INJECTIVE PROTOCOL: THE TOKENOMICS CONCEPT

A blockchain is a growing list of records, called blocks, that are linked using cryptography, with each block having a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree).
Technically, a blockchain which was invented by Satoshi Nakamoto, in 2008, is resistant to modification of the data. It is "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way". For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network majority. Although blockchain records are not unalterable, blockchains may be considered secure by design and exemplify a distributed computing system with high Byzantine fault tolerance.
Blockchains as a decentralized control mechanism automatically gave rise to cryptocurrencies, the alpha cryptocurrency being bitcoin. A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies use decentralized control unlike centralized digital currency and central banking systems. With the advent of cryptocurrencies, arises the need for swapping from one cryptocurrency to the other. This births the concept of cryptocurrency exchanges.

WHAT IS A CRYPTOCURRENCY EXCHANGE?

A digital currency exchange, or commonly a cryptocurrency exchange is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other cryptocurrencies. A cryptocurrency exchange can be a market maker that typically takes the bid-ask spreads as a transaction commission for is service or, as a matching platform, simply charges fees. There are 2 main categories of cryptocurrency exchange, centralized exchange, also known as a cex, and a decentralized, also known as a dex. Centralized exchanges were the initial types existing. Examples abound. Huobi, Binance, Bittrex, Kraken, Coinbase etc are but a few. But challenges such as security and high trading fees have severely hampered and restricted their operations. Horror stories of centralized exchange hacks exist. From the legendary Mt. Gox hack, to the Binance pilfering and then the Upbit affair. Decentralized exchanges such as Forkdelta, Tokenjar, Idex do not store users' funds or private keys on the exchange, but instead facilitate peer-to-peer cryptocurrency trading in a jiffy. Decentralized exchanges are resistant to security problems that affect other exchanges.

Cryptocurrency exchanges can be segregated by
Modus Operandi
Degree of Decentralization

Modus Operandi
It exists in many types and shapes. There are 3 main forms. The Cryptocurrency Brokers, The Direct Trading Platforms, and of course, The Trading Platforms.

• Cryptocurrency Brokers – These platforms are where brokers set their cryptocurrency prices with buyers purchasing at their prices. Cryptocurrency brokers are similar to foreign exchange dealers. Examples include Rucoin etc

• Direct Trading – These websites offer direct person to person trading where individuals can exchange any digital currency or cryptocurrency. These sites do not usually have a pegged or fixed market price with each seller and buyer trading at their own pre-agreed exchange rate. Examples abound like LocalCoinSwap, Coinplace etc

• Trading Platforms –This makes up the bulk of crypto exchanges. These are websites that connect buyers and sellers to make a transaction and take a commission or transaction fee. These are the commonest group of exchanges and include both decentralized and centralized exchanges. Examples include, of course, Emirex, Binance, Kucoin, Bitforex, Coinbase etc

  Degree of Control
  Centralization of a crypto exchange suggests a central control of exchange management and resources. There are Centralized and Decentralized Crypto exchanges, and most, recently Hybrid exchanges.

• Centralized Exchanges
  In Centralized exchanges, also known as CEX, every transaction is being controlled by the owners of the exchange. Transactions can be made only through mechanisms provided and approved by the central body. These exchanges depend on the entity or broker who controls the flow of assets traded. Users of centralized exchanges deposit funds directly on the exchange, and then the exchange becomes responsible for the execution of buy and sell orders in real time. On centralized exchanges, users do not have access to their private keys. Mainstream stock exchanges are similar to centralized exchanges. Examples, of course is Emirex exchange, Binance, Kucoin, Bittrex etc

• Decentralized Exchanges
  A decentralized exchange (DEX) is a cryptocurrency exchange which operates in a decentralized way, i.e., without a central control. Decentralized exchanges allow peer-to-peer trading of cryptocurrencies, and prices are determined by peers. Because users do not need to transfer their assets to the exchange, decentralized exchanges reduce the risk of theft from hacking of exchanges. Decentralized exchanges can also prevent price manipulation or faked trading volume through wash trading, and are more anonymous than exchanges which implement know your customer requirements. Examples abound. Like Etherdelta, Forkdelta, Idex, TokenJar, BinanceDex etc

• Hybrid Exchanges
  A decentralized exchange is bereft of a central control and seller and buyer can directly contact themselves and trade cryptocoins.DEX works on smart contracts that automatically connects sellers and buyers using the buy order, seller order details placed on exchange. Centralized Exchange is one which allows for seller and buyer to trade cryptocurrency with the help of middlemen authority.It also allows the user to trade with or without middlemen authority. You can decide when your exchange have to be CEX and when have to be DEX.
  CEX + DEX = HEX.
  The hybrid cryptocurrency exchange website script has the options for customizing this and you can also make your exchange both decentralized and centralized at the same time.

More
A regular DEX limit orderbook are plagued by poor liquidity, high latency and limited asset listing, with a measure of centralization. Thus DEX platforms have not enough users now. So it causes liquidty problems. It means that there’s huge gap between the best buy and sell orders on the orderbook, which I usually call death kneel difference . This causes l loss of trader funds. So, the net result will be no new users and even loss of current ones. Some of DEX platforms have agreed to make composition of orderbooks to overcome the volume-related problems. Another problem of DEXs is ''front-running''. ETH and any other chains need some miners to run the system and all of this miners gain from the fees while we’re making transactions. And when we think the basic principle of DEXs, the orders will be realized on the next block when filled, miners may threaten this step. When a user creates an order to execute the current one, it must be filled and the pair will be reflected to his/her wallet. But if another user places same order with higher transaction fee, the miners may want to prioritize that one. So it may cause fairness problems. In addition to that, let's suppose the average mining time of each ETH block is about 15 seconds, it becomes easier to manipulate orderbook. To overcome this issue, most of platforms again use 3rd extensions.

Another problem that we face when using DEXs is partially-filled orders. While you’re using an ordinary exchange, it’s easy to fill whole orders one-by-one. But when we think that the transacted amount of orders can’t be modified on ETH chain, it’s impossible to fill orders partially on DEX. This will lead another bad image for such platforms because if you won’t fill the whole order, it will NEVER be executed. The resolution is only composition of orderbook which I stated earlier.

HOW DOES INJECTIVE PROTOCOL HANDLE ALL THESE?

Powered by the Injective Chain, Injective Protocol is a premier decentralized, layer 2 exchange that attempts to annihilate the sieges on dexes. It can be referred to as a front-running resistant exchange protocol that ensures reliably quick trading transactions.
It is on the Ethereum based deFi and trading protocol that supports margin trading, derivatives, and futures.
The injective protocol is being developed to solve the liquidity and high latency decentralized exchanges. It was founded by the CEO, Eric Chen who is currently and colleague Albert Chon who later became the CTO.. They collectively have several years of experience in blockchain and cryptography and this is exactly what brought them together to pursue the Injective Protocol Project. Both students of New York University, NYU and Stanford respectively, and later led to work on Verifiable Delay Functions (VDFs) had the potential to solve scalability and security flaws of decentralized exchanges.
The exchange is characterized by its fully decentralized nature, from the architecture, network to governance. It offers users the means to trade whiles they have full control of their funds and could very their order posted and matched on the sidechain in real-time.

In order to secure trades of users against front-running, Injective Protocol employs Verifiable Delay Functions (VDFs) and selective delay mechanisms to provide users holistic trading and DeFi experience.
We all know that trading on DEXs can sometimes be troublesome for the uninitiated. In order to drive crypto adoption building, user-friendly products are crucial. In response to this, the DEX protocol comes with an intuitive and Human-Computer Interaction (HCI)-focused interface to encourage diverse users to use the DEX to its full potential.

With Injection Protocol's solution, one can trade crypto in a secured environment with good liquidity to make trades much more fluid. In addition, traders can short or long cryptocurrencies with leverage in a more decentralized way unlike that of the centralized exchanges, get access to a wide range of DeFi platforms, etc. Trader will also have access to decentralized futures and derivatives markets.
The problem of liquidity can be solved by ‘’Batch Trading’’. We can simply explain it like a order-pool created with the sum of more than 2 platforms. The user experience may be increased by this method but new issues based on ‘’Whose order filled before?’’ question appear. Also when we implement a different method to DEX idea, we break the rule of decentralization. So it’s not a good choice.
Upholding the principles of decentralization, all the necessary resources required to kick start a decentralized exchange has been open source and free making it easier for new entrants into the exchange business.
Exchange providers can leverage Injective protocol's model and incentives to improve customer experience and drive revenue up.
Injective has taken a bold step and as advocates for decentralization, it's high time we push the agenda for the betterment of our ecosystem.

TOKENOMY

Injective Protocol's native token is used for the following purposes:

Proof-of-stake reward Validators can stake with the token and receive block reward proportional to stake.
Fee Distribution Exchange fees collected via negative spread model are periodically auctioned off through smart contract to buy back Injective's native token for reward distribution. The tokens are first distributed to relayers proportional by orders discovered/originated, and then to validators proportional by stake. Part of the tokens may also be burned instead of distributing to validators depending on final implementation.
We will implement these features in future iterations.

Market Maker Incentives Make orders will receive a net positive fee rebate to incentivize liquidity.
Fee Discount Token holders may receive discount on exchange fees.
Governance Reference Coordinator Contract Governance.
Stake Based Fee Distribution
Exchange fees collected from all trading pairs are aggregated monthly into a "basket of tokens" and sold as a batch to the public which can bid on the basket with INJ tokens. To achieve this, we utilize a simple public auction mechanism that repeats every 1 month equivalent of blocks. The Injective coordinator contract aggregates all of the exchange fees collected over the 1 month period and then conducts a two-day public auction.
During the auction, one can bid on the auction by calling the auction contract bid function which transfers the bidder's INJ token amount to the auction contract (which of course can only occur if the bidder has set the necessary ERC-20 approval). At any given point in time, only the current highest bidder will have their INJ tokens locked in the auction contract, thus allowing any bidders who have been outbid to withdraw their funds whenever they so desire. After the auction period elapses, the winner can trigger the disbursement of the accrued funds to their account.
For a limited period of time, a fixed number of tokens will be periodically distributed to users weighted by their net profit and loss during that time period. The distribution will end when a predetermined cumulative number of tokens is distributed.

BOUNTY PROGRAM

INJECTIVE PROTOCOL team is holding a 6-week Official Bounty Program in bitcointalk to reward its supporters with ETH tokens between June 20, 2020 and July 31, 2020 with 30,000 USDT worth ETH will be allocated to the participants. Each working phase will remain at two working weeks per phase. Therefore, the entire bounty schedule may be extended accordingly.

INJECTIVE PROTOCOL RESOURCES

About the Author
Joseph Johns is a successful Emergency Medicine Physician and an ardent cryptocurrency and Blockchain connoisseur
Bitcointalk Username: Kloppkop
Bitcointalk Profile: https://bitcointalk.org/index.php?action=profile;u=2809524