Dragonfly Partner: Hyperliquid's Order Book Model Can't Solve RWA Liquidity Issues, Variational's RFQ Model Can

Odaily Odaily Planet Daily: Dragonfly partner Haseeb Qureshi stated on X that the Central Limit Order Book (CLOB) model cannot solve the liquidity problem of RWA assets. Hyperliquid has indeed mastered the liquidity of a few RWA macro assets, but beyond the top 10 assets by trading volume (which account for approximately 90% of the volume), liquidity drops off a cliff.

The order book model can work when retail demand is strong enough, but if every asset requires building its own order book, it means you have to cold-start demand ticker by ticker, subsidizing to 'rent' liquidity, ultimately resulting in a collection of markets with thin liquidity.

Variational bypasses all of this with the RFQ (Request for Quote) model. RFQ is the true trading method for institutions. In this model, market makers provide instant quotes on demand and hedge in primary trading venues once orders are placed. This allows Variational to directly tap into mainstream TradFi liquidity and map it onto the chain – where margins are managed in smart contracts, settlements are completed using stablecoins, and liquidity comes from users already trading in the largest underlying markets like the CME and NYSE.

This means anyone can permissionlessly access the same market depth and spreads as traditional markets. Once the cold-start problem is solved, the launch speed of new markets can be as fast as releasing software. It is expected that by next year, RWA perpetual contracts will become the largest category of contracts on-chain, even surpassing the combined size of BTC and ETH perpetual contracts. Ultimately, the platform that wins this race will not look like a traditional exchange.

Yesterday's news: Variational announced the completion of a $50 million Series A funding round, led by Dragonfly Capital, with participation from Bain Capital Crypto and Coinbase Ventures.