Injective (INJ) is a solid bridge to the DeFi financial world for users and developers alike

The lack of task-specific software development tools creates difficulties in releasing applications. To these challenges, we can also add high network fees and low bandwidth of blockchain networks, which hinder the mass adoption of decentralized applications. In this article, let's discuss a protocol that has helped remedy this situation.

What is Injective Protocol?

Injective is a blockchain protocol that builds decentralized (Web3) financial applications. The team introduced developers to its tools and ready-made modules that simplify developing financial applications such as DEX exchanges.

The protocol team also presented its Injective Chain network based on Cosmos SDK. The Cosmos zero-level blockchain provides the infrastructure for building first-level networks like Ethereum, Polkadot, BNB Chain, Solana and others. Using the Cosmos SDK has enabled high throughput and transaction speeds, as well as low fees, which average less than $0.01.

The project was created by Injective Labs, a company founded by Eric Chen and Albert Chon in 2018. The team raised $40 million for blockchain development, and in November 2021, the leading injective Chain network was launched. The project was backed by notable crypto industry companies such as Binance, Pantera Capital, Jump Crypto, and Mark Cuban.

Injective ecosystem

So far, the Injective ecosystem can't boast outstanding results, especially against the background of large platforms like Ethereum, Tron or Arbitrum: the project ranks 55th among blockchain ecosystems in DeFi Llama's DeFi Llama ranking in terms of the number of blockchain assets (TVL), which currently stands at just $15.8 million.

The project ecosystem consists of 7 projects, the best known of which are decentralized exchanges Helix and Astroport. The Injective Protocol architecture stands out from many other blockchains — let's study it in more detail.

The platform consists of three components: a blockchain network (Injective Chain) and simultaneously a decentralized exchange protocol (Injective Chain DEX), an exchange (Injective Exchange) and a hub (Injective Hub).

Notably, the Injective Chain DEX exchange is embedded in the blockchain protocol rather than a separate application like Uniswap or 1inch. This provides security at the level of the blockchain itself. The Injective Chain DEX itself consists of 5 modules:

Auction: participants bid on a "basket of tokens" accumulated from exchange protocol commissions. The tokens of the highest bidder are burned and withdrawn from circulation;
Exchange is a decentralized exchange module for spot and futures markets (derivatives). Traders can manage an order book, and it all runs directly on the blockchain;
Insurance: supports underwriters who in turn support the derivatives market;
Oracle: receives and provides traders with real-time exchange price data;
(Peggy) — connects the Injective Protocol and Ethereum blockchains, enabling the conversion of native protocol tokens to ERC-20 and vice versa.

The next component of the protocol is the Injective Exchange. It is an open-source exchange with an order book model based on the technology of another well-known protocol 0x. The components of the exchange include a user interface, smart contracts functionality and an order book management system.

Another interesting feature of the Injective Exchange is the integration of a trade execution coordinator (TEC), which artificially creates a delay to ensure that old orders are placed before new orders.

Finally, the last component of the Injective Hub protocol provides a dashboard with the necessary information for users better to utilise the full functionality of the Injective Protocol. In addition, Injective Hub members can put forward and vote for suggestions to improve the ecosystem, such as adding a new trading pair, platform functionality and management procedures.

INJ cryptocurrency

The project team has released a native INJ management token. Token holders can become validators and stack INJ directly into the protocol's smart contract or delegate to existing validators, earning income from staking. The target inflation rate for tokens generated by steaking was initially set at 7 per cent per annum but will gradually decrease to 2 per cent. New tokens will stop being issued once the total number reaches INJ 100 million.

The INJ token is also used for management in all blockchain modules, including Auction, Exchange, Insurance, Oracle and Peggy, as well as software updates and Cosmos SDK module parameters for application development and other system components.

60% of the revenue generated by trading commissions is formed into a "basket" that will be received by the holder who offered the highest amount of INJ tokens for it. Traders can also use INJ cryptocurrency as collateral for derivatives trading on the derivatives market.

INJ tokens were issued ahead of the launch of the main Injective Chain network in 2020. A total of 9 million INJs worth $3.6 million were sold — that's 9% of the total token issue, which is 100 million INJs.

There are currently 81 million INJ tokens circulating on the market, and the cryptocurrency's capitalization exceeds $1.2 billion. INJ is ranked 67th among all cryptocurrencies by this indicator.

The token's exchange rate at the time of writing was $14.7. Since the beginning of 2023, the price of INJ has increased more than 10 times, with the price not deviating much from the historical maximum, recorded at $22.2. Even major cryptocurrencies such as Bitcoin and Ethereum have "sagged" much more strongly relative to their highs. This indicates a rapidly growing demand for the protocol and its token.

Current status and prospects of the project

Statistics show that interest in the project is growing despite the bear market. Injective protocol has all chances to become the near future one of the leaders in its niche, namely the infrastructure of financial applications. This can be achieved due to the high level of security and integration thanks to the Cosmos SDK tools, which allow the creation of interoperable decentralized protocols.