Injective Protocol (INJ)

Injective Protocol (INJ)

Most recent update: [January 11, 2024] 

What is INJ? 

Injective Protocol represents a new frontier in blockchain technology, tailored for decentralized finance (DeFi) applications. This layer-one blockchain is engineered to support a range of DeFi platforms, including decentralized exchanges for spot and derivatives trading, along with prediction markets and lending protocols. Its design emphasizes openness and interoperability, allowing seamless interactions across various blockchain ecosystems. Injective’s infrastructure is unique, featuring a decentralized orderbook and a high-performance matching engine capable of handling diverse financial markets, underpinned by a robust anti-Miner-Extractable Value (MEV) framework for equitable trading. The platform runs on Tendermint-based Proof-of-Stake (PoS) consensus mechanism, ensuring swift transaction finality and supporting a high transaction rate.

At the heart of Injective’s ecosystem is the INJ token, serving multiple functions like governance, dApp utility, staking, and incentivizing developers. The token’s economic model is designed to be deflationary, where a part of the fees generated by the platform is allocated to systematically reduce the token’s supply. Injective’s compatibility with major blockchain networks such as Ethereum, Solana, and Polygon, facilitated by its interoperable infrastructure, elevates its position in the DeFi space. This versatile framework makes Injective an attractive platform for a broad spectrum of DeFi applications, setting a new standard for financial applications on the blockchain.

Who is behind INJ? 

The creation of Injective Protocol, a prominent blockchain platform tailored for decentralized finance applications, can be traced back to its inception in 2018 by two notable figures, Eric Chen and Albert Chon. Eric Chen, serving as the CEO of Injective Labs, brought a wealth of experience from his previous role at Innovating Capital, where he was deeply involved in crafting trading strategies and researching blockchain protocols. Albert Chon, who assumed the position of Chief Technology Officer, brought a strong technical background from his tenure as a software engineer at Amazon, complemented by his academic achievements in computer science from Stanford University. Their collaborative efforts at Injective Labs have been crucial in driving the development and advancement of the Injective Protocol, attracting significant investment and support from major entities in the cryptocurrency sector, such as Binance, Pantera Capital, and Jump Crypto.

How does it work? 

Injective Protocol is tailored as a specialized blockchain platform focusing primarily on decentralized finance (DeFi) applications. Its architecture is both open and interoperable, enabling a diverse range of DeFi applications such as decentralized exchanges for a variety of financial markets, alongside prediction and lending platforms. One of its notable features is the decentralized on-chain order book, engineered to be resistant to Miner-Extractable Value (MEV) and ensure equitable trading practices, complemented by a batch auction system for order matching.

Technologically, Injective is built using the Cosmos SDK and employs a Tendermint-based Proof-of-Stake consensus mechanism. This foundation provides the platform with the capability of instant transaction finality and supports a high transaction rate, capable of exceeding 10,000 transactions per second. Interoperability is a core feature, with the platform facilitating seamless asset transfers across multiple blockchains, including Ethereum and Solana, aided by the Inter-Blockchain Communication (IBC) protocol. For smart contracts, Injective leverages CosmWasm, enabling multi-chain transaction processing and novel automated smart contract execution.

The INJ token serves as the heart of Injective’s ecosystem, utilized in various roles like governance, dApp functionality, staking and incentivizing developers. Its deflationary design is evident, with a mechanism where a significant portion of dApp fees is used for a weekly buy-back-and-burn auction, leading to a gradual decrease in token supply. The ecosystem of Injective is both vibrant and extensive, with a global community and over 100 projects. With substantial backing from prominent investors, Injective is pushing the envelope with a significant ecosystem initiative, aiming to foster more DeFi development on its platform.

The INJ Token and Tokenomics 

INJ tokens are currently available for sale on multiple exchanges worldwide. The total supply is capped at 100,000,000 tokens, and as of January 10^th 2024, the market cap for INJ amounted to approximately US$3,321,063,989. The circulating supply of INJ tokens is around 83,755,556.

The initial distribution for INJ is broken down as follows:

• Ecosystem Development: 36%
• Team: 20%
• Private Sale: 17%
• Community Growth (Liquidity Mining): 10%
• Binance Launchpad: 9%
• Seed Sale: 6%
• Advisor: 2%

The INJ token is purported to serve as a utility token to pay for transactions and services on the network and to also be used a liquidity mechanism for value transfers. It can also be used as a governance token.

Security 

Injective Protocol’s security system hinges on a sophisticated blockchain structure and a consensus method that is rooted in its design. The protocol is engineered using the Cosmos SDK, and it relies on a Tendermint-based Proof-of-Stake (PoS) consensus for security and efficiency. This setup ensures high-speed transaction processing and immediate finality, a key feature for maintaining network integrity. In this system, validators are crucial, staking their INJ tokens to validate transactions and safeguard the network, thereby earning rewards for their contributions to network security and stability.

Enhancing Injective’s security further is its integration of CosmWasm for smart contract functionality, allowing automated execution of contracts with each blockchain block. The  platform’s interoperability is also a vital component, facilitated through IBC within the Comos ecosystem and decentralized bridges to other key blockchains like Ethereum and Solana. The INJ token plays a multi-faceted role in this ecosystem, being instrumental in governance, staking, and incentivizing development, and is central to the network’s economic and security model. A distinctive feature of Injective is its token burn mechanism, which helps maintain deflationary supply, underpinning the network’s economic resilience.

Drawbacks and risks 

Injective Protocol (INJ) entails several risks, typical of the cryptocurrency environment. Market volatility is a key concern, with INJ subject to rapid value change driven by various factors. Technical vulnerabilities in the blockchain or its smart contracts pose operational risks. Its decentralized government structure, while beneficial in some aspects, could lead to internal community disputes impacting the protocol’s future development. Moreover, INJ’s valuation is heavily dependent on the growth and user engagement within its ecosystem, where limited progress could negatively impact its worth and practicality.

Finally, as common to many ERC-20 tokens and more broadly Proof-of-Stake networks, their blockchain architecture dictates that those with the most staked tokens will have the most sway in the network’s functioning. This effectively places richer wallets in a position of power. Thus, if one person or a group of entities can acquire 50% of the network’s voting power, they would be able to control it. 

Due Diligence  

Before listing INJ on the VirgoCX Platform, VirgoCX performed due diligence on INJ and determined that INJ is unlikely to be a security or derivative under Canadian securities legislation. VirgoCX’s analysis includes reviewing publicly available information on the following:  

• The creation, governance, and location of INJ and/or its primary development team; 
• The supply, demand, maturity and liquidity of INJ; and 
• Legal and regulatory risks associated with INJ.  

Statutory Rights under Securities Legislation 

VirgoCX is offering Crypto Contracts on crypto assets in reliance on a prospectus exemption contained in the exemptive relief decision Re VirgoCX Inc. dated May 30th 2022 (the Decision). Please be aware that the statutory rights in section 130.1 of the Securities Act (Ontario) and, if applicable, similar statutory rights under the securities legislation of each other province and territory in Canada do not apply in respect of the Crypto Fact Sheet to the extent a Crypto Contract is distributed under the prospectus relief in the Decision. 

Further Reading 

To learn more about the technology behind INJ, check out these in-depth resources here: 

• The official site of INJ
• Coinmarketcap’s overview of INJ
• Coingecko’s tokenomics overview of INJ
• Coinbase’s overview of INJ, along with the relevant news and blogs related to INJ.