Crypto Project Reviews

Altcoinist Review | Injective Protocol: Flash Finance

July 1, 2024

Project Overview

Injective Protocol is an avant-garde decentralized exchange (DEX) that promises to propel DeFi into its next chapter. The following key aspects define this innovative project:

  • Decentralized and borderless: Using the power of blockchain technology, Injective Protocol provides a fully decentralized, peer-to-peer trading experience that breaks geographical barriers.
  • High-speed and low latency: Leveraging a unique layer-2 structure, Injective Protocol ensures speedy transactions without compromising efficiency (25.000+ TPS)
  • Front-running resistance: Implementing advanced technologies like Verifiable Delay Functions (VDF), the project ensures a fair trading environment by mitigating front-running attempts.
  • Native $INJ token: Injective Protocol's native token, INJ, plays a critical role in network security, governance, and protocol operations.
  • Burn Mechanism: 60% of weekly exchange fees are burnt, causing a supply deflation for the $INJ token.
  • Layer-2 structure: The project's unique design solves common DeFi issues like high gas fees and sluggish transactions.

Velocity of Money

In economics, the term 'velocity of money' refers to the frequency and speed at which money changes hands in an economy, stimulating economic activities and reflecting the overall health of the financial ecosystem. A classic example of the importance of money velocity can be found in our everyday life.

Let's consider a farmer selling her produce at the local market. She uses the money received from selling her goods to buy new seeds and equipment from another vendor. This vendor then uses that money to pay for his living expenses, and the cycle continues. Each time money changes hands, it creates a ripple effect, stimulating economic activity and promoting growth. If this process is slow, the growth of the economy slows as well.

The advent of the internet dramatically increased the velocity of money, enabling transactions to occur at lightning speed across global networks. Today, we are on the cusp of another such transformative phase. The advent of blockchain technology and decentralized finance (DeFi) promises to further redefine the velocity of money, allowing for even faster, more secure, and more transparent transactions.

https://www.grandviewresearch.com/industry-analysis/decentralized-finance-market-report

In this exciting landscape, the Injective Protocol emerges as a pioneering force. This next-generation decentralized exchange (DEX) brings together the transformative potential of DeFi with the central promise of blockchain: complete decentralization. As we explore Injective Protocol, we will uncover its ambitious vision to accelerate the velocity of digital money, and thus reshape the world of finance.

Injective Protocol aims to be the accelerator pedal for the velocity of money in the digital era, by offering a platform that marries the security, transparency, and trustlessness of blockchain with the speed, efficiency, and accessibility of traditional financial systems. Let's delve deeper into this innovative platform standing at the juncture of technology and finance, striving to redefine our DeFi trading experiences.

The Problem with Centralized Exchanges

Despite their user-friendly interfaces and high liquidity, centralized exchanges are fraught with issues, including security vulnerabilities, opacity, potential for market manipulation, and susceptibility to regulatory actions.

The centralized model inherently opposes the fundamental ethos of blockchain technology – decentralization.

https://www.reuters.com/technology/crypto-companies-crash-into-bankruptcy-2022-12-01/

The Problem with Existing DEXs

While existing DEXs provide a viable alternative to centralized platforms and align better with blockchain's decentralized philosophy, they're not without their problems. High transaction fees, slow speeds, and lack of liquidity are significant pain points that mar the DEX experience.

https://www.blockchain-council.org/cryptocurrency/centralized-exchange-vs-decentralized-exchange/

Injective's Solution

https://injective.com/

Injective Protocol shines as a beacon of innovation amidst these challenges. By combining the robust security of Ethereum with the scalability of Cosmos via its dual blockchain structure, Injective Protocol facilitates high-speed, low-cost trading across a broad range of DeFi markets.

The platform is fully permissionless, promoting a level of decentralization rarely seen in the crypto space. Users have complete freedom to create and trade on any market, free from intermediaries. This level of control combined with a proof-of-stake consensus mechanism makes the platform particularly attractive to INJ token holders who can participate in network security and governance.

Injective's technology


Injective Protocol is a fully decentralized protocol that facilitates peer-to-peer trading across different blockchain networks, including Ethereum and Cosmos. Its technology can be summarized as follows:

  1. Injective Chain: This is the core of the Injective ecosystem. It is a layer-2 decentralized exchange protocol built on the Cosmos SDK that provides fast, secure, and fully decentralized trading.
  2. Injective Exchange Model: The protocol allows anyone to create and trade on any market. Its fully decentralized orderbook and trade execution coordinator ensure that trading is fast, secure, and fair.
  3. Injective Hub: The Hub is a blockchain that operates the network's staking, governance, and token economics. It enables fast and secure asset bridging, staking, governance, and insurance funds.
  4. Injective Futures: Injective allows users to create and trade on perpetual futures markets. It has a unique oracle scheme that ensures fair and decentralized price feeds.
  5. Injective Governance: Injective Protocol is fully governed by its community of INJ token holders. It uses a decentralized governance model to make decisions and implement changes on the network.
  6. Injective Staking: INJ token holders can stake their tokens to secure the network and earn rewards. The protocol uses a unique auction mechanism for staking, which ensures a fair and decentralized distribution of rewards.
  7. Injective Bridge: This is a blockchain interoperability protocol that allows assets to be moved seamlessly across different blockchain networks. It is built on the Cosmos IBC standard and is compatible with Ethereum and any other Cosmos SDK based blockchain.
  8. Injective Tokenomics: INJ is the native utility token of the Injective ecosystem. It has various uses, including staking, governance, liquidity mining, and fee collection.
  9. Injective Ecosystem: Injective Protocol is part of a broader ecosystem that includes DeFi protocols, data providers, liquidity providers, and other blockchain networks. This ecosystem provides Injective with a wide range of trading pairs and high liquidity.
  10. Injective SDK: Developers can use the Injective SDK to build their own decentralized applications on top of the Injective Protocol. The SDK is built on Cosmos SDK and supports multiple programming languages, including Rust and Golang.

In essence, Injective Protocol combines the best of both centralized and decentralized exchanges, providing users with a fast, secure, and fully decentralized trading experience.

Key Features

Injective Protocol stands apart from other DeFi platforms with its innovative features:

  • High-Speed, Zero-Cost Transactions: Thanks to Injective's layer-2 structure, transactions are swift and cost next to nothing.
  • Fully Decentralized: As a permissionless and trustless platform, Injective Protocol empowers users to maintain complete control over their assets.
  • Cross-Chain Trading: Users can trade across various blockchains, increasing the variety of trading pairs and potential liquidity.
  • Front-Running Resistance: Injective Protocol has taken a proactive stance against front-running, providing a fairer trading environment.

$INJ tokenomics

Injective Protocol has its native utility token, $INJ, which plays an instrumental role in the protocol's operation. The tokenomics of INJ, as of the time of writing, are as follows:

https://cryptorank.io/ico/injective-protocol
  • Market Rank: #66
  • Current Price of INJ: $8.03
  • Market Cap: $672,370,665
  • Fully Diluted Valuation: $802,777,391
  • Circulating Supply: 83,755,555 INJ
  • Total Supply: 100,000,000 INJ
  • Max Supply: 100,000,000 INJ
https://www.coingecko.com/en/coins/injective

The INJ token serves multiple functions within the Injective ecosystem:

  1. Governance: INJ holders can participate in the governance of the Injective Protocol, proposing and voting on various updates, modifications, and improvements to the system. This decentralized governance model ensures that Injective remains by the community, for the community.
  2. Staking: INJ tokens can be staked on the Injective network. Staking not only secures the network and maintains its health but also incentivizes users through rewards.
  3. Liquidity Mining: INJ tokens can be used in liquidity mining programs. Users can provide liquidity to the Injective ecosystem in return for INJ tokens.
  4. Fee Collection: INJ token holders can collect fees on the Injective Protocol.

The burn mechanism is also a noteworthy aspect of Injective's tokenomics. Each week, a basket of trading fees collected by Injective is auctioned off, with the winning bid paid in INJ tokens. These tokens are subsequently burned, creating a deflationary pressure on the INJ token supply.

https://hub.injective.network/staking/

The INJ token's tokenomics and utility are designed to incentivize active participation and promote a vibrant and thriving ecosystem. By providing users with the ability to shape the protocol's future, the Injective Protocol ensures an engaging, responsive, and dynamic environment.

Token Burn, Staking, and Its Significance in the Injective Ecosystem

Token burn refers to the permanent removal of a certain number of tokens from circulation, thereby reducing the total token supply. This action plays an integral role in the financial dynamics of many crypto projects, including Injective Protocol.

So, how does the token burn process and staking impact Injective Protocol and its native $INJ token? Let's delve into it:

  1. Token Rarity and Value Appreciation: As the quantity of $INJ tokens diminishes due to token burning, the existing tokens become more valuable due to their increased scarcity. The mechanism underlying this dynamic is the elementary economic principle of supply and demand: when supply reduces (in this case, the number of INJ tokens), and demand remains constant or grows, the value of each token naturally increases.
  2. Encouragement for Long-Term Holding: By systematically reducing the total token supply, token burning creates an environment conducive for long-term holding. The anticipation of a potential increase in token value over time incentivizes holders to retain their tokens rather than selling them.
  3. Building Trust within the Community: Regular token burns signal the commitment of the project towards maintaining the token's value, which can boost the community's trust in the project's long-term viability.
  4. Controlled Inflation: Token burning can help manage the inflation rate of a token's value over time. By periodically removing tokens from circulation, the project can prevent excessive inflation and maintain the token's market health.

Injective Protocol engages in a token burn process where 60% of the trading fees collected each week are auctioned off, with the winning bid paid in INJ tokens. These tokens are then burned, thus creating a deflationary pressure on the token supply. This unique strategy not only contributes to the value proposition of the $INJ token but also promotes a healthier, more robust token ecosystem.

In addition to these benefits, staking $INJ presents another exciting opportunity for holders. As of the most recent data, the annual percentage return (APR) for staking INJ is 16.64%, offering an attractive proposition for long-term holders. Notably, more than 50% of the current circulating supply of $INJ tokens are staked, highlighting the community's faith in the long-term prospects of the project and their willingness to hold and stake their tokens.

In summary, token burning and staking play pivotal roles in the Injective ecosystem, fostering an environment that encourages participation and long-term investment. Despite these mechanisms, like any investment, potential investors should conduct thorough research and consider various factors before investing.

Injective Ecosystem

Injective Protocol has cultivated an expansive web3 financial ecosystem, including exchanges, institutions, and venture capitalists like Binance, Pantera, Coinbase, Gate Labs, and IDG Capital.

Through Injective, institutions can build enterprise dApps, access institutional products, utilize permissioned gateways, and enjoy various incentives. Simultaneously, individual users and developers have the tools and resources at their disposal to participate fully in the ecosystem.

In summary, Injective Protocol is set to revolutionize the DeFi landscape, offering an advanced, inclusive financial system that gives control back to the users. Whether you are a casual investor or an institutional player, Injective Protocol offers you a seamless, efficient, and truly decentralized trading experience like no other.

Injective Hub

The Injective Hub is a one-stop solution that offers various functionalities, including wallet support, a bridge for fast and secure asset bridging, staking, governance, and insurance funds. It also features an auction mechanism where 60% of the trading fees paid by users are collected by Injective (the remaining 40% are sent to Exchange applications built on top of Injective, read more here). Each week, an auction is held to allow community members to use $INJ to bid for the basket of trading fees collected by Injective that week.

At the end of the auction, the winning bidder receives the full basket of assets, and the winning bid (paid in $INJ) is burned. This creates deflationary pressure on the $INJ token supply.

Developer Experience

https://docs.injective.network/

Injective Protocol is built for DeFi optimization, offering robust financial primitives such as a fully decentralized order book. Developers can leverage these resources to create mainstream dApps or launch their smart contract-powered apps on the Injective ecosystem. The Injective platform is built with flexibility in mind, providing developers with flexible environments powered by Rust & Golang.

https://cryptometheus.com/project/INJ

Market Opportunity for Injective

Injective Protocol's mission to revolutionize the DEX space presents a massive market opportunity. By addressing the issues plaguing existing DEXs, Injective Protocol positions itself to capture a significant share of the booming DeFi market. With its capacity to facilitate rapid, cost-effective trading across a comprehensive range of DeFi markets, Injective Protocol could potentially become the go-to platform for DeFi enthusiasts worldwide.

https://comparemarketcap.com/compare/injective-protocol/solana/

Summary

Injective Protocol is paving the way towards a new future for DeFi trading. Its unique solution to the problems that currently plague DEXs, combined with a deep commitment to true decentralization, places it as a potential disruptor in the DeFi market. Injective Protocol's success depends on delivering on its ambitious promises. If achieved, it could play a pivotal role in shaping the DeFi landscape.

https://injective.com/getinj