Injective Protocol (INJ) Review


Overview

New blockchain projects come and go constantly making advancements and improvements all the way long, thus leaving a better landscape for newcomers. However, the launch of the testnet for the Injective Protocol has produced serious waves within the blockchain community.

The Injective Protocol is a completely decentralized layer-2 exchange platform for trading derivatives. Users are offered a fully decentralized order book and a trade execution coordinator to ensure no front-running occurs. Moreover, through the use of an EVM-compatible environment, the Injective Protocol leverages layer-2 blockchain technology to compile transfers on the Invective Chain. This is actually a side chain that allows for a scalable implementation on the Ethereum Network EVM and it is built on top of the Cosmos-SDK.

It could be the best thing since sliced bread having the potential to shift the landscape for decentralized exchanges and cryptocurrency because it sparked a massive amount of speculative content since it emerged.

Excitement and expectations are high around this innovative DEX project, given that it has been in development since the release of its whitepaper in December 2018, made up of a team of developers with extended experience in the domain and other large-scale tech and blockchain projects.

Built as a fully decentralized derivative exchange the Injective Protocol project aims to bridge the differences in centralized and decentralized exchanges, while also bringing in the blooming decentralized finance (Defi) ecosystem. Even though the implementation of DEXs has faced its hurdles and it turned out to be difficult and long-termed in terms of high adoption, it is worth mentioning that it has been regarded as the logical solution to the security and regulatory problems affecting CEXs.

What is certain is that the Injective Protocol is developing a decentralized platform. However, we need to take into account that it is different from what most people think of as a decentralized finance platform. It is anticipated to establish enhanced functionality and dramatically improve the Defi ecosystem. For instance, it can secure liquidity equal to the one implemented on a CEX.

Let’s take a deep dive into the structure to understand how it can offer and conduct this and how its parts make up a whole that is superior in the world of DEXs.

One fundamental issue the contemporary DEX is confronted with is the incapacity to match the convenience and liquidity of the CEX, which has substantially hindered the adoption of DEXs, even though they support the authentic spirit of the blockchain motion.

At the same time as the Injective Protocol is constructing a decentralized platform, it’s miles unique from what most people consider as a decentralized finance platform. It hopes to bring the better capability to improve the Defi surroundings dramatically. As just one instance, it may provide liquidity that’s the same as that located on a CEX.

Injective protocol History

Starting as an incubated project under Binance, the project has ever since evolved into becoming a platform for trading cryptocurrency, derivatives, and synthetic assets.

What is important to include is that on top of the Cosmos (operating system)-SDK, based on Ethermint the original Injective chain supports generalized smart contract execution through a modular implementation of the Ethereum Virtual Machine (EVM) allowing you to deploy new decentralized applications (DApps) on Injective.

Stemming from various sources such as Chainlink the protocol first went live in late 2020 with perpetual futures markets and live price feeds including Bitcoin, Ethereum, Polkadot, Chainlink, and Uniswap.

In 2021, supporters of the undertaking contributed the burning of an original Banksy artwork which later was auctioned off as a non-fungible token (NFT). The occasion brought about the incubation of a new public sale platform known as Burnt Finance.

The burning of an original Banksy artwork in 2021 was supported by the contributors of the project which was later auctioned off as a non-fungible token (NFT). Burnt Finance was born from the event, as an incubation of a new auction platform called.

What is the Injective Protocol & How it Works

Playing an incredibly important role, the Injective Chain is the blockchain backbone of the platform, taking care of and looking after the following key components of the protocol:

Order Books

Order books are decentralized ‘0x’ based order books to keeping with the decentralized nature of the protocol, and to aid in transaction efficiency. This means that with an on-chain settlement the orders can enable side-chain order relays.  

Hosting the censorship-resistant order books through the usage of INJ nodes, the Injective Protocol is becoming increasingly decentralized.

Trade Execution Coordinator (TEC)

No front-running of orders is ensured and established essentially by the TEC protocol. 

There is a bot in the background that observes and records when placing an order or bid, and certainly, sometimes it can jump the queue copying your exact bid in under a second, and this is considered as front-running. Order not being processed is caused by bots that operate as frontrunners on some exchanges which can be very irritating. 

To ensure that orders are not being placed ahead of prior orders Injective Protocol uses a verifiable delay function.

Bi-directional Token Bridge

Users can transfer ERC-20 tokens to and from the INJ chain thanks to this crucial function of the bi-directional token bridge. Peg zones in the Cosmos network are where the token bridge is built and these are account-based blockchains that bridge zones within the Cosmos ecosystem to and from external blockchains like Bitcoin and Ethererum.

The bi-directional token bridge route travels through the following stages each time that you are using the Injective Protocol from an Ethereum address:

  1. INJ Peg zone smart contract,
  2. the relay service to the ETH bridge module,
  3.  then via an oracle to the Bank Module (COSMOS address),
  4. in reverse order for Cosmos to Ethereum trades.
EVM Execution Environment

Ethereum smart contracts are executed whit the usage of the Injective Chain which is possible thanks to the Ethereum Virtual Machine Execution Environment function. Using the PoS consensus algorithm Developers have the opportunity to build Ethereum-based dApps but in a more scalable environment.

Offering additional benefits including an increased contract byte code size limit of 100KB the Injective Protocol gives the same development experience as Injective EVM when creating decentralized applications,

Smart Contracts performed in EVM environment include:

TEC 

Bi-directional token bridge

Staking

Futures contracts

ERC20 Token contracts

Injective Protocol Unique features
INJ Token

A fully decentralized public utility that’s owned and controlled by the community of INJ holders is why the  INJ token is used and needed.

The Injective token, INJ, has a wide variety of uses to ensure the project has complete self-sustainability and maintains decentralization and that is why it is the essential component of the community-driven philosophy for total sovereignty.

Protocol Governance

Holding voting rights for changes and updates to the platform is a common approach and form of protocol governance for most Defi tokens.

The Interject Chain governing process is as follows:

Proposal Submission –  blockchain proposal submission with a deposit 

The proposal is confirmed and opens for people to vote only when the deposit reaches a certain value.

When the proposal includes a software upgrade validators will need to signal they are ready to switch to the new upgrade. The software will automatically flip to the new version, once more than 75% of validators have signaled they are ready to switch.

Without any community governance, the protocol will become stagnant or centralized, therefore it is crucial to the longevity of the project.

Collateral Background

The INJ token is used as an alternative for the Injective derivatives market rather than using stable coins for margin and collateral backing like most common DEXs.

Having INJ locked up in derivatives contracts to ensure margin is met Injective Protocol has taken a different approach with the use case of their tokens.  Additionally, it is being used for collateral background i.e. insurance pool staking, where stakes earn interest on their locked tokens.

Exchange Fee Value Accrual 

In order to stabilize and maintain a steady price appreciation of the INJ token exchange free value accrual element of the protocol helps in multiple ways such as burning any surplus i.e. excessive tokens that have been accrued after the relayers have been paid. 

To reduce the amount of circulating supply and result in increasing demand of INJ,  burning excess fee tokens is crucial. 

Security

Proof of Stake Tendermint consensus algorithm is what is used by the Cosmos ecosystem, from where Injective Protocol originates.

People are incentivized to stake their INJ coins through staking rewards, collateral backing, or governance rights – Injective Protocol uses a variety of ways and approaches. One good example that describes this is the instance of staking INJ tokens, it not only increases the strength and security of the network but reduces the circulating supply.

Incentivizing Participation 

With incentives through liquidity mining, and new features for the specific market maker and relayer incentives the INJ tokens are a significant way of introducing active participation on the Injective Protocol. Based on snapshots of their trading activity market makers can incentivize liquidity, and receive a net positive fee rebate with periodic distributions.

Nodes and validators can act as relayers on the other side of the network. To originate orders into the shared order book relayers are incentivized. A calculated ratio of the exchange fee as a reward will be awarded to nodes that first discover a make order.

Tokenonmics:

The Injective Protocol community decided to initially issue 100,000,000 tokens, with a 7% annual inflation rate that will decrease over time to 2%. 

Consequently,  the initial issuing of 100,000,000 is expected to decrease over time due to the deflationary burning of excess fess through the exchange fee value accrual mentioned earlier. 

How to Buy Injective Protocol (INJ)

You can buy Injective Protocol (INJ) cryptocurrency with a credit card, debit card, or Bitcoin (BTC), and here are the top 3 brokers to do so:

Binance

Benefit from the lower exchange fees than competing exchanges as well as the increased liquidity that will enable you to buy and sell quickly to take advantage of market-moving news with Binance as one of the largest and most well-known cryptocurrency exchanges in the world.

binance shadow logo

USA residents are prohibited from buying INJ. Australia, Canada, Singapore, UK & international users are best for INJ exchange. 

Gate.io

Gate.io offers a reputable trading platform with an easy-to-use interface for beginners while still maintaining robust and advanced charts for various types of skill levels including technical traders. Established in 2013, while it is not one of the most popular exchanges, they do have a large number of altcoins including Injective Protocol (INJ). 

Most recommended exchange for USA residents.

Huobi

Established in 2013 Huobi today serves more than 5 million users in over 130 countries around the world and it was accounted for half of the world’s digital asset transactions becoming among the world’s largest digital asset exchanges with an accumulated trading volume of US $1 trillion. Keep in mind that they do not accept USA residents. They are one of the top exchanges that currently offer Injective Protocol (INJ) trading opportunities.

Summary

Read more about INJ: Setting the investment stage in 2021-2022

Th Injective Protocol is probably going to advance decentralized derivatives trading into the next generation. It is evident that the Injective Protocol could also possibly solve the issue of front running,  improve liquidity, and order execution that persists as an obstacle in the currently available DEX platforms. And thanks to the level-2 scaling INJ will have plenty of throughputs to facilitate trade transactions.

What is important to note is that the exchange looks to solve the issues disrupting the current CEXs while preserving the novel features. What is more important and also convenient is that fees are significantly lower than traditional platforms, and insider trading should be kept to a minimum, if not eliminated.

Furthermore, traders seem very interested and very excited if the run-up in the token price as far as the hype surrounding the project is any gauge of interest. The uncertainty to ask is whether or not INJ can maintain its value up to elevated levels once the mainnet is launched, or maybe retreat as we’ve seen in so many other previous projects.

Because INJ provides a strong use case it is highly possible to remain elevated, and holders are incentivized not to sell through the staking mechanism.

If you are a trader and need to digest updates on the topic, stay tuned on Cryptogoldie and discover more on all cryptos, advancements, and improvements.

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