Star Xu, founder of the cryptocurrency exchange OKX, said the matching engine behind Hyperliquid, a decentralized perpetuals exchange that operates on its own blockchain, is more market maker friendly than the systems used by centralized trading venues. Xu shared the view on the New Era Finance Podcast with host Michael, where the conversation also covered MiCA regulation, customer protection, and the market turmoil of October 10.

His remarks followed a turbulent stretch for digital-asset markets, including a wave of cascading liquidations on October 10 — forced closures of leveraged positions that can set off further closures as prices swing — that swept through derivatives venues.

How the Hyperliquid Matching Engine Works

Xu said the Hyperliquid matching engine differs fundamentally from the technical design of centralized order book exchanges. Centralized venues process orders individually, while Hyperliquid matches orders block by block. Within each block, the system prioritizes cancellations, meaning market makers can cancel orders ahead of takers. Xu called this design market maker friendly.

The maker-taker split is central to how order books work: market makers post limit orders that rest on the book and supply liquidity, while takers execute immediately against those resting orders. Under Xu's description, giving cancellations priority within each block lets quoting traders pull their orders before they can be filled — a dynamic that is harder to achieve when orders are processed one by one.

In his view, this design helps explain why Hyperliquid's order book depth appears better than that of many centralized exchanges. He added that the engine offers another approach for long-tail assets with limited liquidity.

Xu made the comments while discussing crypto's evolution. He said repeated crises — from early attacks on Bitcoin and the 2014 collapse of Mt. Gox to the failure of FTX in 2022 — tested the sector, and that each episode also prompted improvements. He sees blockchain as a base for more finance built on self-custody, stablecoins, and tokenized assets.

Trust, Risk Controls, and the October 10 Turmoil

Turning to regulation, Xu described MiCA, the European Union's Markets in Crypto-Assets framework that establishes a common licensing regime for crypto-asset service providers across the bloc, as an important step toward consistent crypto regulation across Europe and noted the compliance challenges OKX faced while entering the market. He said international growth depends on earning the trust of customers and regulators through transparent operations and stronger governance.

He pointed to board oversight, dedicated compliance and risk functions, monthly proof-of-reserves reports, and external auditing. OKX also plans to pursue a public listing, which he said would further increase accountability — a step that would subject the exchange to the recurring disclosure requirements that come with publicly traded status.

Xu said safeguarding customer funds matters more than aggressive growth, and that exchanges should follow financial rules while earning revenue from technology and services. He recommends self-custody for users who can manage keys securely, though he cautioned that wallets can be vulnerable. He also warned against unusually high yields and demands to "just trust" an exchange.

Xu attributed the cascading liquidations of October 10 partly to USDe, Ethena's synthetic dollar token, being treated like a stablecoin and accepted as derivatives collateral, even though collateral quality sits at the base of any leveraged trade. He described USDe as a higher-risk, hedge-fund-like product: leveraged borrowing against it could magnify returns, but it could also amplify losses when prices moved. He argued that tighter risk controls and regulated derivatives venues could help prevent such episodes.

Looking Ahead

Xu expects crypto to expand beyond trading into everyday financial services, including wallets for holding money, blockchain payments, and tokenized equities. He also expects on-chain asset-management tools that let users keep control of their funds. He said he is optimistic these technologies could become widely used financial infrastructure.

Source: Blockonomi