What is the Injective Protocol (INJ)? How Does it Work?

The DeFi market has swiftly grown over the past few years. A huge number of projects are introduced with several innovative features. Each project is dedicated to standing out so it may secure a huge amount of investors. But investors often face a common problem when they want to transfer funds from one DeFi protocol to another.

They usually need to rely on third-party applications due to which their funds are at risk. Injective Protocol is trying to solve this problem with its unique features.

What is the Injective Protocol (INJ)?

Injective Protocol is a layer-2 network that offers cross-chain derivatives trading for several layer-1 blockchain networks including Ethereum, Cosmos, and more. The protocol is built on Cosmos but it enables users to access crypto tokens from other platforms like Polkadot and Ethereum.

The platform is dedicated to offering a high level of decentralization with a robust network speed. Although it’s a decentralized exchange, it provides an environment similar to the centralized stock and crypto exchanges because it uses the traditional order book model instead of the automated market maker.

Thus, the platform offers the transparency of a decentralized exchange while achieving the efficiency of traditional finance. Unlike other decentralized exchanges, the platform charges the market maker and taker fees to execute transactions.

What Problem Does Injective Protocol Solve?

Injective Protocol removes the collision barriers allowing users to trade cryptos, derivatives, and futures without the involvement of a third party. This decentralized exchange is capable of handling a large number of transactions with its innovative technologies. The protocol also ensures flexibility and efficiency by creating a bridge between several DEXs.

Injective Chain

It’s the most important component of the protocol that uses a hand-in-hand process with Cosmos zone to facilitate the transactions. It uses a decentralized and trustworthy mechanism to power the Defi applications of the next generation. The Injective Chain consists of a range of components that ensure secure transactions.

EVM Execution Environment

The Injective Chain provides a robust infrastructure for executing smart contracts, thanks to its use of a modular implementation of the Ethereum Virtual Machine (EVM) built on top of Cosmos SDK. Leveraging a scalable and interoperable implementation of Ethereum on top of Tendermint, the network supports Proof-of-Stake consensus and boasts a fast 1-block finality, empowering users with reliable and efficient execution of their smart contracts.

Injective EVM Bridge Contracts, Injective Derivative Contracts, Staking Contracts, 0x V3 Exchange Contracts, and Injective DEX Contracts are some of the leading contracts deployed on Injective EVM.

Decentralized Orderbook

As it’s discussed earlier, Injective Protocol offers a trading environment similar to traditional centralized exchanges. But it ensures the privacy of the transactions with its decentralized nature. Injective Chain has a group of nodes that host a censorship-resistant and decentralized order book.

Injective Exchange Client

The Injective Exchange Client offers a user-friendly interface that caters to both novice and advanced users. With the help of relayers, the client can be hosted on servers to enable easy interaction with the Protocol. Moreover, individuals can also run the clients on their local machines for a direct and seamless experience.

The deployment of the Exchange Client Interface is made possible through the use of IPFS – an innovative platform that offers a decentralized and secure approach to file storage and sharing.

By leveraging the power of IPFS, the Injective Exchange Client ensures that users can easily access the Protocol and perform transactions without any worries about security or reliability. This cutting-edge technology provides a robust and scalable platform for the deployment of the client, ensuring that users can access it from anywhere and at any time.

Injective Protocol Brief History

Injective Protocol was introduced by Albert Chin, a former Amazon Software Development Engineer, and Eric Chen in 2018. Chen worked as a venture partner at Innovating Capital. Chen had a degree in finance while Chin had a masters degree in computer science.

Injective Protocol attracted a number of investors with its innovative features. Mark Cuban, Pantera Capital, and several other notable investors invested tens of millions of dollars in this project. The platform was primarily designed to overcome the restrictions of DEXs.

How Does Injective Protocol Work?

As it’s mentioned above, Injective Chain is the most important component of the Injective Protocol. It uses a set of modules to facilitate different trades.

Auction – The platform collects exchange trading fees from traders and adds them to several baskets of tokens. The traders can place bids to get these tokens.

Exchange – The traders can directly exchange tokens with other traders using this module. The protocol handles order book management, trade execution, and other relative tasks.

Oracle – The prices of assets are determined with the help of oracles that collect real-time data from traditional exchanges.

Peggy – ERC-20 token holders can use this bridge to convert their tokens to Cosmos-native tokens.

Injective Hub

Injective Hub is a user-friendly interface that enables users to access several features of Injective Protocol smoothly. Using this dashboard, INJ token holders can lock their INJ tokens to become validators. They will then receive rewards for their contribution. The token holders can also delegate their tokens to other validators if they don’t have the required resources and time to participate in the validation process.

INJ Tokenomics

INJ is the native token of the Injective Protocol that is used to pay maker and taker fees. The token holders can also stake their INJ tokens to earn passive income. Moreover, the INJ token holders also have governance rights within the platform.

With a circulating supply of 73 million tokens, INJ has a market cap of $287 million. It has a total supply of 100 million tokens that will be released through staking rewards. INJ token ranks among the 200 best cryptocurrencies in terms of market cap.

Conclusion

Injective Protocol is designed to solve the problems the traders usually face with decentralized exchanges. It tries to solve the liquidity problem by creating several bridges between different layer-1 blockchain networks. Moreover, it uses traditional order book management to provide better trading facilities to the users.

If you need more information about how Injective Protocol works, feel free to get in touch with us.