Welcome to this week’s coin review where we take the time to research some of the latest projects available so you don’t have to. With a pretty dull market the last few weeks, a few new projects are launching amidst the new years’ uncertainties. Aside from a few one off 50% bumps for a couple of select projects, everything else is either continuing its downtrend or holding that sideways momentum. With all that going on, we’re going to change things up just a bit this week and introduce a new “Flashback” variation of our usual weekly review. With so many great projects covered so early in their lifecycle, it only makes sense that we’d revisit some select projects that have come a long way since we first discussed their protocol. To kick off our first interaction we’ll be taking a look back at Injective Protocol to update everyone on exciting new developments and those on the horizon. It has been a long time since we interviewed them back in October 2020!
Injective Protocol is a fully decentralized layer-2 DEX built for the next generation of decentralized derivatives exchange. The Injective Chain is a Tendermint-based IBC-compatible blockchain that supports a decentralized orderbook-based DEX protocol and a trustless ERC-20 token bridge to the Ethereum blockchain. It is the first fully decentralized layer-2 exchange protocol for decentralized perpetual swaps, futures, and spot trading that unlocks the full potential of decentralized derivatives and borderless DeFi. Every component of the protocol has been built to be fully trustless, censorship-resistant, publicly verifiable, and front-running resistant. By providing the unrestricted and unprecedented ability to express diverse views in the decentralized financial markets, Injective is striving to empower individuals with the ability to more efficiently allocate capital. Some key features of Injective Protocol include a truly decentralized protocol with Injective transforming an exchange into a decentralized public utility by open-sourcing every single component of the exchange, from the front-end exchange interface to back-end infrastructure to orderbook liquidity. Injective is completely permissionless throwing the traditional business model of exchanges on its head, as they cut the technical barrier to entry for users by creating a permissionless and highly performant exchange for both spot and derivatives markets. Injectives combined with permissionless access ensure an open and unrestricted market, resistant to any censorship. Nodes on the Injective Chain are incentivized through token economics to act as order relayers, host a decentralized orderbook, and serve as a decentralized trade execution coordinator.
Unlike traditional exchanges which serve as gatekeepers to the crypto industry, Injective transforms an exchange into a decentralized public utility. What truly differentiates Injective is that it brings every component of a decentralized exchange to the public. Everything from the front-end exchange interface, back-end infrastructure, and order book liquidity is provided openly and for free. This transforms the traditional business model of exchanges as it eliminates the technical barrier to entry for individuals to freely run a highly performative exchange. Injective’s business model rewards relayers in the Injective network for sourcing liquidity. By doing so, exchange providers are incentivized to better serve users as they compete amongst each other to provide better user experiences. Allowing users from all around the world to access decentralized financial markets. The Injective Client is a comprehensive yet friendly graphical user interface catered towards the general public as well as more advanced users. Relayers can host the client on a server to allow users to interact with the protocol. Individuals can also run the client locally to directly interact with the protocol. The exchange client interface will also be deployed on IPFS. Injective API nodes index block events obtained from the Injective Chain and serve as a data layer for external clients. Due to the fact that the API nodes solely rely on publicly available data obtained from the Injective Chain, anyone can run their own permissionless API node and get a trustless data layer for interacting with the Injective Protocol. Injective API nodes can also optionally provide fee delegation services on the individual transaction level for other users, wherein the exchange API node pays for the gas fees for a third-party user. By doing so, users experience zero-fee trading on the Injective Chain.
The function of the Peggy Bridge contract is to ease efficient, bidirectional cross-chain transfers of ERC-20 tokens from Ethereum to the Injective Chain. Unlike other token bridge setups, the Injective Peggy bridge is a decentralized, non-custodial bridge operated solely by the validators on Injective. The bridge is secured by the proof of stake security of the Injective Chain, as deposits and withdrawals are processed in accordance to attestations made by at least two-thirds of the validators based on consensus staking power. On a basic level, the Peggy module mints new tokens on the Injective Chain upon an ERC-20 deposit from Ethereum and burns tokens upon withdrawing a token from the Injective Chain back to Ethereum. The peggy module also manages the economic incentives to ensure that validators act honestly and efficiently, through a variety of mechanisms including slashing penalties, native token rewards, and withdrawal fees. An extra module provides insurance funds for derivative markets in the exchange module of the Injective Chain to support higher leverage trading. On a high level, insurance funds for each derivative market are funded by a permissionless group of underwriters who each own a proportional claim (represented through insurance fund share tokens) over the underlying assets in the insurance fund. Each insurance fund grows when positions in its corresponding derivative market are liquidated with positive equity, as half of the positive equity is sent to the insurance fund upon liquidation. When a position with negative equity is liquidated (i.e. the position has surpassed bankruptcy), the insurance fund is utilized to cover the missing equity.
For starters Injective has launched its mainnet in November 2021 after almost 2 years in testnet, an astounding feat that required all hands on deck across Injective’s ever-expanding ecosystem. Since the launch of the mainnet, trading volumes have soared to never before seen levels and an unprecedented number of users have joined the worldwide community. In the days following launch the total trading volume on Injective surpassed $100M. The Injective Pro trading guide launched on YouTube and the Injective Trading Bot became completely open-sourced. Launching alongside the Protocol was a $120 Million Astro Incentive Program to entice new liquidity and traders over to Injective Protocol. Injective Astro aims to distribute 10 Million INJ tokens over the next five years to bring greater liquidity to the protocol. This fund is separated into two categories, the first is the Dedicated Market Makers Program aimed at retaining a competitive environment. Any market maker who is the worst performer for two consecutive epochs will effectively lose all their unvested rewards and can possibly be eliminated from the program. A total of 3 Million INJ is proportionally allocated to all qualified Direct Market Making Program participants, based on individual market-making scores calculated every four weeks. The second part is the Trade & Earn allocation where the remaining 7 Million tokens will be proportionally allocated to all trading participants for their maker and taker orders every week. All users of Injective can effectively enjoy these rewards with DMMs and traders alike able to view their earned rewards and how much in total rewards have been distributed. Within each epoch that takes place every 4-weeks. The rewards tabs are quite extensive with an overview of past rewards as well as countdowns to the next distribution.
The first batch listing proposal went live on the Injective Hub with the successful launch of decentralized BNB perpetual markets. This update marked the latest synergy with Injective’s collaborator Binance and enabled users to trade BNB perps to earn Injective Astro rewards. Decentralized ETH, BTC, and LUNA perpetual markets have also gone live, allowing users to trade perps for zero gas fees and earn rewards. While Futures Markets are still under development, Injective has launched USDT Spot Market for INJ, ATOM, WETH, LINK, UST, LUNA, and GF (GuildFi) so far. Injective allows for a maximum of 20x leverage against trades on the platform. The Injective Protocol Bridge is the easiest and most secure way to transfer assets in and out of the Injective Chain, currently enabled for low fee swap between Ethereum, Terra, and Cosmos. All new users who transfer and trade on Injective can earn a rebate for any gas transfer fees that they may have paid when bridging assets to the Injective Chain from Ethereum. To qualify, you must have no prior trading history on Injective, at least one deposit transaction of greater than 500 USDT (must be in USDT) from Ethereum, and make a trade where the notional value is at least 500 USDT in any market of your choice on Injective Pro.
Announced shortly after launch, Injective introduced one of the largest token burning ratios of any project to introduce immense deflation of the INJ token supply. Burning exchange fees every week, as approved by the Injective community as part of the canonical mainnet rollout. Every week 60% of exchange fees collected on the protocol will undergo a buyback and burn process that’s managed by a community-led auction. With a new Auction interface created for users to track fees collected and burned on Injective. This reflects that Governance on Injective Protocol is already in full swing and working to benefit everyday users build the direction of the protocol.
Two community-driven goals currently underpin Injective. The first is enabling anyone to access, create, and trade unlimited DeFi markets. The second is to build a custom layer-1 protocol that can be utilized to build scalable cross-chain trading, derivatives, and Web3 applications. Ultimately, all Injective’s achievements in 2021 enabled it to continue delivering upon its mission of creating a truly free and decentralized financial network for everyone. The focus in 2022 will be to build the most powerful decentralized derivatives exchange, interoperable smart contract layers, and innovative Web3 applications ever developed. A significant benefit of deploying on Injective is the ability for these new exchange relayers to share one order book which in many ways rectifies the cold start problem faced by other DEXs that have to recruit users and liquidity from scratch. Injective will continue to bolster its infrastructure to unlock the full power of decentralized derivatives. A key towards achieving this will be to integrate more decentralized oracle solutions such as Chainlink to embed further redundancy into the network. Integrating more oracle solutions will also allow users to have access to versatile price feeds from which new DeFi markets and pairs can be launched on the exchange itself.
Another goal will be to increase order book liquidity exponentially through concerted growth in retail usage, exchange relayers, and institutional adoption. Unlike most exchanges today, Injective has built an exponentially performant on-chain orderbook that is able to prevent commonplace issues such as high gas fees, slippage, and predatory front-running. Increasing liquidity for the on-chain order book will be led by a multifaceted strategy that focuses on growing both the institutional and retail user base. Injective Pro and other products within the Injective ecosystem will undergo new iterations to offer a much more seamless user experience. Specifically, this entails putting in place intuitive UI for the Injective Bridge and exchange. Some of these parameters are already underway such as seen through a recent mainnet upgrade that showcased an experimental feature that would allow users to trade without having to sign transactions every time with their wallet. More exchange pairs and market types will be also introduced to attract new retail user bases. Currently, Injective has managed to eclipse over $100 Million in daily trading volume with the help of only a few pairs listed. Over the coming months, new spot and derivatives markets will be introduced by the community. The idea is basically to make Injective the go-to exchange for any form of decentralized trading since it will ideally be able to offer access to markets not found elsewhere. Connecting the IBC Bridge to additional chains over the coming year will play a tremendous role in this expansion of the protocol. While Injective is already a highly scalable chain that is custom-built for cross-chain trading and decentralized derivatives. The next step being discussed is to enable a smart contract layer that allows developers to build entirely new interoperable Web3 applications on Injective. Ultimately, the goal is to provide the Injective community with the tools and platform needed for them to express their unique ideas and talents. By allowing any member of the community to shape the protocol, the pace of innovation can be accelerated by the collective intelligence of the global Injective community, which is far superior to a singular centralized team.
The Injective Ecosystem continues to be one of the fastest-growing ecosystems in all crypto. Injective has solved many of the salient issues that continue to plague the world of traditional finance by creating a permissionless protocol through which anyone can access derivatives markets in an entirely decentralized manner. Injective Pro itself has already processed over $1 Billion in trading volume in just a month since the launch of its highly anticipated mainnet. To put this number in perspective, it took Coinbase over a year to achieve the same. A good start like this can only lead to a prosperous future ahead of the protocol. Injective has big plans to launch new and exciting products across its multifaceted exchange in 2022 and I’m looking forward to using every one of them.
Until next time, remember that the only guarantee is BTC. So keep stacking that Satoshi.