TL;DR:
- The Kinetiq protocol announced the deployment of Elysium L2 for the Hyperliquid network, using the HYPE token as the gas payment mechanism.
- The sequencer fee distribution will allocate 50% to open-market KNTQ buybacks and burns, 25% to developers, and 25% to the treasury.
- The supply of kHYPE experienced a 62% decline between its August 2025 peak and May 2026, posting an additional 18% drop over the last month.
During Monday’s session, liquid staking protocol Kinetiq unveiled Elysium L2, a Layer 2 solution designed to optimize the throughput of HyperEVM and drive spot market activity across Hyperliquid‘s infrastructure.
— Kinetiq (@Kinetiq_xyz) August 24, 2026
The initiative aims to address performance bottlenecks present in the HyperEVM architecture. Technical data disclosed by Kinetiq indicates that the current environment faces throughput limitations, transaction fee spikes during demand peaks, and a dual-block structure that splits operations between small fast blocks and larger slow blocks.
According to market reports, Elysium will operate as a high-speed EVM environment directly connected to HyperCore. The network will use HYPE as its native token for gas fee payments. Technical data suggests this direct integration could significantly reduce latency in order transmission.
The Layer 2 design focuses on revitalizing liquidity within the protocol’s spot segment. Official documentation from Kinetiq highlights that spot volumes and HIP-2 liquidity levels hit multi-month lows by the end of August.
Elysium incorporates a high-speed execution environment for proprietary automated market makers (PropAMMs). According to the development team, this mechanism will enable direct access to HyperCore’s order book data. The architecture establishes an end-to-end asset lifecycle where tokens launch on an AMM, build liquidity, transition to a spot market on HyperCore, and eventually qualify for perpetual contract listings under the HIP-3 standard.
New Token Burn Model and TVL Recovery
The launch comes amid a period of contraction across Kinetiq’s core liquid staking market. On-chain data from May 2026 reveals that HYPE’s share in liquid staking dropped from 10.42% to 4.42% of the total network stake, following a 62% decrease in circulating kHYPE compared to August 2025.
The total value locked (TVL) of kHYPE recorded an additional drop of nearly 18% over the past four weeks. Analysts from the Bankless report noted that relying exclusively on staking yields constrained the protocol’s growth avenues during prolonged deposit outflows.
In response, Elysium introduces a complementary value-capture stream for the KNTQ token through its sequencer operations. The tokenomics framework mandates that 50% of sequencer fees will be used to buy back KNTQ on the open market for burning.
The remaining 50% of fees will be split equally: 25% allocated to the Kinetiq treasury and 25% designated as developer incentives. According to team projections, diversifying revenue streams could ease pressure on traditional yield products if Layer 2 transaction volumes maintain steady momentum.
Kinetiq confirmed that complete technical specifications and the official roster of launch partners will be released across the platform’s official channels prior to the final mainnet rollout.