DeFi has quickly become one of the most popular uses for blockchain technology and is meant to replicate certain traditional financial services through the use of smart contracts. DeFi apps include decentralized exchanges (DEXes), lending/borrowing protocols, derivatives markets, and more.
Injective provides tools to build decentralized applications (dapps) that focus on these types of financial functionalities in the crypto space. In doing so, it aims to build a comprehensive DeFi infrastructure that is interconnected and is able to access deep liquidity. Built using the Cosmos software development kit (SDK), Injective can also take advantage of fast transactions using the Cosmos blockchain’s underlying architecture and the interoperability of Cosmos’ Inter-Blockchain Communication (IBC) protocol.
Injective’s native token, INJ, is used to validate transactions through staking and govern the protocol through community voting. Additionally, those who build DeFi dapps on Injective are rewarded with INJ tokens.
How was Injective developed?
Injective was founded in 2018 by Eric Chen, who serves as Injective Lab’s CEO, and Albert Chon, who serves as the company’s CTO. Injective Labs is the parent company of the Injective protocol oversees its funding and development. Injective has achieved several important milestones, including its mainnet release in late 2021 and the launch of smart contract capabilities in late 2022.
Injective has received backing from many large crypto investors—including Binance, which hosted the INJ token launch. It has received additional funding from large venture capital groups such as Pantera and Jump Crypto. It has additionally partnered across the space to support the protocol’s development, including funding of its $150 million ecosystem fund.
How does Injective work?
Injective’s primary role is to provide software modules that can be used by developers to build DeFi solutions.
Additionally, because Injective’s tools provide a de facto standard in its ecosystem, any DeFi protocols created with them are naturally interoperable, meaning they can interact with each other and access each other’s liquidity. Put a different way: the assets that back each individual Injective-based platform can be shared across those platforms, making them easier to launch—and smoother to use.
Finally, Injective uses frequent batch auctions (FBA) to solve the frontrunning problem that has plagued DEXes in the past. Frontrunning happens when high-frequency traders (HFTs)—namely bots—detect trades submitted by individual traders and “jump the line” in front of them to execute more advantageous trades, resulting in a large profit. FBAs accept orders over a discrete time period, choose an execution price, and then publish trades only when these are finalized—neutralizing any frontrunning efforts.
Focus on interoperability
In addition to liquidity aggregation, Injective attempts to maximize interoperability by using the existing Cosmos infrastructure. Cosmos introduced the Inter-Blockchain Communication (IBC) protocol in 2021, making it possible for the various chains and dapps using the IBC standard to transact with each other. Through IBC, tokens and other data can seamlessly traverse Cosmos’ ecosystem, and since Injective was built using the Cosmos SDK, it benefits from the same functionality.
Injective also has prioritized communication with chains outside of Cosmos through bridges. This type of blockchain infrastructure allows for transfer of digital assets between individual chains. Injective Bridge supports Ethereum, Solana, Cosmos, Moonbeam, and more.
Projects built on Injective
Injective’s development relies on the successes of projects that build on its framework. Injective-based projects include:
- Helix – a DEX based on an “order book” model, similar to how traditional brokerages operate.
- Astroport – a DEX providing both spot and derivatives trading based on the automated market maker (AMM) model popularized by Uniswap.
- Frontrunner – a sports betting platform.
How is the INJ token used?
INJ is the native token of the Injective blockchain, serving a number of purposes for users.
For example, INJ can be staked to secure the blockchain. Injective uses a delegated proof of stake (DPoS) consensus mechanism based on Tendermint to set the rules for processing transactions, which. Tendermint is a Byzantine Fault Tolerant (BFT) design used by all Cosmos protocols and is able to process transactions quicker than some other common methods. Stakers are rewarded with additional INJ for their work in securing the chain.
Further, 40% of all protocol fees are allocated to developers, so INJ is used to incentivize them to build dapps on Injective. INJ is used in those dapps to pay for network fees and to provide the liquidity necessary to run them.
Finally, INJ is used for community governance through its DAO.
Deflation through burn auctions
The INJ token is designed to have an inherent deflationary mechanism through burn auctions. Whereas 40% of protocol fees are distributed to Injective’s dapp developers, the remaining 60% are collected and auctioned off to the highest bidder each week. The highest bidder “wins” the INJ in the pool of collected tokens, and the INJ tokens they have bid are burned (destroyed). This is a specific type of “buyback-and-burn” approach used by many crypto projects to exert deflationary effects on their token economics.
There is a maximum supply of 100 million INJ. A public sale for 9% of the supply was held through Binance in 2020, with each token being sold for $0.40. Of the remaining tokens, around 36% were allocated to ecosystem development, 10% to community growth, and the remaining 45% to seed/private sales, the development team, and advisors.
- Injective is a blockchain that prioritizes the development of decentralized finance applications built using the same tools used by the Cosmos blockchain.
- Important features of Injective’s infrastructure include reducing the effect of high-frequency traders (bots) on decentralized exchanges and maximizing interoperability among protocols and other blockchains.
- The INJ token is Injective’s native asset, which has many uses including staking, rewarding users, and decentralized governance.