The Challenge: Building Secure Liquid Staking Infrastructure on Hyperliquid

‍

Hyperliquid's HIP3 proposal allows users who stake 500,000 HYPE tokens to launch perpetual markets using the protocol's infrastructure. This created significant demand for liquid staking tokens: users needed liquidity while their assets remained locked in HIP3 vaults.

‍

Hyperbeat, a DeFi protocol offering liquid staking for the HYPE token (beHYPE) and multi-asset yield vaults, faced the security challenge of managing high volumes of user funds while building on Hyperliquid's relatively new ecosystem. Integration required coordination across multiple protocol layers, as the Hyperliquid ecosystem was still in its early stages and required multiple manual workflows. The protocol needed rigorous security reviews for its liquid staking infrastructure and multi-asset yield vaults connected to the Hyperliquid core DEX (USDC, USDT, lstHYPE, ultra HYPE, BTC, xAUT).

‍

This engagement presented several technical challenges:

‍

• High-Volume Fund Management: Securing liquid staking and vault mechanisms handling substantial user deposits
• Emerging Ecosystem Integration: Building on Hyperliquid's early-stage infrastructure with evolving documentation and manual workflows
• Multi-Layer Protocol Coordination: Integrating withdrawal processing, vault accounting, and cross-chain token mechanics across Hyperliquid's stack

‍

The integrity of this infrastructure was essential for maintaining user trust while operating on a new L1 blockchain.

‍

‍

‍

Our Process: Two Comprehensive Security Reviews

‍

Nethermind Security conducted two full audits spanning Hyperbeat's liquid staking and multi-asset vault infrastructure. Our approach combined rigorous code review with ongoing collaborative support.

‍

Throughout both engagements, we maintained close communication with the Hyperbeat team through a dedicated Telegram channel for asynchronous coordination and multiple synchronous calls for technical alignment. We developed custom test suites to validate edge cases in withdrawal processing and cross-chain accounting mechanisms.

‍

First audit findings:

• 1 Critical, 4 Low, 1 Informational, 1 Best Practice

‍

Second audit findings:

• 2 Medium, 5 Low, 2 Informational, 1 Best Practice

‍

All vulnerabilities were resolved before deployment.

‍

‍

‍

Hardening Critical Components Through Joint Review

‍

First Audit: Withdrawal Queue Security

‍

Working with Hyperbeat's engineering team, we identified an important area where reinforcing the logic would critically strengthen withdrawal safety.

‍

• ‍Withdrawal Queue Blocking: We discovered that the withdrawal finalization mechanism employed a sequential push approach, where withdrawals were processed in sequence. A user could set a receiver address unable to accept native asset transfers, permanently blocking the entire queue with no bypass mechanism.‍
• Impact: Any user attempting to withdraw after this point would be unable to access their funds.‍
• Resolution: The Hyperbeat team implemented a redesign of the withdrawal mechanism that eliminated sequential dependency, ensuring failed withdrawals couldn't block subsequent claims.

‍

Second Audit: Vault Valuation Integrity

‍

Our second joint review revealed a set of subtle edge cases that affect the computation of vault valuation, underscoring the complexity of building cross-chain yield infrastructure.

‍

• ‍Stuck Funds Accounting: Funds could become stuck in the contract, increasing totalAssets but remaining inaccessible for actual vault operations. This created a disconnect between reported vault value and available liquidity.‍
• Cross-Chain Supply Tracking: The share token's OFT (Omnichain Fungible Token) design created an accounting vulnerability. The token could be bridged to other chains, decreasing total supply on the origin chain without adjusting totalAssets, artificially increasing the totalAssets/totalSupply ratio.‍
• Impact: Both vulnerabilities could enable share price manipulation, undermining the vault's pricing mechanism.‍
• Resolution: The Hyperbeat team implemented accounting fixes to track cross-chain supply correctly and prevent inaccessible funds from inflating valuation metrics. The team recognized that while these cross-chain edge cases were subtle, they represented genuine economic risks in a multi-chain environment.

‍

‍

‍

The Outcome: Securing Infrastructure on a New L1

‍

All identified issues were resolved before deployment across both audits. The withdrawal queue was secured against permanent lock scenarios, and vault valuation mechanisms were protected against cross-chain manipulation vectors.

‍

The team's technical depth made it possible to address complex architectural challenges across multiple audits without delaying their launch timeline. Hyperbeat has scheduled additional audit work with Nethermind Security for upcoming protocol developments.

‍

‍

‍

Why This Work Matters

‍

This engagement demonstrates the precision required when building liquid staking infrastructure on emerging blockchain ecosystems. Our audits supported Hyperbeat in launching a protocol that provides liquidity for HIP3 market operators while managing substantial user funds across multi-asset vaults.

‍

The successful resolution of critical withdrawal mechanism vulnerabilities and vault accounting challenges validated the strength of the security foundation established through this collaboration.

‍

"Nethermind helped us launch safely and faster by identifying critical gaps we would've missed internally."
Hyperbeat Team

‍

Start a conversation about your project's security.