Author: Eric Chen, Co-Founder & CEO, Injective Protocol
Injective Protocol links cross-chain derivatives trading on Cosmos, Ether and other layer-1 blockchain networks. Injective’s decentralized trading platform leverages several leading-edge technology innovations to provide extremely fast network speeds, superior security and a high degree of decentralization.
Injective Protocol Trading Architecture
The role of INJ passes in the Injective ecosystem
Key technical components of the Injective Protocol
Injective Protocol Smart Contracts
Future vision of Injective Protocol
Injective Protocol Transaction Architecture
Injective Protocol is a decentralized trading (DEX) protocol that provides advanced trading capabilities such as cross-chain margin trading, derivatives, synthetic assets, etc. Injective aims to be a fully decentralized, license-free and high-performance trading protocol with zero gas costs. Injective achieves this through its Cosmos-based layer-2 sidechain infrastructure, and enables high speed, accessibility and decentralization through its connection to the Ethernet mainchain.
Injective Protocol’s mission is to remove barriers to entry into the DeFi market, eliminate gas fees while maintaining high speed transactions, and provide a truly decentralized and free trading experience for everyone. To that end, Injective Protocol achieves this powerful functionality through several key features.
Fully decentralized network building: Injective Chain – based on the Cosmos Tendermint mechanism – is a fully decentralized sidechain relay service that acts as a layer-2 derivatives platform, a trade execution coordinator (TEC), and a decentralized order book. centralized order book. Provides Injective with a zero-hindrance cross-chain decentralized derivatives marketplace.
Layer-2 High Speed Protocol: Injective Chain connects two-way anchoring of Ether and ERC-20 compliant passes. Injective’s peg-zone architecture is based on the Cosmos Gravity Bridge, which allows for value transfer between Cosmos Hub and Ether, while the EVM execution framework is based on Tendermint’s Ethermint EVM, enabling strong cross-chain compatibility and liquidity.
Top-notch decentralized order book: Injective’s order book solution is a fully decentralized order book with order aggregation on the Injective sidechain and bulk settlement of transactions on the chain.
Free market trading: Injective’s Derivatives Protocol allows users to trade fully decentralized peer-to-peer derivatives using perpetual contracts and contracts for difference (CFDs). In addition, Injective Protocol enables anyone to create their own derivatives marketplace at any time, fostering a free, community-driven ecosystem of innovation.
Low network latency and 0 gas cost: Due to Injective’s unique layer-2 structure, the protocol is designed to avoid network congestion and the associated high gas cost. Its 0 gas cost model allows all platform users to transact publicly without incurring associated costs, while reducing network latency.
The role of INJ passes in the Injective ecosystem
INJ is Injective Protocol’s native utility and governance pass. It plays an integral role in governance, derivatives collateralization, protocol security, market maker and relay incentives, and transaction fee value capture.
Protocol and Ecosystem Governance: INJ enables users to participate in ecosystem governance by enabling them to vote on proposed changes to derivatives protocols, transaction parameters and other protocol upgrades through a decentralized autonomous organization (DAO) structure.
Collateral support for derivatives: INJ passes can also be used as an alternative to stablecoins, as margin and collateral for derivatives. In addition, in some derivatives markets, INJs can be used as collateral or pledged in insurance pools, thus allowing pledgers to earn interest on locked-in pass-throughs.
Tendermint-based proof-of-stake (PoS) security: The Injective protocol is based on Tendermint’s PoS consensus mechanism, where the ecosystem incentivizes nodes to participate in network consensus by providing pledge rewards. This mechanism increases the supply of INJ passes, with an initial inflation rate set at 7% per year from the launch of Genesis, decreasing to 2% over time.
Market Maker Incentive: Injective DEX initially charges users a 0.1% pending order fee and a 0.2% order taking fee. To incentivize liquidity, we will offer fee waivers to market makers who introduce liquidity on the DEX trading platform. We will periodically snapshot their exchange account balances to distribute rebate incentives corresponding to a specific period of use.
Key Technical Components of the Injective Protocol
Injective DEX is a highly technical platform designed to be trust-free and publicly verifiable, while providing a smooth user experience. To make this possible, Injective Protocol’s technical architecture is built on top of four different layers in the software development stack.
The Injective Exchange Client is the front-end interface that users see when they log in to the trading platform. The service layer consists of the Injective Application Programming Interface (API), which includes the Exchange API, the Coordinator API, the Derivatives API, and The Graph API (for connecting to The Graph index query system to help implement derivatives trading on the protocol).
The APIs mentioned above are used to determine how certain parts of the system work together and communicate to allow the entire technology stack to function correctly. Together they act as an intermediate layer, allowing Injective Exchange clients to communicate with the Tendemint-based Cosmos layer.
Cosmos Layer: On the other side of the software stack, the Injective API and Injective EVM RPC connect to the Injective Chain and Injective Explorer for tracking all transactions made on the Injective Chain. The Tendermint blockchain was chosen as the most suitable infrastructure for Injective Protocol, which is able to support the immediate certainty required to execute different spot and derivative order types.
Ethernet Layer: Finally, the Ethernet layer consists of the Injective Bridge smart contract that communicates with the Injective Chain and the Ethereum network. This is achieved through Injective’s bi-directional ERC-20 cross-chain bridge, which is designed to send INJ-based assets between Injective and the Ether blockchain. This cross-chain interoperability is also key to the decentralized blockchain infrastructure.
Injective Protocol Smart Contracts
Injective Protocol interacts with INJ pass-throughs. The basic protocol interaction and pass economy of the Injective ecosystem can be achieved through the following Ethernet-based smart contract types.
Injective Coordinator Contract: The Injective Coordinator Contract guarantees Injective derivative transactions on the Ether and Injective chains.
Staking Contract: The Staking Contract is designed to manage the core functions of pledgers on the Injective Protocol through rewards, slashing, delegation and governance mechanisms.
Injective Derivative Contracts: Injective Derivative Contracts are smart contracts that allow traders to create, execute and use decentralized perpetual contracts in any market.
Injective Bridge Contracts: Injective Bridge Contracts are smart contracts that manage bidirectional anchoring between the Ether and Injective chains.
Injective Pass-Through Contracts: Injective Pass-Through Contracts are ERC-20 contracts designed for the different uses adopted by INJ.
Injective Protocol’s vision for the future
Injective Protocol is pioneering a new decentralized economy to create a more free and inclusive system.
Injective creates a solution that allows cryptocurrency trading to become a decentralized public utility, providing users and their communities with much-needed access to value in the exchange space. injective’s technology allows every user to participate in cross-chain blockchain-based derivatives trading.
By leveraging technology innovations that increase the speed of settlement and trade execution in a truly decentralized, permissionless manner, Injective Protocol is building a trading model that has the potential to transform the industry.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/a-look-at-how-the-cross-chain-trading-system-injective-works-in-one-article/
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