What is Injective and Is It a Good Investment?
The crypto market has in recent years seen an explosion of decentralized exchanges (“DEXs”). And it’s not hard to see why. DEXs allow for secure peer-to-peer transactions in a fully decentralized manner. Different projects have had different visions of how DEXs should be structured. But at the center of this has been to create cross-chain support for trading various crypto assets, and liquidity management.
Well, this is where the Injective Protocol (INJ) comes in. The project is designed to provide an elaborate infrastructure that supports fast and efficient cross-chain crypto derivatives trading. Injective will be the focus of our article today. We will look at what it is, how it works, and if it’s a worthy investment.
What is the Injective Protocol?
As noted above, the Injective Protocol is a decentralized exchange or DEX that provides cross-chain trading for crypto derivatives. The protocol is built using the Cosmos SDK, a popular framework for building application-specific blockchains. It is a layer 2 solution that provides interoperability across Layer 1 chains, including Ethereum, Cosmos, and others.
Thanks to its cutting-edge technology, Injective has managed to offer users fast cross-chain transactions, zero gas fees, and a relatively higher degree of decentralization. Also, the platform allows users to trade a wide variety of derivatives. This includes things like margin trading, synthetics, crypto futures, forex, options, and so much more.
As with other DEXs, Injective is also fully permissionless and noncustodial. In other words, no third parties are involved in trading and users don’t need to transfer their crypto assets into the exchange. Everything remains well secured in your wallet.
Meet the Injective Team
The Injective Protocol has two founders on record. The first one is Eric Chen. Before getting involved in this project, Chen worked as a cryptographic researcher and trader. He has extensive knowledge of the intersection between blockchain protocols and traditional finance.
The second co-founder is Albert Chon. Chon serves as the CTO for the Injective Protocol as well. He holds a master’s degree in computer science from Stanford and worked as a software developer for Amazon. Both are also supported by an extensive team of experts who are part of the Injective vision.
What Are the Key Features of the Injective Protocol?
The Injective Protocol comes with several unique features that make it one of the most powerful DEXs in the crypto-verse. The following is a breakdown of some of these features and how they work:
Injective is built according to the Cosmos Tendermint standard. This means that it is a highly scalable decentralized sidechain designed to operate as a layer 2 trading platform. The protocol also comes with decentralized order books and cross-chain interoperability. This makes injective the most ideal place to trade without any restrictions.
Cross Chain Compatibility
Injective offers what is known as a “two-way peg” between the Ethereum chain and all applicable ERC20 tokens. The protocol also has an execution framework that is fully compatible with the Ethereum Virtual Machine or EVM.
The “two-way peg” on the other hand is built on the Cosmos Gravity Bridge. The bridge facilitates the transfer of assets from the Cosmos Hub and the Ethereum blockchain. These features make it easier for Injective to offer outstanding cross-chain compatibility.
Zero Gas Fees and Low Network Latency
Injective is a layer 2 infrastructure and as such, it does not suffer from the congestions associated with layer 1 chains. This enhances the speed of transactions. Also, lack of network congestion means that transactions can be done with zero gas fees. Very few exchanges can guarantee unlimited no cost trades with low network latency.
Is The Injective Protocol Worth Your Investment?
Now that you have some background on what the Injective Protocol is all about, the next thing would be to see if indeed this project is worth your money. There are different ways to invest in this project including staking and yield farming. But for this post, we are going to focus on the idea of buying and holding the native INJ token.
What is the INJ Token?
The INJ Token is the main governance and utility token for the Injective Protocol. The token is designed to play several key roles within the Injective ecosystem. These include things like collateral backing for margin trading. INJ can also be staked to help enhance node validation and security. It is also a key part of the market maker incentives that are offered here.
Is INJ A Good Investment?
The vision for Injective is to create a highly efficient cross-chain DEX that will make the exchange of crypto derivatives as simple as possible. The platform is lowering the barriers of entry for derivatives trading in crypto. It is making it cheaper and faster to conduct these trades across multiple chains. This is the most important selling point for the project.
Demand for interoperable DEXs is high now and will continue in the future. While most DEXs don’t offer nearly the same liquidity as centralized exchanges, several solutions to solve that are starting to emerge. The future of crypto trading could therefore bank on DEXs and Injective looks like it’s among the leaders here.
Besides, at the time of writing, data from Coinmarketcap.com shows that the project has a market cap of around $224 million. There is still more room to run. Also, the volume of derivatives traded on the exchange has now gone above $4.5 billion. This comes just a few months after Injective launched its Canonical Chain Mainnet.
Injective has also so far attracted around $120 million in total value locked or TVL. While this TVL is still relatively small, there is still potential for it to grow further. This is because the expected growth of DeFi in 2022 is likely to lift projects like Injective. If you are looking to add some DEX tokens as part of your crypto portfolio, you won’t find a more promising option than INJ. It is worth your consideration.
What To Consider Before You Invest in Injective?
As with any investment, there are so many considerations you need to make before committing your money. At the end of the day, you are personally responsible for your investment decisions and the consequences thereof. The first you need to keep in mind is that crypto-assets, in general, are very volatile.
Sometimes there are wild price swings in the market that can cause panic. Please consider if you are disciplined enough to endure this volatile nature. Also, what are your investment goals? Are you looking for a long-term play where you hold assets for a year or more? Or perhaps you simply want to buy and sell after a few weeks or so?
Either way, your investment strategy determines how much capital you allocate to INJ and other assets. As a rule, never allocate more than 10% of your account or capital on one asset, especially if you are trading short-term.
The growth of cross-chain DEXs will no doubt accelerate in the near term. There is a strong need for such platforms in the market. Right now, it seems Injective is positioning itself to lead the way in this sector. Based on its features, and underlying fundamentals like trade volume and TVL, there is no doubt this is a promising project.
* We hope this information will help you in your investment process, but this is not investment advice. Every investment carries risk, especially in this industry, so DYOR before making a decision.