Injective: The first universal DeFi protocol

Two major problems with most of the DEXs and DeFi products are slow transactions and high fees. The Injective protocol solves these two issues with a truly decentralized, permissionless decentralized exchange and multichain DeFi protocol.

The Injective protocol is a derivative exchange with special features that make it a “truly” decentralized DEX. It is a layer-2 DEX, meaning it is built on top of an existing blockchain. Here, the protocol is built using a Cosmos SDK built with Ethermint (EVM on Tendermint).

What it essentially means is the Injective protocol solves the problems faced by other common DEXs like Uniswap, Sushiswap… This is because the Injective protocol is interoperable between multiple chains like Cosmos and Ethereum. This essentially reduces the effect of congestion in the ethereum network getting in the way of the DEX’s operations.

There are other interesting features that make this protocol truly decentralized. One of them is that users can introduce their own derivative market on the DEX. Most DEXs have a centralized component that restricts the features, products, or services on their platform. Injective on the other hand is a universal DeFi protocol that offers cross-chain derivatives trading for spot, swap, and derivative trading.

Components of Injective Protocol

The protocol offers peer-to-peer trading for spot, swaps, and derivatives and has 5 main components:

  1. Injective Chain
  2. Injective Exchange Client
  3. Injective API Provider
  4. Injective EVM RPC provider
  5. Injective Bridge Contracts on Ethereum
Components of Injective Protocol

The injective chain is the core component of this protocol and it has 4 different parts: A fully decentralized orderbook, Trade execution coordinator, EVM execution environment, and a Bi-directional token bridge to Ethereum.

A fully decentralized orderbook is made possible by the 0x protocol and a trade execution coordinator is also implemented which works based on the  0x Coordinator specifications. The trade executor takes care of the problem of front running in the market.

The EVM execution environment includes smart contracts such as Injective Coordinator Contract, Staking Contract, Injective EVM Bridge Contracts, etc. These smart contracts help with features like peer-to-peer trading, two-way peg between Ethereum and the Injective Chain, liquidity solutions, and more.

Users can transfer ERC-20 tokens from Ethereum through the bi-directional Injective Token Bridge, which serves as a two-way Ethereum peg-zone for ERC-20 tokens to be transferred to the Injective Chain EVM. The peg-zone is based off Peggy and is secured by the Proof-of-Stake security of the Injective Chain.

This process involves different steps:

Ethereum → Injective Chain

Injective Chain → Ethereum

Injective Exchange Client is another component that helps anyone to easily participate in our decentralized exchange protocol in a fully permissionless manner. Individuals can run their client from locally to directly interact with the protocol using this comprehensive yet friendly graphical user interface feature.

The Injective API nodes serve two purposes: 1) providing transaction relay services and 2) serving as a data layer for the protocol.

All these components work together to make this protocol work as a decentralized derivate exchange. INJ tokens, which is the native token of the protocol form the backbone of the entire DEX.

How to use INJ tokens

INJ tokens are the governance token of the Injective protocol that is used for making changes to the platform and the protocol. It is also used as a security for the proof of stake consensus mechanism of the protocol. In addition to that, INJ tokens are used as incentives for the exchange participants and liquidity providers.

The exchange fee goes through a buyback and burn method to keep the accrued value for INJ. This, in effect, will reduce the supply of the tokens. INJ tokens can also be used as collateral in some of the futures markets.

INJ tokens have a maximum supply of 100 million with 29 million in circulation now. You can now start investing in the evolving decentralized derivatives exchange of Injective by hodling INJ tokens on ZebPay!

Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The views, thoughts, and opinions expressed in the article belong solely to the author, and not to ZebPay or the author’s employer or other groups or individuals. ZebPay shall not be held liable for any acts or omissions, or losses incurred by the investors. ZebPay has not received any compensation in cash or kind for the above article and the article is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.

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