HIP-4: How Prediction Markets Work on Hyperliquid

HIP-4 is the Hyperliquid protocol upgrade that added outcome markets, also called event or prediction markets, natively to the L1. Instead of a bolted-on app or a separate venue, it makes event contracts a first-class instrument on the same chain that already runs Hyperliquid’s perps and spot books. You trade a question about the real world, settle in USDC, and never leave the network you were already on.

The name follows the same pattern as the rest of the protocol’s improvement proposals. HIP-3 opened up builder-deployed perpetuals, letting people stand up their own perp markets. HIP-4 does the analogous thing for outcomes: it gives Hyperliquid a native way to create and trade contracts that pay out on a yes-or-no event, rather than on where a price drifts. If you have traded perps on Hyperliquid, the surface will feel familiar. The instrument underneath is different.

You buy shares in an outcome using USDC. Each share trades somewhere between $0 and $1, and that price is the market’s live read on probability. A YES share at $0.40 means the crowd is pricing roughly a 40% chance the event happens. If it does, the share redeems for $1.00. If it does not, it expires at $0. The gap between what you paid and the $1.00 payout is your profit, and the price you paid is your maximum loss.

That last point is the part worth slowing down on, because it is what sets HIP-4 apart from the rest of Hyperliquid. These markets are fully collateralized. You put up the entire cost of the share up front and that is the whole of your exposure.

• No leverage. You cannot borrow against a position. A $40 stake on shares at $0.40 buys you 100 shares and risks exactly $40. There is no multiplier turning a small move into a large gain or a large hole.
• No funding. Perps charge a funding rate to keep them pinned to spot. Outcome shares have nothing to track and no funding to pay or collect. You hold the share and wait, and time costs you nothing beyond the capital tied up.
• No liquidation. There is no maintenance margin and no liquidation engine, because there is nothing to liquidate. The price of a YES share can fall from $0.40 to $0.10 and you are not forced out. You still hold the shares, and they still redeem for $1 if the event eventually lands. Your downside was already capped the moment you bought.

You are not locked in until expiry, either. The shares trade on an order book, so you can sell into a price move and bank the gain, or cut a losing view before the event resolves, the same way you would close any position. Settlement only matters if you choose to hold to the end. When you do, a resolution source reports the result on-chain and the winning shares pay out automatically.

HIP-4 markets come in two shapes, and knowing which one you are looking at changes how you read the prices.

A binary market is the classic YES/NO. One question, two sides, and the two prices add up to $1.00. Will the Fed cut at the next meeting? YES sits at $0.70, NO at $0.30, and the market is telling you it reads the cut as a 70% event. Buy the side you think is mispriced and you are done.

A multi-outcome market, sometimes called a bucket market, splits a question into several mutually exclusive results. Which party wins the election, which team takes the title, which range BTC closes in at year end. Each outcome gets its own share price, and because exactly one of them will be true, the prices across all the buckets sum to $1.00. Read that spread like a probability distribution rather than a single bet: a candidate at $0.55 is the favorite, the field underneath them splits the remaining $0.45, and the shape of that distribution tells you how decided the crowd thinks the question is.

The same fully-collateralized rules apply to both. Whether you buy one side of a binary question or one bucket out of six, you pay the share price, that price is your max loss, and a win redeems each share for $1.

Plenty of venues will sell you an event contract. What HIP-4 changes is who holds the money and where the trade actually clears. Running outcome markets on the Hyperliquid L1 buys you three things that an off-chain venue cannot.

• You custody your own USDC. Your collateral sits in a position your wallet controls, not on a company’s balance sheet. There is no operator to freeze a withdrawal, gamble with deposits, or quietly become insolvent while you are holding a winning ticket. The FTX failure mode does not exist here.
• Settlement is transparent. Matching, collateral, and payout all happen on the L1 in the open. When a market resolves, the contract pays out on its own. No support ticket, no manual review, no withdrawal queue between you and money you have already won. Because the markets are fully collateralized, the winning payouts are already locked in the market rather than owed by a counterparty.
• One margin account. Your outcome positions live in the same self-custodied account as your perps and spot. The USDC you trade events with is the same USDC you trade BTC perps with. You are not bridging to a separate app or funding a second balance, which keeps your capital in one place and your accounting honest.

That shared account is easy to undersell, but it is a real edge in practice. You can hold a perp view and an event view side by side, move capital between them in the same wallet, and read your whole book on one screen instead of reconciling balances across two venues that do not talk to each other.

HIP-4 is not the only place to trade outcomes, and it is worth being fair about where it sits. The three main options solve the same problem with very different tradeoffs.

The honest read: Kalshi wins on US legal clarity and Polymarket still has the deepest books on marquee political markets. What HIP-4 brings is the on-chain version of the deal, your own custody and a single account that already holds the rest of your Hyperliquid trading. If you live on Hyperliquid for perps, trading outcomes in the same place is a short step rather than a new account. For a fuller side-by-side, see our deeper write-up on how prediction markets work.

If you already trade on Hyperliquid, the path is short, because the account is the one you already have. Here is the order of operations.

• Have USDC on the Hyperliquid L1. It is the collateral and the settlement currency. If you are already trading perps, your existing balance works. You do not need to hold HYPE to open an outcome position.
• Connect your wallet. The same self-custodied wallet you use for the rest of Hyperliquid trades these markets too. No second account, no separate deposit.
• Read the resolution criteria first. Before you put money on, find out what counts as a win and who reports the result. A loosely worded question or a flaky resolution source is where payouts get disputed. If the wording is fuzzy, skip it.
• Buy the side you think is mispriced. Pick the YES, NO, or bucket whose price disagrees with your read on the real odds. You pay the share price, and that price is the most you can lose. Size accordingly.
• Hold or trade out. Wait for resolution and let winning shares redeem for $1, or sell into a price move beforehand to lock a gain or cut a loss. Both are fine.