CoinEx Research

CoinEx Research: Research Report on Injective Protocol (INJ)

2021-02-05 07:33:25

I. Project Background

The DEX is still in its infancy. Although DeFi has gradually entered the public vision, crypto derivatives have just emerged. At present, many derivatives platforms are still at an early stage, supporting only a limited range of trading pairs. Under different mechanisms, they have respective trade-offs. Few have developed outstanding decentralized derivatives market projects.

The emergence of Injective Protocol (INJ) has created a modular distributed asset trading ecosystem, which will bring users a wealth of derivatives, make efficient value discovery possible, and make up for the lack of DeFi in the field of derivatives.

Unlike other platforms that use the AMM mechanism, INJ adopts Layer 2 side chains for efficient transactions, and, based on the Cosmos-Tendermint underlying protocol, makes it possible to trade cross-chain assets; to avoid preemptive transactions, INJ employs a verifiable delay function (VDF) to create a publicly verifiable decentralized timestamp that sorts all transactions. In addition, INJ integrates Polkadot and BNB Chain to expand its ecosystem.

II. About the Project

1. Potential

Injective Protocol is a decentralized derivative protocol of Layer 2 and Tendermint. The protocol allows fast and secure perpetual swaps, futures, leverage, and spot transactions on Ethereum, and integrates a verifiable delay function (VDF) to prevent cheating and bad transactions in a decentralized transaction protocol.

The ecosystem of Injective Protocol consists of three parts: the Injective chain, the Injective trading platform, and the Injective derivatives protocol.

(1) Injective chain

The time stamp proof protocol based on the Cosmos zone and released in Layer 2, used to host zero trust and decentralized transactions; it adopts the Cosmos IBC protocol to realize cross-chain transactions.

(2) Injective trading platform

A completely decentralized trading platform developed on the Injective chain. It eliminates early transactions and accelerates order matching. Nodes maintain a decentralized order book and obtain rewards by introducing transactions. It also features free order placing and cancellation, transactions without a whitelist, and permissionless issuance in an open and fair trading market.

(3) Injective derivatives protocol

It is a decentralized peer-to-peer futures and perpetual swap agreement that can be operated independently and is easily integrated. It can access various trading markets easily and be issued in an independent market. Everyone can create their own “Bitmex”, which supports arbitrage, hedging, leveraged contracts, and other financial derivatives.

Injective is one of the eight projects incubated in the first phase of Binance Labs and has received support from many institutions, including Pantera Capital, one of the world’s top cryptocurrency venture capital companies.

2. Characteristics

(1) Decentralized derivatives transactions based on Layer2: Injective can achieve fast transactions without gas fees;

(2) Create arbitrary markets: Injective allows anyone to create arbitrary derivatives markets through price subscriptions, thereby providing more trading opportunities that other exchanges do not have;

(3) Cross-chain transactions and revenue generation: Injective can support various transactions and revenue generation activities across different Layer1 blockchain networks;

(4) Community-driven network governance: Injective’s network will be managed by its decentralized community, in which new listings or parameter changes will be voted on in the decentralized autonomous organization (DAO);

(5) Incentive measures for liquidity mining: Injective’s community can incentivize users and obtain value through yield farming.

3. Token

Name: Injective Protocol

Code: INJ

Official site: https://injectiveprotocol.com/

Release date: November 2020

Type: ERC20

Total amount: 100 million

Launched on: CoinEx, Binance, Gate, and Upbit

Details of the token:

(1) Token distribution

16.66 million tokens will be unlocked in April 2021, accounting for 5% of the total private placement.

(2) Token usage

INJ mining — Users can obtain INJ by establishing a new derivatives market or participating in transactions. In other words, “trading is mining”;
Commission of the relay node — A relay node will receive a 40% commission reward by injecting liquidity;
Security maintenance rewards — Users staking INJ in Injective Chain and other components or participating in the governance of Injective Futures, Injective Chain and various components will be rewarded;
Repurchase mechanism — Every month, the team will spend the income on the remaining 60% transaction fee on repurchasing and burning INJ in the market.

4. Team and know-how

(1) Team

The team is located in New York, USA. Eric Chen, co-founder and CEO, graduated from the School of Computer Science at New York University. He was previously a protocol researcher at Innovating Capital and used to work as an analyst at Essence Fund Management and Sino Partners Fund.

Albert Chon, CTO, graduated from the School of Computer Science at Stanford University. He previously served as a consultant for the blockchain security company OpenZeppelin and a software engineer at Amazon. He created the ERC-1178 token standard.

(2) Know-how

Injective Protocol integrates a verifiable delay function (VDF), a decentralized transaction protocol that uses Proof of Elapsed Time to avoid sequence conflicts in the same block, transaction cheating, and bad transactions.

Injective Chain is realized through the modularization of the Ethereum Virtual Machine (EVM) on the Cosmos-SDK (based on Ethermint), and supports the execution of general smart contracts. By implementing EVM on top of Tendermint, users can enjoy the scalable and interoperable implementation of Ethereum based on Proof-of-Stake. Through the inter-chain composability supported by Cosmos-IBC and two-way Injective/Ethereum ERC-20 transmission, Injective has an Ethereum bridge protected by a consensus mechanism.

(3) Roadmap

Q4 2020 — — Released the public beta testnet V1, launched an incentive testnet trading contest, and issued ERC-20 tokens;

Q1 2021 — To release the public beta testnet V2, and launch an incentive staking contest and the Ethereum bridge;

Q2 2021 — To launch the mainnet V1, realize bridging between multiple blockchain networks, introduce yielding farming, and adopt staking incentive measures and token swap from Ethereum to Injective original chain;

Q3 2021 — To launch 10+ perpetual contracts and expiring contracts and cross-chain revenue;

Q4 2021 — To launch DAO governance, with asset listing and market creation to be governed by the community; and launch a mortgage pool for insurance funds;

Q1 2022 — To launch the trading interface for institutions and traditional financial derivatives supported by encrypted assets.