Injective Whitepaper

Injective Whitepaper

This whitepaper’s accuracy is in no way endorsed by Curious Cosmonaut Research. This paper’s content was aggregated from their website here on 11/5/2022 as part of a series to make content more accessible from one place in Cosmos.

What is Injective?

Injective is a blockchain built for finance.

Injective is the only blockchain where developers can find robust out-of-the-box modules such as a completely decentralized orderbook that can be utilized to build a diverse array of sophisticated applications. Moreover, Injective is an open interoperable smart contracts platform.

Injective is built using the Cosmos SDK and is able to attain instant transaction finality using the Tendermint proof-of-state consensus framework. In addition, Injective can facilitate fast cross-chain transactions across the largest layer one networks such as Ethereum and Cosmos Hub.

The Injective ecosystem is a network of decentralized applications that focus on providing the best in class user experience. By providing the unrestricted and unprecedented ability to access decentralized financial markets, products, services and toolings, the ecosystem is striving to empower individuals with the ability to more efficiently allocate capital.

Why Build on Injective?

• Optimized for decentralized finance: Injective provides out-of-the-box financial primitives such as a fully decentralized order book to allow developers to create mainstream dApps. Applications for instance can leverage the order book to launch exchanges, prediction markets and various other on-chain strategies.
• Interoperable: Injective is natively interoperable across a number of sovereign blockchain networks while also being IBC-enabled. Injective is able to facilitate seamless cross-chain transactions across Ethereum, Moonbeam and IBC-enabled chains such as CosmosHub.
• Build dApps Using CosmWasm: Injective supports CosmWasm, a novel smart contracting platform built for the Cosmos ecosystem. This means developers can easily launch their own smart-contract powered applications on Injective easily. Smart-contracts that work on other chains supporting CosmWasm can seamlessly be migrated to Injective.
• Launch Ethereum and IBC compatible tokens: Since Injective supports cross-chain transactions with Ethereum and all IBC-enabled chains, it means tokens launched on Injective can be exposed to multiple networks by default.
• Intuitive developer experience: Utilize flexible and expressive development environments powered by Rust and Golang.

INJ

INJ is Injective’s native staking token. Staked holders can govern and decide the future of the protocol.

Base Denomination

INJ uses Atto as the base denomination to maintain parity with Ethereum.

1 inj = 1×10⁻¹⁸ INJ

This matches Ethereum denomination of:

1 wei = 1x10⁻¹⁸ ETH

Injective Token Economics

1. Proof of Stake Security

To ensure the security of our sidechain, we inflate the supply of our token to incentivize nodes to stake INJ and participate in the Injective network.

The tentative initial supply of INJ will be set to 100,000,000 tokens and shall increase over time through block rewards.

The target INJ inflation will tentatively be 7% at genesis and decrease over time to 2%. Gradually, the total supply of INJ may be lower than the initial supply due to the deflationary mechanism detailed in the Exchange Fee Value Accrual section below.

2. Governance

The INJ token also serves as the native governance token for the Injective Chain.

INJ is used to govern all aspects of the chain including:

• Auction Module Parameters
• Exchange Module Custom proposals and Parameters
• Insurance Module Parameters
• Oracle Module Custom proposals
• Peggy Module Parameters
• Wasmx Module Parameters
• Software upgrades
• Cosmos-SDK module parameters for the auth, , bank, crisis, distribution, gov , mint , slashing , and staking modules.

Full details on the governance process can be found here

3. Relayer Incentives

The exchange protocol implements a global minimum trading fee of

r_m=0.1\%

r

​m

​​=0.1% for makers and

r_t=0.2\%

r

​t

​​=0.2% for takers. As an incentive mechanism to encourage relayers to source trading activity on the exchange protocol, relayers who originate orders into the shared orderbook are rewarded with

\beta = 40\%

β=40% of the trading fee arising from orders that they source..

4. Exchange Fee Value Accrual

The remaining

60\%

60% of the exchange fee will undergo an on-chain buy-back-and-burn event where the aggregate exchange fee basket is auctioned off to the highest bidder in exchange for INJ. The INJ proceeds of this auction are then burned, thus deflating the total INJ supply.

More details on the auction mechanism can be found here.

5. Collateral Backing for Derivatives

INJ will be utilized as an alternative to stablecoins as margin and collateral for Injective’s derivatives markets. In some derivative markets, INJ can also be used as collateral backing or insurance pool staking where stakers can earn interest on their locked tokens.

Gas and Fees

The concept of Gas represents the amount of computational effort required to execute specific operations on the state machine.

The Injective Chain utilizes the concept of gas to track the resource usage of operations during execution. Operations on the Cosmos SDK (which the Injective Protocol is built on) are represented as read or writes done to the chain’s store.

A fee is calculated and charged to the user during a message execution. This fee is calculated from the sum of all gas consumed in a message execution:

fee = gas * gas price

Gas is used to make sure that operations do not require an excess amount of computational power to complete and as a way to deter bad-acting users from spamming the network.

Cosmos SDK Gas

In the Cosmos SDK, gas is tracked in the main GasMeter and the BlockGasMeter:

• GasMeter: keeps track of the gas consumed during executions that lead to state transitions. It is reset on every transaction execution.
• BlockGasMeter: keeps track of the gas consumed in a block and enforces that the gas does not go over a predefined limit. This limit is defined in the Tendermint consensus parameters and can be changed via governance parameter change proposals.

More information regarding gas in Cosmos SDK can be found here .

In Cosmos, there are types of operations that are not triggered by transactions that can also result in state transitions. Concrete examples are the BeginBlock and EndBlock operations and the AnteHandler checks, which might also read and write to the store before running the state transition from a transaction.

BeginBlock and EndBlock

These operations are defined by the Tendermint Core’s Application Blockchain Interface (ABCI) and are defined by each Cosmos SDK module. As their name suggest, they are executed at the beginning and at the end of each block processing respectively (i.e pre and post transaction execution).

AnteHandler

The Cosmos SDK AnteHandler performs basic checks prior to transaction execution. These checks are usually signature verification, transaction field validation, transaction fees, etc.

Wallets on Injective

There are variety of different wallets that are supported on Injective. Users can choose to submit transactions on Injective using their Ethereum native wallet or a Cosmos native wallet

Overview

Injective defines its own custom Account type that uses Ethereum’s ECDSA secp256k1 curve for keys. In simple words said, it means that Injective’s Account is native (compatible) with Ethereum accounts. This allows users to use Ethereum native wallets to interact with Injective.

Injective is built on top of the CosmosSDK. This means that (with some modifications, since Cosmos uses different curve for keys) users can also use Cosmos native wallets to interact with Injective.

Ethereum Based Wallets

As we’ve explained above, users can use Ethereum based wallets to interact with Injective. Right now, the most popular Ethereum based wallets are supported on Injective. These include:

1. Metamask
2. Ledger
3. Trezor
4. Torus

The process of signing transactions on Injective using an Ethereum native wallet is relatively simple to explain and consists of:

1. Converting the transaction into EIP712 TypedData,
2. Signing the EIP712 TypedData using an Ethereum native wallet,
3. Packing the transaction into native Cosmos transaction (including the signature) and broadcasting the transaction to the chain.

Obviously, this process is abstracted away from the end-user. If you already used some Ethereum native wallet before, the user experience will be the exact same as you are already accustomed to.

Cosmos Based Wallets

As we’ve stated above, being built using the CosmosSDK gives us the ability to allow our users to use Cosmos native wallets to interact with Injective. The most popular Cosmos and IBC enabled wallets are supported on Injective. These include:

1. Cosmostation
2. Leap
3. Keplr

Injective Hub

Hub Overview

Injective Hub is the platform and gateway that allows you to interact directly with Injective. Below are some core functionalities within Injective Hub.

1. Wallet
2. Bridge
3. Staking
4. Governance
5. Auction
6. Insurance Funds

Wallet

Injective Wallet allows you to monitor your assets on Injective. Assets can be native tokens on Injective, as well as bridged assets from Ethereum, Moonbeam and various IBC-enabled chains.

You can also send assets to other Injective wallets using the wallet. Note that Injective supports the memo field, so please be reminded to check whether your recipient requires this detail to be filled before transferring assets.

Bridge

Injective is a blockchain built specifically to support financial applications. A key strength of Injective is its ability to perform seamless cross-chain transactions with the majority of popular blockchains.

You can use the Injective Bridge to transfer assets in and out of Injective with the following blockchains:

1. Ethereum
2. Solana — Coming soon
3. CosmosHub
4. Osmosis
5. Evmos
6. Persistence
7. Axelar
8. Moonbeam
9. Persistence
10. Secret Netwrok
11. Stride
12. Terra

Staking

Staking is the process of locking up your assets (in this case INJ) in order to validate transactions on the blockchain. Users who choose to stake will be able to obtain rewards as a result of that process.

Injective follows a proof-of-stake mechanism, in which users can stake their tokens to certain Injective validators who will do the work of validating transactions, while the user reaps the benefit through only contributing assets.

Stake INJ

Stake your INJ to a validator to start earning rewards.

Withdraw staking rewards

Rewards start accruing the moment you stake INJ. Monitor your rewards in the staking section of Injective Hub. Once you have earned a sufficient amount of rewards, you may withdraw them at any time.

Redelegate

Redelegating lets you transfer staked INJ from one validator to another without waiting the 21-day unstaking period. Redelegating happens instantly.

Undelegate

Undelegating INJ is the process of unstaking your assets from a validator. The unstaking period takes 21 days to complete.

Governance

Injective is a community-run blockchain and users who have staked INJ are able to participate in governance as it relates to the blockchain. Proposals can be submitted to make revisions to Injective programs, tech upgrades, or any other Injective related changes that impact the entire Injective ecosystem.

Within Injective Hub, new proposals are submitted through the governance portal and voted on by the entire community.

Submitting a request

To submit a new request, you must create a proposal that outlines what you would like to change, what areas within Injective this change may impact, and why you are requesting this change.

Upon creating a proposal, you must deposit at least 1 INJ to submit it for governance. This is to ensure that you are an active participant of the Injective community, and thus eligible to make proposal requests.

For the proposal to pass to the voting stage, 500 INJ must also be deposited. This can be deposited directly by you or in collaboration with other community members.

Voting Period

Once the proposal and deposit is submitted, the proposal will go through a four-day voting period.

33.4% of INJ holders must vote on a proposal for the vote to be considered, and 50% of those votes must be “yes” for the proposal to pass.

Voting Outcome

If a proposal passes, Injective contributors will begin to work together to put into effect the new request. If 33.4% of the total vote is NoWithVeto, quorum is not met, or the minimum deposit isn’t reached, the deposit will be burned. All other vote outcomes get their deposits refunded.

Burn Auction

60% of the trading fees paid by users are collected by Injective (the remaining 40% are sent to Exchange applications built on top of Injective, read more here) Each week, an auction is held to allow community members to use INJ to bid for the basket of trading fees collected by Injective that week.

At the end of the auction, the winning bidder receives the full basket of assets and the winning bid (paid in INJ) is burned. This creates a deflationary pressure to the INJ token supply.

Insurance Funds

Injective enables users to build sophisticated derivatives markets on chain. An insurance fund is required for each and every derivative market in order to limit any form of socialized loss.

Any user can create an insurance fund for a derivatives market, as well as become an underwriter by adding funds to it. Based on the ownership percentage, the underwriters may receive more or less than they originally put into the fund.