-0.20. These low costs enable profitable strategies even for smaller position sizes. For example, minting 2,500 feUSD against $5,000 of HYPE collateral would cost roughly $0.20 in gas plus whatever annual interest rate the user selects (e.g., 4% = $100/year on 2,500 feUSD).
Liquidation carries a 5% penalty paid to stability pool depositors or just-in-time liquidators. If a borrower's collateral value drops and their position health falls below 1, they forfeit 5% of their collateral value as a liquidation bonus while retaining the feUSD they originally borrowed. This compares favorably to Aave's 5-15% liquidation penalties depending on asset risk parameters.
Is Felix Safe? Security Audits and Track Record
Felix has undergone multiple security audits from reputable firms as part of its pre-launch preparation. Dedaub conducted a comprehensive audit in December 2024 covering the core protocol contracts based on the Liquity V2 codebase. Three Sigma executed a focused audit on Felix's price-feed module between July 23-25, 2025, reviewing 198 lines of Solidity code across kHYPE and wstHYPE price feeds. The audit addressed critical issues including deviation threshold alignment (set to 0.5%) and oracle frontrunning mitigation.
The protocol implements multiple security layers beyond audits. Felix maintains a dual-team review structure with separate groups focusing on core implementation and security analysis to prevent single points of failure. The team conducted extensive invariant testing to verify protocol behavior under edge cases. Admin operations employ opsec measures including multi-signature controls and timelocks on critical parameter changes, though specific multi-sig threshold details have not been publicly disclosed.
As of November 2025, Felix has maintained a clean security record with no reported hacks or exploits since its April 2025 launch. The protocol has processed tens of millions in feUSD debt and over $250 million in collateral deposits without major incidents. The codebase inherits from Liquity V2, which underwent four comprehensive security audits before Felix's deployment, providing additional confidence in the underlying architecture.
However, users should note that Felix is a relatively young protocol operating in DeFi's high-risk environment. The HyperEVM ecosystem itself is less than one year old as of Q4 2025, meaning both the network and its applications have limited battle-testing compared to Ethereum mainnet protocols. Other HyperEVM projects have experienced issues—Hypervault Finance suffered a $3.6 million rug pull in September 2025, highlighting ecosystem risks despite Felix's legitimate team and audit history.
Who Should Use Felix and When?
Felix serves three primary user categories with distinct needs. High-volume leverage traders represent the core audience, using CDP positions to mint feUSD against HYPE or BTC collateral, then swapping into additional assets for leveraged long positions. Traders moving $10,000+ positions benefit from Felix's low fees and user-controlled rates compared to alternatives. For example, a trader depositing $25,000 in HYPE to mint $10,000 feUSD at 3% annually pays only $300/year in interest plus negligible gas—significantly cheaper than perpetual funding rates during bullish periods.
DeFi yield optimizers find opportunities in Felix's stability pools and carry trades. The classic strategy involves minting feUSD at a low interest rate (3-4%), depositing it in a stability pool earning 6-10% from liquidations and fees, then capturing the spread. More sophisticated users execute HLP carry trades: borrowing feUSD or stablecoins through Felix, converting to USDC, depositing into Hyperliquid's HLP (earning ~12% APR as of Q4 2025), and profiting from the rate differential. These strategies require active management to maintain healthy collateralization ratios and adjust interest rates based on redemption risk.
Conservative stablecoin holders seeking yield can park idle capital in Felix Vanilla Markets or stability pools without taking on leverage. Depositing USDe, USDT0, or feUSD in lending pools generates 3-7% yields with relatively low risk compared to leveraged positions. Stability pool deposits carry unique risks—depositors may receive volatile collateral like HYPE or BTC during liquidations rather than stablecoins—but benefit from buying these assets at a 5% discount during market downturns.
Felix is less suitable for DeFi beginners unfamiliar with collateralization ratios, liquidation mechanics, and redemption risk. The user-set interest rate feature requires understanding the tradeoff between low borrowing costs and redemption probability. Users seeking maximum capital efficiency should note Felix's conservative 40% LTV limits leverage compared to Aave's 80%+ LTV ratios. Cross-chain users needing to borrow on multiple networks will find Felix's HyperEVM-only deployment limiting compared to multi-chain protocols.
What Risks Should Felix Users Consider?
Smart contract risk remains the primary concern despite Felix's audit history. The protocol's architecture combines Liquity V2 core logic with Morpho lending pools and custom price feed modules—each introducing potential vulnerabilities. While auditors reviewed the codebase, no audit guarantees complete safety, and Felix's relatively short operational history (8 months as of November 2025) means fewer opportunities to discover edge-case bugs. Users should only deposit amounts they can afford to lose and consider starting with smaller positions to test the platform.
Redemption risk specifically affects CDP borrowers who select low interest rates to minimize costs. When feUSD trades below $0.995, arbitrageurs can redeem feUSD for $1 worth of collateral, with the protocol canceling debt from lowest-rate positions first. Borrowers at the bottom of the interest rate queue may have their positions partially or fully redeemed, receiving their collateral back but losing their leverage. During feUSD's first months, the stablecoin maintained a tight peg, but future volatility or low liquidity could trigger significant redemption waves that force users out of positions at inopportune times.
Liquidation risk affects all leveraged positions. Felix's 110-120% liquidation thresholds (depending on collateral) mean relatively small price movements can trigger liquidations. A borrower at 150% collateralization ratio faces liquidation if their collateral drops 25% in value. The 5% liquidation penalty compounds losses—a $10,000 position liquidated forfeits $500 to stability pool depositors. While Felix's conservative LTV limits reduce likelihood compared to higher-leverage protocols, HYPE's volatility (as a relatively young L1 token) creates elevated liquidation frequency compared to borrowing against ETH or BTC on established platforms.
Platform-specific risks include Felix's dependency on HyperEVM oracle pricing and the Hyperliquid L1's continued operation. The protocol uses oracle-free pricing by integrating directly with Hyperliquid's order books, but this creates centralization risk tied to the exchange's infrastructure. HyperEVM's dual-block architecture and 1-second block times are novel compared to battle-tested Ethereum architecture, introducing potential consensus or execution bugs that could affect all HyperEVM protocols including Felix.
Regulatory risk applies less to Felix than centralized platforms, but users should understand that DeFi protocols face uncertain regulatory treatment worldwide. The protocol's points program and anticipated FEL token launch could attract regulatory scrutiny depending on how tokens are distributed and governed. Hyperliquid itself has faced questions about its decentralization given the team's control over validator sets during the network's early stages.
