Decentralized Finance aims to create financial freedom from safe, permissionless, and non-regulated applications. DeFi projects are becoming popular for their numerous benefits. These benefits are the reason for the shift from (CEX) centralized exchanges to (DEX) decentralized exchanges.
The DEX platform that permits the direct trade of digital coins between two wallets is a laudable innovation. This type of trade is unlike the normal trading method that involves a mediator.
One of the DEX protocols highly anticipated to possess this special feature is the Injective Protocol. The injective Protocol is a product of highly experienced technologists plus strong support from Binance.
It is a Defi protocol that allows all markets trades like CFDs, Derivatives, perpetual swaps, sports, and futures. The injective Protocol creates an exchange that can be accessed globally and yet maintain a user-friendly interface.
The protocol has its consensus developed on a Tendermint-based proof-of-stake (PoS). This aids in the trading of cross-chain derivatives across Ethereum, Cosmos, and layer -1 protocol.
However, this injective Protocol review gives a detailed insight into what the protocol is and its special features.
This Injective Protocol review also explains how the protocol fixes the DEX challenges and who the founding team members are. It is a good tool for beginners and intending investors.
What is Injective Protocol?
The injective Protocol project aims at making crypto exchanges to be a public network that is decentralized completely.
Meaning that the exchange of cryptos in the network will be operated solely by members with the protocol’s token –the INJ tokens. The protocol was officially launched through a public offering in 2020 and is backed by Hashed, Pantera, and Binance.
The injective Protocol chain forms the main foundation of its project. It operates with an order book that is completely decentralized and uses elements from the EVM (Ethereum Virtual Machine).
The protocol also incorporates a bi-directional token bridge, which links it directly to the Ethereum ecosystem. The protocol’s white paper was released in December 2018 and had been undergoing a development process since then.
The protocol hopes to improve the functionality of the Defi ecosystem with its unique features. For instance, the Injective Protocol can provide liquidity that is equivalent to that seen in centralized exchanges.
We will understand how the protocol achieves this by looking at the protocol’s innovation and construction. Also, how its sections make a whole platform that is more superior in the DEX ecosystem.
The Injective Protocol Innovation
The Injective Protocol is Cosmos SDK built with a token-bridge between Ethereum and Cosmos. It has many features of communication between blockchains (inter blockchain communication). It is the first exchange to avail users first-time opportunity to trade in a completely decentralized manner.
The structure of the injective Protocol exchange made it a public utility. Hence, a Network of investors can create a personalized and customized derivative market in the injective utility. It also gives sole ownership to its users. Owners of INJ tokens have governance and rights to vote for the protocol updates and changes in the future.
The innovation of the injective Protocol is a step forward towards achieving a full decentralized and interoperable web. This is because the protocol adopts a 2-layer infrastructure that guarantees a higher transaction speed at a lesser cost compared to other DEXs.
Four major innovations distinguish the protocol from other DEXs. They are what can be referred to as the backbone of the injective platform as explained below;
The Ethereum Domain
The injective protocol incorporates an Ethereum virtual machine (EVM) with Cosmos SDK to produce a scalable and interoperable smart contract. This happens on the Ethereum Proof-of-Work (PoW) consensus model.
The EVM ‘Bridge Contract’ is simply a smart contract that stabilizes prices between the Ethereum Network and the Injective Protocol. It is done in a two-way-peg with the smart contract creating a ‘token bridge’ between the ETH and INJ native tokens.
The Client Domain
In the client domain, we have the Exchange Client. This is simply the user interface presented to traders or investors while making use of the exchange. The development team has been working on this aspect of the project. They aspire to allow users access to a ‘front-end’ interface that is comprehensive and user-friendly.
Exchangers always face the challenge of creating a user-friendly interface that is suitable and meets the expectations of experienced users. Hence, the injective Exchange Client gives all users the means of accessing the DEX easily and simply.
The Cosmos Domain
This is taken as the protocol’s backbone- it harbors the injective chain. The injective chain gives a decentralized order book that is innovative to the Client Exchange.
The TEC (Trade Execution Coordinator) combats the EVM execution and the front-running environment.
It achieves all these through the Ethereum token bridge. In addition, the Injective Protocol contains some smart contracts that allow users to take advantage of all the benefits of a fully decentralized derivative while trading with the protocol.
The Service Domain
This is where the EVM and API stay. The services layer is very critical to the injective Protocol’s performance.
This layer also provides API nodes responsible for data layer processes, EVM connection, and transaction relay.
These nodes enhance direct data interaction and simplify ‘transaction relay.’ They also provide data and analytic services to the ‘Exchange Client.’
The Development Team
Injective Protocols’ development team consists of several experts in blockchain technology. However, there are 15 notable people among the team who are highly acknowledged. They include:
- Eric Chen
- Albert Chon
- Maxim Shen
- Max Kupriianov
- Markus Waas
- Alex Athanasopulos
- Vivian Ma
- Hannah Grub
- Jun Kai
- and Nam Dang Duy
Eric Chen (CEO and Co-founder of Injective Protocol) is a Bachelor’s Degree holder in Finance from New York University. He is also a Venture Partner at Innovating Capital, one of the first investors in INJ.
Albert Chon is the Chief Technological Officer and (CTO) and co-founder of Injective Protocol. Previously, he worked as a Software Engineer for Amazon after completing his MSc. in Computer Science, majoring in Systems at Stanford University.
The remainder of the team includes Golang developers, Solidity, and full-stack developers.
Injective Protocol has the support of numerous blockchain advisers, including Josh Felker and Eric Wang.
INJ Token Economics
Injective Protocol’s INJ token functions for several utility purposes, but basically, as a governance token for the protocol. It provides the user the right to contribute to decisions concerning the Injective Protocol. For example, to propose a change and to the protocol and to vote for or against those changes.
Secondly, the token serves as support lending platforms as collateral. It functions similarly to the utilization of Stablecoins as collateral in Defi platforms. The INJ tokens can be lent as margins for the derivative markets built in the ecosystem.
The token also serves as collateral backing or pool staking for insurance to create more passive income.
Additionally, the INJ tokens serve as the means of paying market makers and relay operators. The market makers pay 0.1% for exchange fees, while takers pay 0.2%.
This allows the market makers to get payments in net positive rewards for returns. These rewards are what facilitate the incentivization of the provided liquidity. After creating liquidity, the market begins to enjoy narrow spreads and some worthy market depth.
To enhance all that, the validators and nodes will be encouraged to advance their interface or API to support trades directly. In doing so, the protocol pays them.
The remaining transaction fees can now be utilized in purchasing tokens back. They can also be used to burn the tokens in a deflationary manner. This means, decreasing the supply will increase the value.
Eventually, a part of the available remaining tokens will be shared with users based on their notional profits. Users who have the most notional profits get rewarded most rewards, and this is judged based on who rewarding those who utilize the platform most. The network calculates the rewards using a daily snapshot.
How Does The Injective Protocol Work?
For an easy understanding of the mechanism of the injective Protocol, we will look at how its various components work. The backbone of the protocol is the injective Protocol. It ensures and maintains the efficiency of the components of the protocol, which include;
Trade Execution Coordinator (TEC)
The Trade Execution Coordinator makes sure that it becomes impossible to front-run the order book.
Front-running means monitoring the order book with bots. These bots can jump the ‘order’ queue via copying the real user’s exact bids.
Unfortunately, the bots can copy trades within a second, and using them leads to real exchange users having an unfilled order. This condition can cause the users to be frustrated and even exit from using the exchange.
The protocol has a delay function for verifying data which ensures that orders are handle on a first ait basis.
The order book is used on the Client Exchange; it is 0x based. It enhances transaction efficiency and provides full decentralization. This is possible as Orders can enable side-chain relays with on-chain settlement.
The Order books are not just decentralized; the INJ nodes that are censorship-resistant host them.
Bi-Directional Token Bridge
The Token Bridge is needed to transfer the ERC-20 tokens to & from the INJ token chain. This bridge is created within the ‘peg zone’ in the Cosmos network.
These peg zones are account-based blockchains bridging between zones within the Cosmos ecosystem and outside blockchains (in this case, Ethereum). Practically during transactions, the bridge route goes through the 3 stages below from an ETH address.
- INJ Peg zone smart contract
- relay service to the Ethereum bridge module
- an oracle to the Bank Module (COSMOS address)
When it is a Cosmos to Ethereum transaction, this route takes the reversed step.
EVM Execution Environment
The EVM Execution Environment takes care of how to execute the Ethereum ‘smart contracts’ using the Injective Chain. This enables developers to build Dapps on the Ethereum platform in an environment that is more scalable. And also in an environment using Proof of Stake (PoS) as consensus.
Developers share the same experience in creating Dapps and while using Injective EVM. Using the EVM execution environment has increased the protocol’s benefits, including increasing the size limit of the byte code.
The Injective Protocol Smart Contracts found in the EVM environment are:
- Bi-directional token bridge
- Futures contracts
- Trade Execution Coordinator
- ERC20 Token contracts
Injective Protocol’s Key Features
The Injective Protocol allows users to:
- Create and carry out trades on all market derivatives using a price feed only. Hence, creates room for more trading opportunities on markets that are not available in other exchanges.
- Partake in decentralized trading of ‘cross-chain derivatives with 0 gas fees.
- Access to a multitude of assets for generation of cross-chain yield.
The network is a general Defi protocol that trades over a plethora of digital products for cross-chain derivatives. The products include futures, perpetual swaps, and spot trading.
The injective Protocol is used as a Cosmos SDK module that is built with Ethermint (an EVM on Tendermint). It makes use of a ‘Tendermint-based’ Proof-of-Stake (PoS) to enhance the trading of cross-chain derivatives across Ethereum, Cosmos, and other layer-1 protocols.
The protocol is resistant to any collision. It prevents ‘front-running’ using a VDF (verifiable delay function).
The INJ is the native token of the protocol used for functions like;
- Mining Liquidity
- Protocol governance
- Capturing the value of the Exchange fee
- Collateralization of Derivative
What Makes Injective Protocol Unique?
The Injective Protocol aims at solving the problems facing the financial world through the adoption of decentralized blockchain technology.
The INJ token enables users to be part of a real Defi (decentralized finance) organization. It gives them the power to propose new ideas and effect changes in the system.
The blockchain of the Injective Protocol is readily available for investors making the system completely decentralized.
Injective Protocol gives an equal level of power and influence to both big and small-time investors. In addition, its blockchain allows the trading of various CFDs, derivatives, and other types of assets.
The protocol doesn’t decentralize the ecosystem of trading and exchanges only; it also offers some proven methods of making money.
Users pay gas (transaction) fees in INJ tokens. This allows a continuous operation of the platform in a decentralized way.
INJ Token Performance
The token performance of any digital coin is mostly what attracts investors, and the INJ token is not an exception. The INJ token in November 2020 traded at USD 0.75, which was good. Because the token was listed on Binance launchpad a month earlier at the rate of USD 0.40, it offered the launchpad buyers almost 100% monthly earnings.
The price later started increasing to around USD 1.50 in December and then higher to USD 16.87 on 19th February 2021. The value of INJ slashed in the following month, but it didn’t get to less than USD10 before it started increasing again. It reached its all-time high rate of USD21.45 on the 21st of April 2021.
However, it is unpredictable if the INJ token price will continue to increase. Two days after the token reached its all-time high, the token has had a 25% decrease in value already. This implies that as of April 2021, the INJ token price is USD15.65 and at the time of writing INJ trades at $6.85.
Whether the token continued to decrease or has risen in value will be ascertained in this review under the ‘INJ price live data’ subheading.
Where Can You Buy Injective Protocol (INJ)?
INJ tokens are seen on major exchanges, with Binance having the highest INJ token trading volume in USD at USD12,687,084.
The Binance is the most verified popular exchange where INJ can be purchased.
Other good exchanges are Huobi, Bilaxy, Uniswap, and Global.
INJ Price Live Data
As of the 14th of July 2021, the Injective Protocol price is USD 6.85 with USD22,081,218 as the 24-hour trading volume.
The present CoinMarketCap ranking is significant, with a live market cap of USD 157,811,152. It has a circulating supply of 25,928,450 INJ coins and a maxim supply of 100,000,000 INJ coins.
How Is the Injective Protocol Network Secured?
The Injective network blockchain runs on a mechanism of (PoS) proof-of-stake consensus. This is one of the prominent ways INJ is similar to the Ethereum blockchain. INJ depends on PoS while using the EVM (Ethereum Virtual Machine) mechanism for security.
Proof-of-stake (PoS) is an alternative consensus for the proof-of-work (PoW) utilized by Bitcoin. The PoS has a lot of advantages as regards the required power input for scalability mining and usability. The consensus plays an important role in maintaining the decentralized network operation in the entire system.
Conclusion on Injective Protocol Review
This injective Protocol review shows that the protocol is likely to move decentralized derivatives trading to the next level. Unlike the other DEX platforms currently available, the protocol gets rid of ‘front-running.’ And also improves the execution of order and liquidity. Furthermore, the INJ, with the help of level-2 scaling, facilitates transactions with large, thorough put.
The exchange aims at solving the challenges facing the CEX presently while still maintaining its novel features. It also planned to make transactions faster at a much lower transaction or gas fees. Traders will have no choice but to invest in INJ tokens if the token value remains elevated.
Readers of this Injective protocol review should also check the protocol’s testnet or the official site for more updated information.