Basically, as at the moment, we can categorize exchange into two CEX (Centralized Exchange) and DEX (Decentralized Exchange). The centralized once are more successful as they provided over 90% of the entire trade volume. Their main function among others is to act as the middle-man connecting those who are willing to trade digital assets while being in custodial of their wallets, by this whenever someone deposit in any decentralized exchanges, he/she has voluntarily handed over their private keys based on the trust they have on the providers to safely store and safe their assets. This without any iota of doubt is against the norm and revolution of the blockchain revolution and with the popular saying in the crypto space, “not your key, not your money”.
The DEX is meant to address the above shortcoming thereby creating a system that will permit users to be custodial of their digital assets and private keys by creating a peer-to-peer service that allows transactions between interested parties directly on the blockchain. This makes them require no or limited supervision as compared to the centralized exchanges thereby creating anonymity and security and avoid repetitive hacking witnessed often from the centralized counterparts.
From 2011 according to report, more than $11 billion worth of cryptocurrencies have been stolen all traces to different hacking incidents As the blockchain and cryptocurrencies begin to attract the attention of the global audience and big institutions, the methods hackers used to commit crimes are also becoming sophisticated. If attacks can be traced to South Korea’s biggest cryptocurrency exchange (Bithumb – $30 million in stolen digital tokens) and Binance the most liquidity exchange as of now which was hacked to the tuned of 7,000 BTC. This is proof and indication that the largest players in the cryptocurrencies space are not safe and there is nothing better than to be in the custodian of your crypto assets and decentralization is just the way to achieve this and that is the mission of Satoshi Nakamoto. Most decentralized exchanges we have at the moment have flaws from the design concept which open them to numerous security vulnerabilities and harm the user’s experience.
INJECTIVE PROTOCOL: THE SOLUTION THE WORLD HAS BEEN WAITING FOR IN THE DECENTRALIZED EXCHANGE
Despite the presence of numerous decentralized exchanges, they occupied less than 2% of the liquidity in the crypto space and some even required KC before users can establish a trade that is totally against the norm of DEX. Here come Injective Protocol, fast, secure, and fully decentralized trading platform. It is the first front-running resistant, layer-2 exchange protocol that utilizes verifiable delay functions (VDF) to resolve the same block order conflicts and to prevent the front-running attack. The protocol relies on two components which are:
- Settlement logic layer and
- Trustless relayer network protocol.
The Injective Protocol relies on Cosmos IBC protocol to achieve cross-chain transactions, VDF (Verifiable Delay Function) to simulate real-time through Proof of Elapsed Time, and standardize order sequencing to eliminate early tradings. In addition, the Injective chain supports token staking and provides technical support for creating more services such as staking in the future. It is worth knowing hat the Injective Protocol was incubated by the Binance Lab and has been able to raise $2.6 million in a seed funding round. This will make the team concentrate on developing a decentralized exchange that will resolve high latency and poor liquidity.
They already have a group of investors that will provide global brand and liquidity to support business development. This group is lead by Pantera Capital, we also have Asia-based QCP Soteria, Axia8 Ventures, Boxone Ventures, Bitlink Capital, and other participants.
Layer 1 public infrastructure has a huge setback when it comes to the processing of transactions. For example, the shortfall that characterized Ethereum has made the on-chain settlement to be slow, high cost of gas, trade collision and not user friendly. Here comes the Injective Protocol with the capabilities to tackle the above issues by building the user-friendly trading platform with uncompromising decentralization (0 point of centralization) via Layer-2 scalability with their VDFs Protocol – Verifiable Delay Functions (VDFs).
From day one of launch, all the well-known wallets will be supported in addition to their native wallet. Users should expect a good speed of execution, market diversity and the most important aspect – solid liquidity which is provided by the institutional market making partners as illustrated above.
The transaction in the Layer 1 DEX takes an average of 15 seconds to complete which is derived from the average block production rate of Ethereum. The outcome of this makes transactions stay longer before they are processed which hampering user experience. Layer 2 is gaining public attention with the immense speed of transactions which gives 1800 times the transaction speed of Ethereum. The outcome of this will makes placing or canceling of an order be effectively accomplished with a minute which will create a cognitive alternative to many trading needs. Injective Protocol has combated slow process of transactions by their 1 second block time which translated to that order settlement, cancellation, posing and the update will occur within a minute.
Furthermore, Injective Protocol chain is secured by the Prove of Stake Consensus which makes it open for anyone to become a validator as long they have the required tokens for staking. For any trade that occurred on the platform, 40% of its fee will go to the node that originated it while the remaining 60% will be used for buy-back-and-burn mechanism. More focus will be on derivatives from the beginning due to high demand and others like margin will follow. The Injective Protocol will support perpetual swaps, contracts for difference (CFD) and other derivatives will be added as the journey progresses. The users of the Injective Protocol platform will have the opportunity to create and trade arbitrary derivative markets with just a price feed. This is an added advantage that is yet untapped and this will meet the needs of many individual and institutional traders which most viable centralized exchange cannot meet.
PROPERTIES OF INJECTIVE PROTOCOL
- Trustless: The settlement does not depend on any third-party integration or any centralized trade execution coordinator (TEC) to satisfy the sequence of incoming orders
- Resolvable: Any conflicting orders that are submitted in the same block can be resolved fairly and deterministically via the settlement logic
- Verifiable publicly: users of the injective protocol platform can verify the incoming order through the time stamp to ascertain that a satisfactory order sequence was executed
- Liquidity neutral: It is an open exchange and does not impose restrictions on the accessibility of various liquidity pools.
- Front-running proof: Another proposal on the platform is to ensure that a predatory front-runner cannot manipulate the sequence of incoming orders fin an attempt to manipulate the price.
A brief glance of what will be available on the platform
- Decentralized Lending/Margin Trading: The platform allows to short or long any digital assets that is listed with leverages
- Decentralized Futures & Derivatives Markets: It is the first of its kind to allow decentralized futures and derivative products that is fast and secure.
For further analysis of this project or any inquiry, you can visit any of the following links