Namaste Tribe! We had an amazing AMA with Eric Chen, CEO & Co-Founder of Injective Protocol, in WazirX Telegram group as a part of INJ Giveaway on Monday, 23rd November 2020. Here’s a quick summary of the session.
Hi Eric, we are glad to have you here today! Can you introduce yourself and Injective Protocol?
Hey everyone! I’m Eric Chen, CEO and Co-founder of Injective Protocol. Prior to Injective, I was working at hedge funds and spent a lot of time in cryptographic research at a blockchain-focused fund. Most of my time was also spent on developing new types of trading strategies and researching blockchain protocols. Before that I was also part of the NYU Blockchain Labs.
Injective Protocol is the first layer-2 decentralized exchange protocol that unlocks the full potential of DeFi. It enables fully decentralized trading without any restrictions, allowing individuals to trade on any market of their choosing such as with crypto, synthetics, and NFTs. Injective allows various forms of decentralized trading such as futures, perpetuals, spots, etc. We have built every component of our protocol to be fully trustless, censorship-resistant, publicly verifiable, and front-running resistant.
Q1. Because there are many super hackers, security, scalability, and data privacy are three aspects that are very important at enterprise level, how Injective Protocol (INJ) foundation is handling these issues?
Beyond our non-custodial nature and our plan to fully audit our contracts, we will leverage VDFs to enforce a fair transaction ordering consensus that reflects real-world time via proof-of-elapsed-time, thereby solving critical race conditions and miner extractable value issues present in Ethereum. This allows you to never miss out on a trade opportunity due to attackers trying to front-run your order.
We also implement selective delay to prioritize order cancellation over trades. I’m sure you have seen people mistakenly posting mispriced orders and then get instantly matched by bots before your cancellation is confirmed. This won’t happen on Injective.
Q2. How do you define which project gets Injective’s financial support in EcoBoost? Do you have any profile, any kind of candidacy, or voting?
We’re always welcome to any type of project to join the Injective ecosystem! Currently, we are prioritizing open-source market making bots, exchange clients, and market creation tools.
Q3. Injective Protocol has just partnered with StaFi. What are the highlights and the main advantages of that partnership?
Stafi is a DeFi protocol built on Substrate for staking derivatives that unlocks the liquidity of staked assets. Through this partnership we plan to introduce StaFi’s staking derivatives onto our DEX, and Stafi can help to unlock additional liquidity for INJ tokens in the near future. As we recently announced an upcoming integration with Polkadot, assets built on Polkadot could be traded on Injective with ease. Stafi aids in this effort by further expanding our potential to work with the Polkadot and Substrate communities.
Q4. Liquidity mining & yield farming have been a very popular concept and a strategy for DeFi projects to bootstrap, does injective Protocol has similar planning to incentivize protocol adoption?
Injective has a strong incentive system for liquidity introduction like make order rebate, referral fee rebate, and market maker incentives. From day 1, we have multiple market making partners and investors who will be helping us provide institutional grade liquidity. Beyond the make order rebates, we also have a huge relayer incentive where people can host nodes and earn 40% of the exchange fees they route. In addition, individuals can refer other users to our DEX which would make them eligible to earn 40% of trading fees (we are the first-ever DEX to have on-chain referral like this).
Q5. What’s the main business model of Injective Protocol? And the biggest barrier for DeFi is that of interoperability, providing cross-chain interactions and multiple blockchains, how do you provide unique solutions for this?
We don’t have a business model. However, we ensure that the value of the exchange is accrued back to the token holders and ecosystem participants.
Injective Token has the following properties:
Protocol Governance: The INJ token can be used to govern various components of Injective’s sidechain including the futures protocol, exchange parameters, and protocol upgrades via a DAO structure.
Exchange Fee Value Capture: After the relayer reward distribution, the exchange fee will undergo an on-chain buy-back-and-burn event to accrue value for INJ.
Collateral Backing for Derivatives: INJ will be utilized as an alternative to stablecoins as margin and collateral for Injective’s derivatives markets. In some futures markets, INJ can also be used for collateral backing or insurance pool staking where stakers can earn interest on their locked tokens.
Exchange Participation Incentives: The foundation plans to incorporate a liquidity mining scheme and distribute a fixed number of INJ tokens daily weighted by the liquidity each network participant provides.
Tendermint-based Proof-of-Stake (PoS) Security: To ensure the security of Injective’s sidechain, Injective will incentivize nodes to stake INJ and participate in the sidechain’s network consensus with block rewards.
Q6. Why did you choose Tendermint Consensus? What are its advantages for Injective Protocol?
We use a Tendermint-based Proof-of-Stake (PoS) to facilitate cross-chain DeFi trading across Cosmos, Ethereum, and many other layer-1 protocols. Also, through Tendermint consensus, we scale Ethereum transactions on our own chain to ensure that users can enjoy fast block-time and more importantly finality, which increases speed and make the overall user experience for an average trader will feel just as nice as a centralized exchange.
Q7. You mention that Injective will be compatible with Ethereum which in my opinion is the most valuable feature of other chains. Besides INJ as an underlying asset, what pairs will you launch at the start?
That’s a closely guarded secret 🙂 but we certainly plan to have Bitcoin and Ether futures
Q8. Recently, various layer2 related projects and cross-chain related projects are coming out. What do you think is the advantage of your project compared to those projects?
We’re not trying to be the best generalized layer-2 solutions out there. Our approach is the create the best bespoke solution for exchanges. We support derivatives and you can gain leveraged exposure on existing markets while exploring a lot more interesting markets as well! One of the most interesting features is that market creation is open and permissionless!
Q9. Do you think Injective can save us from the current DEX fees that make the transaction unsustainable and a long wait for confirming the transaction because of the bloated network?
Yes 🙂 we don’t have gas fees and our consensus allows us to support instant finality!
Q10. How many audits are you planning to do, and which companies will be involved? Have you seen any recent exploits, and has it changed any of the companies that were audited?
We plan to work with the top security auditing firms in the space. We’re looking to engage with up to 3 firms to ensure that our protocol is bulletproof. Recent exploits we’re seeing are mainly from unaudited contracts, auditing from reputable firms will boost the contract security by a considerable margin.
Q11. Price has always been a serious concern for users, what should Injective do to avoid price and switch to Features and Products in the Injective Protocol?
We just focus on building and growing so that the value of the exchange reflects back to the token 🙂
Q12. Your metamorphosis is a laudable one, how have you been able to survive this longest bear market and continue building and developing cos many projects have died out in this time period?
We kept the burn low and kept iterating our product so that we can present our value proposition in the bull market. A bear market is when the potential customers will never lie to you 🙂
Q13. Any plans to increase the number of validators where common holders will be able to stake Injective Protocol in the future? If so, are there any estimated launches?
We are planning on launching an incentivized staking campaign to work out the optimal parameters!
Q14. Where do I get information about your team? Do you have a plan to identify your team later?
It’s on our website 🙂
Q15. One of the biggest issues for dApps is onboarding. What solutions have the Injective Protocol team found to try to resolve this problem?
Beyond the referral model, we have built our client as simple as possible to ensure a seamless onboarding process!