The end of 2020 is a relatively challenging period, not only for the crypto market but for others also.Many news releases every day is a challenge for traders in this season. However, the bizarre thing is that DeFi seems to be a relatively "hot" topic.
Just two weeks ago, Binance launched Alpha, one of the most active new projects in the DeFi Yield Farming field. Today, October 12, Binance announced the next IEO on Launchpad: Injective Protocol. It's not surprising that Injective is a project in the DeFi segment. More particularly, they compete directly with Binance because Injective's main product is Decentralized Exchange.
If you have not heard of DEX or do not understand what DEX is and its importance, you can read my article on Serum (SRM) or DeFi. DEX is an exchange where users can directly trade without intermediaries or send money straight to the exchange.
Of course, DEX has many advantages; however, it is also quite inferior to traditional CEX exchanges. If you are still unsure, I suggest you reread my articles.
At first glance, as a new type of DEX, Injective seems to want to compete directly with Serum (SRM) rather than a simple AMM-using mechanism like Uniswap.
According to the Injective team, they are a Layer-2 exchange capable of supporting cross-border financial systems, particularly to the trading of margins, derivatives and futures contracts. It is a distinct feature of the project. Whilst most popular DEXs desire to buy and invest traditional altcoins, Injective seeks to focus on leverage and derivatives trading, which is a considerable challenge for DEX.
Why is it a challenge? The reason is, as we all know, when you trade on a traditional exchange such as Binance, each transaction is just a number. As for the money that is deposited in or withdrawn out, the exchange is in charge. For example, if A buys 5 BTC from B, then the exchange will record the transaction. If A wants to withdraw 5 BTC to his wallet, the exchange will be the licensee. If the exchange does not allow it, 5 BTC does not yet belong to A. As the exchange manages it, the trade will take place almost immediately.
In terms of DEX, things will be more straightforward. When A buys 5 ETH from B, those coins will be transferred directly from B's ETH wallet to A's ETH wallet on the Ethereum blockchain. Security, privacy, and security are there; however, unfortunately, ETH runs relatively slow. If A buys 5 ETH from B, sometimes, it takes 30 minutes for the money/coins to be available in the wallet. It is acceptable for traders who do not use leverage. For those who use leverage, the problem is unacceptable. If the traders close the position late by only 1 second, there will be a relatively massive difference between loss and profit, not to mention 30 minutes.
Therefore, there are not many DEXs that focus on the mentioned market segment. Injective may be the first excellent project that focuses on this field that I have ever seen. Of course, to succeed, they also need their weapons.
Injective Protocol is not only an "exchange". It has three main products: Injective Chain, Injective Exchange and Injective Futures. These three products are in the same ecosystem and will work closely together to provide users with products that have the security of DEX and the fast and easy-to-use experience of CEX.
Injective Chain is a Layer-2 sidechain connected to the Ethereum network. Injective Chain was initially built on the Cosmos SDK; therefore, they will probably link cross-chain to other blockchains in the future. By using Layer-2 solutions, Injective Chain can optimize the speed of transactions to serve Injective Exchange and Injective Futures.
Injective Chain uses the Proof-of-stake version of Tendermint (similar to Cosmos), combined with Layer-2, to create the fastest transaction speed on the Chain to deliver the best experience of trading on its Exchanges and Futures. The figure below is a summary of the operation steps of the injection Chain.
The Injective Protocol calls itself an Injective Exchange. Of course, this is a decentralized exchange. Like other decentralized exchanges, Injective are bound to face two problems: liquidity and trading volume. When there is no liquidity, it is not simple to attract users to generate volume. When there is no trading volume from users, the liquidity will become weaker and weaker. As a result, neither the exchange nor those who invest in the exchange will receive a cent.
To solve this problem, the Injective team must come up with their solutions or perform better than its competitors. The first thing Injective announces is that they have an order book like other traditional exchanges.