Injective Reviewed: A New Era For Decentralized Finance

Injective is a Cosmos-based Layer 1 blockchain, one of the fastest Layer 1 blockchains. It enables the creation of new markets, including derivatives and futures, in a fully decentralized and permissionless ecosystem.

Injective leverages advanced blockchain technology to provide a secure, fast, and completely decentralized trading experience, attracting a wide range of users in the DeFi space. Its focus on interoperability and user-centric features makes it a notable participant in the decentralized finance ecosystem.

What is Injective?

Injective is a blockchain platform known for its set of pre-built modules, including a decentralized order book, providing developers with resources to create complex applications. It operates as an open and interoperable smart contract platform.

Using the Cosmos SDK and Tendermint proof-of-stake consensus framework, Injective ensures instant transaction finality. It excels in facilitating rapid cross-chain transactions between major Layer-1 networks such as Ethereum and Cosmos Hub.

The Injective ecosystem consists of a network of decentralized applications focused on delivering an exceptional user experience. By offering unrestricted access to decentralized financial markets, products, services, and tools, Injective enables individuals to efficiently allocate capital.

Benefits of Injective:

• Optimized for DeFi: Injective offers pre-built financial primitives, such as a fully decentralized order book, for developers to create mainstream DApps. These applications can leverage the order book to launch exchanges, prediction markets, and various on-chain strategies.
• Interoperable: The platform is inherently interoperable, seamlessly integrating with multiple sovereign blockchain networks, and has inter-blockchain communication capabilities. Injective facilitates cross-network cross-chain transactions, such as Ethereum, Moonbeam, CosmosHub, and Wormhole-integrated chains like Solana and Avalanche.
• Building DApps with CosmWasm: Injective supports CosmWasm, a smart contract platform designed specifically for the Cosmos ecosystem, allowing developers to launch smart contract-driven applications. Smart contracts compatible with other CosmWasm-supported chains can smoothly migrate to Injective.
• Launching Ethereum and IBC Compatible Tokens: The platform supports the launch of Ethereum and IBC compatible tokens as it facilitates cross-chain transactions with Ethereum and all IBC-supported chains. Tokens launched on Injective can be accessed across multiple networks by default.

In April 2021, Injective raised $10 million from Mark Cuban and other investors such as Pantera Capital and BlockTower in a private funding round. A year later, in August 2022, it raised $40 million in a funding round led by Jump Crypto.

Features

• Decentralized Finance (DeFi) Trading: Offers a fully decentralized platform for trading various financial instruments, including derivatives and futures.
• High-Performance Blockchain: Built on a high-speed blockchain network for a rapid and efficient trading experience.
• Interoperability: Designed for cross-chain interoperability, allowing seamless integration with multiple blockchain networks.
• Permissionless Market Creation: Users can create and list their own markets, fostering innovation and diversity in trading options.
• Secure, Trustless System: Utilizes advanced security protocols to ensure a secure, trustless trading environment.
• Zero Gas Fees: Provides a gas-less trading experience, enhancing accessibility and convenience for users.

Who is the team behind Injective?

Eric Chen and Albert Chon are the co-founders of Injective. Today, Chen serves as CEO and Chon as CTO.

Before joining Injective, Chen was a researcher at Innovating Capital, working on trading strategies and protocol research. Chon’s resume includes working as a software development engineer at Amazon. Chon went to Stanford University, where he completed his master’s degree in computer science, specializing in systems.

CosmWasm Support

CosmWasm is a smart contract platform built specifically for the Cosmos ecosystem. CosmWasm is written as a module that can plug into the Cosmos SDK, allowing anyone currently building a blockchain with the Cosmos SDK to add CosmWasm smart contract support to their chain without adjusting existing logic.

Rust is currently the most commonly used programming language for CosmWasm, but other programming languages, such as AssemblyScript, may be supported in the future.

Injective allows you to securely transfer crypto assets and Web3 data from renowned blockchains for use on any application built on Injective. All DApps in the Injective ecosystem can natively access sovereign Layer 1 chains for frictionless interoperable communication.

Interoperability

Injective enables secure transfers of crypto assets and Web3 data from renowned blockchains for use on any application built on Injective. All DApps within the Injective ecosystem can natively access sovereign Layer 1 chains for frictionless interoperable communication.

Assets can be transferred in or out of Injective through the Injective Bridge via the following blockchains:

• Ethereum
• Solana
• Cosmos Hub
• Osmosis
• Evmos
• Axelar
• Moonbeam
• Persistence
• Secret Network
• Stride
• Crescent
• Sommelier

Staking

Injective adheres to a proof-of-stake mechanism, where users can stake their tokens to certain Injective validators who will complete the work of validating transactions, and users can earn rewards by contributing assets.

Currently, the APR is 15.90%, with 49.83 million INJ ($1.861 billion) staked.

From the moment you stake INJ, rewards start to accumulate, and you can monitor your rewards in the staking section of Injective Hub. You can withdraw your rewards anytime once you have accumulated enough. You can also immediately transfer your staked INJ from one validator to another. However, the unstaking period takes 21 days to complete.

Burn Auction

As an incentive mechanism to encourage exchanges (acting as relayers) to establish Injective and source trading activities, exchanges sending orders to the shared order book on the Injective trading protocol will receive 40% of the trading fees generated by their sourced orders. The other 60% goes to Injective.

An auction is held weekly, allowing community members to bid with INJ for a basket of trading fees collected by Injective that week. At the end of the auction, the highest bidder receives all assets, and the INJ paid by the highest bidder is burned. This creates deflationary pressure on the INJ token supply.

Insurance Fund

During periods of significant volatility in margin trading, the losing side of a trade might be unable to pay the winning side if the margin runs out, i.e., position bankruptcy. If a trader’s position is liquidated and a new trader takes over at a worse price than the bankruptcy price, the insurance fund is used to cover the deficit.

Unlike most exchanges, the insurance fund on Injective is market-specific, meaning there is no pooled insurance fund collected, but a new fund exists for each derivatives market launched on Injective. This isolates the risk of insuring insurance to each individual market.

When users insure a derivatives market, they stake the collateral currency of that market and in turn receive insurance pool tokens specific to that market. These pool tokens represent a proportional ownership of the insurance fund. Thus, as the insurance fund grows from liquidation proceeds, insurance fund stakers profit from the increase in value of their insurance fund shares.

Injective allows users to establish derivatives markets on-chain. Anyone can create an insurance fund for a derivatives market or become an underwriter by adding funds to it. Based on the proportion of ownership, underwriters receive funds that may be more or less than the initial funds put into the fund.

INJ Token

INJ is Injective’s native staking token, allowing holders to manage and decide on the future of the protocol. The token was launched through Binance Launchpad, as its 16th project.

As of March 22, 2024, INJ has a market capitalization of $3.49 billion, ranking 39th in the cryptocurrency market cap.

INJ Tokenomics

Besides being used for governance and incentivizing exchange DApps, INJ is also used for several other purposes, including:

• Proof-of-Stake Security: As mentioned, the Injective PoS blockchain is governed by its native INJ token. The initial supply is 100 million tokens, and it is expected to increase over time through block rewards. The target inflation rate of INJ was 7% at genesis and will decrease to 2% over time. Due to its deflationary mechanisms, the total supply of INJ may gradually fall below the initial supply.
• Collateral Support for Derivatives: INJ will serve as an alternative to stablecoins as collateral and margin for Injective’s derivatives markets. In some derivatives markets, INJ can also be used as collateral support or insurance pool staking, where stakers can earn interest by locking up the token.

Injective Partnerships

Injective has formed several strategic partnerships.

• Ecosystem Fund: Pantera Capital, Kucoin Ventures, Jump Crypto, and Delphi Labs backed a $150 million Injective Ecosystem Fund to support projects aimed at accelerating the adoption of interoperable infrastructure and DeFi.
• Espresso Systems: Injective partnered with Espresso Systems, a protocol that helps create decentralized order aggregators. Injective stated that this collaboration is a step towards achieving decentralized rollups built within its ecosystem.
• Hackathon: Injective launched the Illuminate Hackathon, supported by Google Cloud and co-hosted with DoraHacks. The four-week online hackathon is a major launching platform for builders of Web3 financial applications, with a prize pool of $100,000.

Bottom Line

Injective is a key player in the DeFi space. With its innovative solutions and interoperable framework, the company not only facilitates seamless cross-chain transactions but also provides fertile ground for developing complex financial applications. Its commitment to transparency, security, and accessibility is evident through features like CosmWasm compatibility, Injective Bridge, staking mechanism, innovative burn auction, and insurance fund.

Injective’s strategic partnerships and support from investors such as Pantera Capital, Kucoin Ventures, and Jump Crypto highlight its potential and credibility in the blockchain space. The platform’s native token, INJ, serves not only as a governance tool but also plays a crucial role in securing and supporting the collateral in derivative markets.

As the demand for secure and decentralized financial solutions continues to grow, Injective’s DeFi platform offers users a promising gateway to the future of decentralized finance.