Injective aspires to play a role in global financial innovation

jayplayco외 1명
Xangle Partner Research
Apr 29, 2024


Table of Contents

1. Introduction

2. Crypto Continues to Gain Adoption Within the Financial Sector

3. Mainnets Pursuing New Financial Infrastructure

4. About Injective

5. Injective Ecosystem

6. Rising Institutional Adoptions

7. Closing Thoughts



1. Introduction

Ever since the approval of the Bitcoin spot ETF, the entire crypto market has gained significant momentum. In addition to the market-leading Bitcoin, other Layer 1 coins have also been back in the spotlight. Injective, in particular, has seen its token price surge more than 500% in the last year.

We believe Injective's price appreciation is particularly noteworthy because the biggest ingredient in this bull market is the anticipation of crypto’s integration into traditional finance. With its technological capabilities and established ecosystem, Injective stands as an infrastructure capable of bridging the gap between traditional finance and digital assets.

In this report, we'll take a look at how the financial sector is utilizing crypto, what the recently popular RWA (Real World Asset) is, and why Injective is one of the most prominent players amidst all of this movement.


2. Crypto Continues to Gain Adoption Within the Financial Sector

The term "RWA” has recently garnered notable attention, extending its reach beyond the confines of the Decentralized Finance (DeFi) space to traditional financial domains. For example, BlackRock, one of the largest asset managers, unveiled a tokenized asset fund on the Ethereum network in March 2024. Cryptocurrencies, originating from the foundational principles of Bitcoin aimed at remedying the limitations of centralized currencies, have established profound ties with the financial sector. Consequently, the gradual integration of the cryptocurrency market by both traditional financial institutions and Web2 users has marked several significant milestones in its path toward widespread adoption. Before delving into the specifics of RWAs, it's essential to examine the evolving utilization of cryptocurrencies, particularly within the financial sector.

2-1. Raising money through ICOs

In traditional finance, startups tend to raise funds through IPOs by selling shares to existing shareholders or new shares to the public. In crypto, on the other hand, an ICO (Initial Coin Offering) means that the company or project’s coins go on public sale. The main difference between an IPO and an ICO is the point of entry, depending on the stage of readiness of the company. Whereas an IPO typically occurs when a company has reached a certain level of revenue or equity capital, allowing existing seed and venture investors to exit, a crypto ICO is an extension of seed investment. This is because, in most cases, crypto ICOs are to announce the development of a product and to publicly raise funds. ICOs were popular in 2017, but gradually faded away due to lack of regulation, which failed to protect investors. Subsequently, ICO evolved into forms such as IEOs (Initial Exchange Offerings) and launchpads that are conducted directly through centralized exchanges to ensure investor protection.

2-2. DeFi

In 2019, DeFi began to develop around the Ethereum blockchain based on smart contracts that allow financial transactions to be conducted without intermediaries. In particular, DeFi became known for having token-to-token transactions taking place directly peer-to-peer without centralized exchanges. At the same time, a key innovation was the development of AMMs (Automatic Market Makers), which automate the provision of liquidity and turn investors into market makers. This has allowed decentralized exchanges like Uniswap to raise over $5B in liquidity.

2-3. Bitcoin spot ETF approval

While the crypto market has previously grown with sectors such as DeFi, NFTs, and the Metaverse, the approval of Bitcoin as a spot ETF in the U.S. is largely due to the fact that cryptocurrencies, especially assets like Bitcoin, are now dramatically more accessible to corporations and institutions. Until now, accessing the crypto markets has been a matter of trusting and using centralized exchanges, managing them directly through a personal wallet such as MetaMask and Phantom, or participating via shares of MicroStrategy, Coinbase, etc. With the approval of the Bitcoin spot ETF, institutions and corporations can now participate in the crypto market by adding a regulated and protected ETF to their portfolio.

2-4. RWA

The tokenization of real-world assets (RWA) is the next trend in the cryptocurrency ecosystem, enabling decentralized trading through the tokenization of U.S. Treasuries or fiat currencies, or even fractional investment of larger assets. Assets can include real estate, stocks, bonds, precious metals like gold, artwork, and more, and through tokenization, they can be traded on the blockchain.

Tokenization of RWA acts as a bridge between the crypto space and real economy, and can contribute to increasing the liquidity and market size of digital assets. It proves the practicality of blockchain technology and provides a new way to trade RWAs with more efficient management. In particular, investing through tokenized RWAs has the advantage of improved transparency, efficiency, and accessibility compared to traditional assets.

Consequently, blockchain projects are gearing up for expansion through various strategies. This momentum is partly fueled by the soaring interest in Bitcoin, which attained a new all-time high following the approval of a spot ETF earlier this year. Additionally, there's a keen observation on how the crypto ecosystem might influence traditional financial infrastructure.


3. Mainnets Pursuing New Financial Infrastructure

Bitcoin, recognized as the leading cryptocurrency akin to digital gold, has garnered increased attention from financial institutions, particularly after the approval of Bitcoin ETFs. With companies integrating Bitcoin into their asset portfolios, its financial significance and adoption are steadily growing.

Now, let's explore the preparations and criteria that other mainnets issuing altcoins are undertaking to position themselves as emerging financial infrastructures

Current financial adoption status of major L1s

  • Ethereum: Ethereum is a major platform that supports smart contracts and plays a big role in the DeFi space. Many financial applications and projects are built on Ethereum, which is driving its financial adoption.

  • Binance Smart Chain (BSC): BSC is Layer 1 blockchain that is compatible with Ethereum and has attracted many DeFi projects and applications thanks to its low transaction fees and fast processing speed. This contributes to increasing the accessibility of financial services and expanding market adoption.

  • Solana: Solana is a high-performance blockchain that uses SVM (Solana Virtual Machine), as opposed to EVM (Ethereum Virtual Machine). The key difference from EVM is that SVM uses Sealevel, which enables parallel transaction processing for increased throughput. While it has low compatibility with Ethereum, Solana is known for high throughput and low transaction costs, leading to rapid growth and adoption.

  • Injective: Injective is a Layer 1 blockchain built for finance. It is an open, interoperable platform optimized for Web3 finance applications, providing developers with many native modules to leverage, such as a fully decentralized spot and derivative exchange. Built with Cosmos-SDK, it uses a Tendermint-based PoS consensus mechanism and delivers fast performance of over 25,000 TPS (transactions per second). INJ is the ecosystem's utility and governance token, used for PoS security, governance, fee value capture, and developer incentives.

Mainnet conditions required for financial services operations

Key requirements for an L1 blockchain to operate financial services are stability, fast transaction processing speed for scalability, and security. Moreover, compatibility across multiple chains is crucial in preventing liquidity and market fragmentation, key factors in ecosystem activity and growth. And finally, the ability to provide convenience to institutions that play a critical role in finance, such as liquidity provision, is essential to a mainnet's ability to operate financial services.

Among these major L1 blockchains, Injective has shown dramatic growth over the past year in many aspects. It fulfills all the conditions mentioned above and is built for everyone, including individuals and institutions alike.


4. About Injective

Injective sets itself apart from other Layer 1 blockchains by being built specifically for finance. In particular, Injective is highly institutional friendly as well as retail friendly. There is a diverse category of ecosystem dApps built on Injective for users to get involved, ranging from derivatives trading, yield farming, borrowing and lending, etc. These dApps offer unique and advanced features to meet the needs of different types of users. In addition, all the on-chain dApps are able to utilize Injective’s shared liquidity environment with ease, which caters to the need for institutions that require high liquidity.

4-1. Speed

Injective offers one of the fastest transaction speeds in crypto with a block time of 0.8 seconds. Injective is approximately 1,700 times faster than Ethereum and 3.5 times faster than Polygon, which means its financial transactions are processed quickly and efficiently.

Tendermint Consensus Algorithm

  • Injective utilizes a custom version of the Cosmos SDK, leveraging the Tendermint consensus algorithm, and is renowned for its high transaction processing speed.

  • Instant transaction finality: Injective achieves remarkable performance, with transaction speeds exceeding 25,000 TPS and instant transaction finality. This means that once a transaction is executed, it is immediately confirmed and the asset becomes instantly accessible. Such rapid finality is crucial in mitigating risks associated with price volatility that arise when transactions are processed with delays.

4-2. Finance-related technical specifications

Injective possesses various features that are useful in the financial sector.

  • Institutional-grade Modules: Injective offers a range of institutional-grade financial infrastructure primitives, such as a high-performance on-chain decentralized exchange infrastructure, binary options, derivatives and the only automated smart contract layer. As a result, developers can launch unique finance focused projects without having to deal with the myriad of technical intricacies.

  • On-chain order book: Injective offers the world's first on-chain spot and derivatives order book.

  • MEV-resistant: Injective is fully MEV-resistant with a frequent batch auction model for transaction processing.

4-3. RWA Module

Among all the DeFi modules, the world’s first RWA module introduced by Injective has garnered the most attention, as RWA has recently become a trending topic in crypto.

The RWA module was introduced during the Injective Volan mainnet upgrade earlier this year. This initiative heralds a groundbreaking blockchain solution that simplifies the tokenization and on-chain integration of a growing array of real-world assets. While Injective's origins, with its exchange module, greatly reduced development and onboarding challenges for projects, its latest advancement includes the integration of a module for tokenizing RWAs on-chain. The RWA module further enhances the entry of traditional financial assets into the Injective ecosystem.

This development enables institutions to easily launch and access a variety of structured products and RWAs, including unique offerings such as tokenized fiat pairs, treasury bills, and exclusive credit products, accessible through a compliant gateway. 

For instance, an institution can launch a permissioned asset using Injective’s RWA module, while maintaining full control over which addresses can interact with that specific asset. This enables the entity to meet its specific compliance needs while also being able to enter the on-chain world for the first time. This innovation could finally promote on-chain institutional adoption, which was previously unattainable due to the absence of a robust infrastructure. 

4-4. Interoperability

Another advantage of Injective is that it allows for easy compatibility with other chains via Inter-Blockchain Communication (IBC). Additionally, Injective has integrated with cross-chain bridges like Wormhole for interoperability outside of IBC-enabled chains. As a result, Injective has one of the highest numbers of cross-chain connections out of any blockchain, making it a preeminent player in the world of interoperability.

  • High Interoperability: Injective is able to provide high interoperability with multiple layer sources through Cosmos IBC. Integrations with Wormhole and Celer enable interoperability with most of the major Layer 1 blockchains, including Ethereum, Solana, Polygon, Avalanche, Polkadot, and more.

  • Multi-VM Environment: Injective is the only blockchain network that supports multiple VMs (WASM, EVM, and SVM), allowing Cosmos, Ethereum, and Solana developers to build on Injective.

  • Ethereum Native Tools: Injective supports Ethereum native tools. Users can access Injective using MetaMask without having to switch networks, and it's the first network within the Cosmos ecosystem to natively support Ethereum-based assets.

4-5. Near zero fees

With a commitment to minimizing transaction costs, Injective recently introduced Gas Compression, which provides users with near-zero transaction fees. The significance of Injective Gas Compression lies in its seamless transition and enhanced accessibility. This feature enables Injective to maintain the lowest transaction costs in all of crypto, therefore lowering the entry barrier for on-chain users and widening the potential user base of the platform.


5. Injective Ecosystem

The injective ecosystem is growing rapidly, with over 30 dApps already built and trading volumes exceeding $26 billion. As the Injective ecosystem continues to grow rapidly, there are various activities available for general users beyond simple staking to contribute to its development. Among these opportunities, participating in ambassador programs and supporting the activation of early-stage dApps that have not yet issued tokens.

5-1. Shared liquidity for all ecosystem dApps

One of the defining advantages Injective offers is unified liquidity, which means Injective provides a shared liquidity environment for all on-chain applications to utilize from day one of the product launches. Users can easily and securely access liquidity and trade through all the exchange dApps built on Injective, such as Helix. Therefore, dApps can leverage Injective's shared order book without the need to spend a lot of time sourcing for liquidity, thus offering liquidity conveniently and securely with higher capital efficiency achieved.

Against this backdrop, the Injective ecosystem is rapidly expanding, with a diverse range of projects gaining traction despite being in its early stages. Particularly, protocols utilizing the built-in order book within Injective and derivative protocols involving liquidity staking are experiencing rapid and significant growth.


source: Hydro Protocol

Hydro Protocol provides robust liquidity solutions on Injective with the focus on Liquid Staking Derivative (LSD) and LSDFi products, offering real yield assets for diversified yield exposure, combining real world and crypto assets. Hydro Protocol has been very successful since its mainnet went live in January, surpassing $140 million in TVL shortly after its launch. As the largest LSD protocol on Injective, Hydro Protocol has been notably influential in activating the Injective staking ecosystem. This is exemplified by the trading of liquidity staking derivatives tokens like hINJ on Helix, and the provision of liquidity on Injective's AMM-based DojoSwap DEX. These conditions rapidly facilitate users' engagement in additional DeFi activities based on staking.


While most L1 blockchains feature NFT marketplaces, the Talis Protocol stands out in this regard. Talis Protocol has been quite popular by attracting numerous NFT creators and traders within and beyond the Injective community, contributing to the community culture in their own ways. 

In addition, NFT collections on Injective go beyond just trading and vibes. Injective Quants is the first NFT collection that contributes to the weekly INJ token burn. 5% of the Quants NFT trading volume will be burned. In other words, the more Quants get traded, the more INJ tokens get burned, allowing the supply of INJ to decrease over time. 

source: Tails

Innovative Token Standard

Furthermore, dApps within the Injective ecosystem primarily concentrate on financial aspects. For instance, DojoSwap, an AMM, addresses the liquidity provision challenge—a key concern for NFT communities. Instead of simply airdropping NFT community tokens to DojoSwap holders, DojoSwap offers initial liquidity and yield farming features for NFT tokens. This unique approach represents an unprecedented method not witnessed in any other Layer 1 ecosystem to date.

Overall, projects within the Injective ecosystem are constantly showing a remarkable agility in adapting to trends. For instance, shortly after the success of Ethereum's ERC404 project, a native CW404 token based on Injective was swiftly launched by an individual project within a five-day window, culminating in a successful token launch. Presently, the CW404 token specification has been officially released by Injective, solidifying a token standard ahead of Ethereum.

source: X(@Injective)


6. Rising Institutional Adoptions

Leveraging its finance-friendly infrastructure, Injective strives to foster integrations with key institutions, allowing traditional institutions to smoothly transition over to a new world of Web3 enabled finance. Notably, Injective has actively pursued collaborations with major institutions like Jump Crypto, Coinbase Institutional, Binance Custody, and BitGo to broaden access for institutional investors across multiple fronts.

source: Injective

As Injective’s key investor and ecosystem builder, Jump Crypto is a division of Jump Trading Group, one of the largest traders by volume across traditional asset classes. The funding from Jump Crypto has helped Injective to be appealing within institutional circles globally. Jump Crypto is one of the earliest institutional adopters that integrated with Injective’s on-chain order book, allowing higher liquidity for dApps across the Injective ecosystem. 

On the data oracle side, Pyth Network, which was incubated by Jump Crypto, has also integrated with Injective to enable access to institutional grade data at unprecedented speeds. The data is sourced and aggregated from 70+ major market participants, including traditional finance institutions such as Jane Street, CBOE, and DRW Cumberland. Through this integration, accessing Pyth data is an invaluable asset to the future growth of the broader ecosystem to enable new and innovative use cases that relate to traditional finance. 

Injective also aimed to enhance institutional investors' access to its derivatives trading platform through a collaboration with Coinbase Institutional. Coinbase Institutional is renowned for its safety, reliability, and compliance standards, offering custody, trading, and prime brokerage services to institutional investors. By establishing trusted collaboration, Injective aims to present a more appealing option to institutional investors.

Regarding security, Binance Custody and BitGo are both integrated with Injective and the native INJ token in order to enable institutional access to the Injective ecosystem in a secure manner. Ensuring asset safety is crucial for the mainstream adoption of DeFi. Therefore, creating a secure DeFi environment for institutional investors is essential for facilitating seamless integration with traditional finance and driving widespread adoption of DeFi.

source: Injective


7. Closing Thoughts

Injective is rapidly expanding its ecosystem with a high-performance, interoperable blockchain optimized for decentralized finance. In particular, functionalities like its exchange module, RWA module, shared liquidity environment, near zero fees, and the fastest transaction speed have all paved the way for institutions to efficiently manage and trade assets while complying with regulations. 

Moving forward, Injective is continuing to pioneer solutions that aim to bridge the gap between crypto and traditional finance, which is a crucial step for the mass adoption of Web3 finance. Through consistent upgrades, Injective is leading the charge to integrate with and bring the best financial institutions into crypto.


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