Injective Research Report: L1 Built for Financial Applications

Author: Jake Pahor

Compiled by: Deep Tide TechFlow

Institutions are injecting funds into decentralized order books. And what about Injective? They have developed one of the best order books. I believe a 350% increase within a year is just the beginning. This is my research report on INJ from August 2023.

Injective is a blockchain built specifically for financial applications. It has the following features:

• The fastest L1 blockchain;

• Decentralized and modular order book;

• Instant trade finality using Tendermint;

• Interoperable across multiple chains.

Its value proposition is to provide cutting-edge and next-generation financial infrastructure for the next user adoption cycle. Injective is determined to build applications that attract new users and facilitate institutional adoption growth.

The industry is moving away from excessive DeFi yields from high-inflation assets. Injective is ready to offer products typically seen in traditional finance, such as spot and derivatives markets based on an order book model. All of this comes with extremely low Gas fees.

The current total value locked (TVL) is $21 million (more than doubled since March). The majority of the TVL (83%) is currently held on Helix, the top decentralized exchange on Injective. $INJ has been following this positive trend and is one of the best-performing coins this year (+357% over 1 year).

The maker fee is 0.1%, and the taker fee is 0.2%.

• 40% of INJ dApps fees → Developer incentives;

• 60% of INJ dApps fees → Auctioned weekly through buyback and burn mechanism.

The trading fees generated in the past week were approximately $35,000.

INJ is the native and deflationary asset used to drive Injective and its ecosystem. It is used for:

• Securing network security;

• Paying Gas fees;

• Governance.

It is a PoS network, currently offering an annual yield of 16% through staking.

Injective has also implemented the highest weekly token burn in the industry. 60% of the trading fee protocol revenue is auctioned in the form of INJ and then burned. So far, INJ tokens worth over $5,700,000 have been burned ($12,400,000).

Here are the current supply statistics:

• Circulating supply = 83.76 million;

• Max supply = 100 million;

• Market cap = $607 million;

• FDV = $725 million;

• Market cap/FDV = 0.84.

The last unlock period is set for January 2024.

Injective's treasury includes:

• 15.2 million INJ tokens;

• Total value of $105 million.

It is concentrated in native tokens, which may pose significant diversification risks.

Injective has established a global DAO that allows the community to participate in the following:

• Protocol upgrade proposals;

• Validating the network (staking rewards);

• Burn auctions.

The minimum deposit requirement is 500 INJ, with each voting period lasting over 4 days.

Injective Labs was founded in 2018 and incubated by Binance Labs in the same year. The project attracted some impressive investors after becoming the first project to launch on Binance Launchpad in October 2020.

In multiple funding rounds, INJ raised approximately $56.7 million. It recently announced two incentive programs:

• A $120 million Cosmos ecosystem incentive program;

• A $150 million ecosystem fund program in partnership with (Pantera, Jump, Kucoin, Delphi Labs).

Injective faces competition on two fronts. First, from traditional EVM-based perpetual protocols like GMX, Gains, and Synthetix. Second, from new competitors that have developed their own custom application chains, such as dYdX, Kujira, and Sei (decentralized order book).

Although dYdX is the clear leader in total value locked (TVL) and revenue, Injective has a large treasury and support from some heavyweight institutions. To ensure it keeps pace with strong competitors, Injective must continue to innovate.

The project has passed audits and received a security score of 73.82 from CertiK. It scored very high in code security, fundamental health, operational resilience, and governance strength (top 10%). However, it ranked in the bottom 5% in market stability.

Overall, I am very optimistic about Injective and the ecosystem it is building. Here are some bullish catalysts:

• Institutional adoption;

• $150 million Injective Venture Group;

• Token burns;

• Expansion of the ecosystem and integrations.