Co-founder of layer-2 decentralised derivatives exchange protocol - Injective Protocol- Eric Chen started his passion for crypto and blockchain back in high-school, when he mined bitcoins for the first time. After a career as researcher at NYU Blockchain Labs and Innovating Capital, in 2018 Eric founded Injective Protocol together with Albert Chon (CTO). The idea behind the project was to improve DeFi usability and security, eliminating problems related to high latency, poor liquidity and UX. The ultimate goal was to give DEX users the same flawless experience they have with CEXs, eliminating the gap between the two.
Today Injective Protocol is one of the most exciting upcoming projects in the cryptospace, being not only one of the fastest and most secure decentralised protocols, but also backed by important key-players of the market such as Binance, Pantera Capital, StartX and QCP. Injective Protocol is the also the upcoming Binance Launchpadproject, one of the reasons everyone is talking about it.
Meet Eric Chen and shoot over your questions to him!
Amazing session with Eric Chen, who gave us a great overview about Injective Protocol. He dived into this exciting project explaining into details how it works, the differences between the other protocols, the partnerships already in place and what's next. Beyond this, Eric also shared his general view regarding DEXs and their future, liquidity mining, yield farming and much more!
HERE AN OUTLOOK OF THE MOS EXCITING CONVERSATIONS FROM THE AMA:
➡️ The Wolf Of All Streets: "Hi Eric! I have been a vocal proponent of Elrond and now $EGLD and am curious to the long term plans for your partnership with Beniamin Mincu and his team. It seems like a perfect marriage with endless potential. What is the end game of your work together?"
➖ Eric Chen: " Elrond is an amazing project and our teams have known each other for quite some time now. We discussed many points of collaboration with Beniamin and his team."
The first step will include introducing eGold on our DEX as a wrapped token. Looking to the future, this collaboration will bring forth even more opportunities for both companies. With Elrond assets available on Injective Protocol's DEX, Elrond’s unique technical capabilities can be integrated more into Injective’s future developments.
Through this partnership, Elrond will now have the ability to introduce new derivatives products that utilise EGLD via new distribution channels on Injective’s DEX. Not only will this open doors for EGLD users, but it will also allow Elrond to access new users globally and bring forward a faster adoption of Elrond’s technology stack.
Injective and Elrond share a common vision of expanding DeFi networks globally while breaking down current financial barriers. By partnering with one another, both companies will move one step closer to this goal as the interoperability between the two will improve greatly as Elrond assets will be accessible on Injective.
Along with interoperability improvements, this partnership will enhance the user experience for both companies. Injective will provide Elrond users access to a decentralised derivatives platform and Elrond will improve Injective’s user experience by giving users access to their innovative smart contract capabilities. As a result, this partnership will benefit the rapidly growing DeFi industry as a whole".
➡️ Enter The Crypto Matrix: ""Do you think that the first layer 2 DEX will solve the actual problems in term of scalability, and how much can we push this further to the mass adoption before Ethereum 2.0 coming?"
➖ Eric Chen: "I think that just in terms of the core infrastructure, we already have a lot of value to deliver to the Ethereum (ETH) users. Our proof of stake bridge as well as our EVM module makes us a viable generalised scaling solution for any Ethereum Dapps and DeFi protocols. That being said, what really stands out is that we’re an application specific scaling solution for derivatives. Our bespoke infrastructure is tailored specifically for exchange and derivatives market trading, with a lot more potential for scalability upgrades than any existing DeFi project (it is our own chain after all).
ETH 2.0 does provide a lot more horizontal scalability, however it still has a suboptimal block time for exchanges and especially order books. So even with Eth 2.0 coming out, users will still adopt our platform due to the significant speedup users enjoy when trading".
➡️ Danilo S. Carlucci: "Danilo here, founder of CryptoAtlas - what's been your most challenging and most exciting time/event at Injective Protocol so far?"
➖ Eric Chen: "Honestly, anytime I get to interact with a live audience is very exciting since it helps me understand just how enthusiastic everyone is about our upcoming launch. I must say that the Crypto Atlas platform is quite different from the telegram AMAs I have done in the past. I love the format and the ability to interact with the people here since the relationships seem more genuine and I am able to use different options to interact such as upvoting comments, etc."
➡️ That Martini Guy: "How do you plan to gain adoption of Injective Protocol by the main stream and make this into a global product with a solid userbase?"
➖ Eric Chen: "Beyond the general growth strategies that I’ve talked about in prior questions. I think the most important factor we prioritise when trying to acquire and maintain a loyal customer base is incentivizing a rapid but healthy innovation in market creation. There are a few things we do to achieve this:
- Prioritise the creation of expiry futures like quarterly over perpetuals
While perpetuals are the most popular markets out there, we find it difficult to close the market fairly once it’s created. This means that traders might be stuck with an illiquid open interest if there are no counterparties to settle with. Quarterly, on the other hand, has a settlement date where everyone’s profit and loss will be settled. This allows traders to gain confidence in creating positions as they know that the open interests will be settled regardless. Once a quarterly market has shown sustained interest, it’s not difficult roll into a perpetual. With this premise, market creators will be able to innovate freely and create many interesting markets without putting traders up for liquidity risk.
- Properly incentivize all builders of the ecosystem
Beyond the referral incentive, the market maker incentive, and the market creator incentive, a significant portion of the ecosystem development fund will be allocated towards rewarding developers, partners, and ecosystem projects to ensure that they thrive and prosper. The end goal 4-5 years into the future is that the ecosystem will own an insignificant amount and it will end up in the hands of the community members."
➡️ David Lie: "What role do developers play in Injective Protocol? What are the incentives for developers to create unique derivatives markets?"
➖ Eric Chen: "Developers play one of the most important roles in the Injective ecosystem! Beyond contributing to open source repositories, nodes and validators of the Injective chain also have the capability to act as relayers who can cater to traders in their desired ways (e.g. a relayer can provide an improved interface/API catering to a specialized group of traders).
As an incentive mechanism for relayers to provide the best experience for traders, we reward relayers who originate orders into the shared orderbook. The node that first discovers an order (by relaying to the shared orderbook) will receive 40% of the exchange fee as reward!
Also an interesting use of this mechanism is to turn it into an on-chain referral mechanism where a node can enter into an agreement for anyone to create referral links! Referrals are popular in the traditional startup world, for example if you refer a friend to use Airbnb they can earn some money as a reward. However, current DEXes do not really have proper referral systems built. Injective will be the first DEX to have on-chain referral by which anyone can earn 40% of the exchange fees. This will help immensely in driving usage and growth of our platform, beating out any competitors we might have easily."
➡️ fin feb: "What is the benefit of holding $INJ tokens when using DEX? What are the benefits of long term hold of INJ tokens?"
➖ Eric Chen: " The use cases intended for INJ include but are not limited to: protocol governance, exchange fee value capture, derivative collateralization, liquidity mining, and staking. Further details regarding each of these use cases can be found below.
- Protocol Governance: The INJ token can be used to govern various components of Injective's sidechain including the futures protocol, exchange parameters and protocol upgrades via a DAO structure.
- Exchange Fee Value Capture: After the relayer reward distribution, the exchange fee will undergo an on-chain buy-back-and-burn event to accrue value for INJ.
- Collateral Backing for Derivatives: INJ will be utilized as an alternative to stablecoins as margin and collateral for Injective's derivatives markets. In some futures markets, INJ can also be used for collateral backing or insurance pool staking where stakers can earn interest on their locked tokens.
- Exchange Participation Incentives: The foundation plans to incorporate a liquidity mining scheme and distribute a fixed number of INJ tokens daily weighted by the liquidity each network participant provides.
- Tendermint-based Proof-of-Stake (PoS) Security: To ensure the security of Injective's sidechain, Injective will incentivize nodes to stake INJ and participate in the sidechain's network consensus with block rewards".
➡️ Alistair De Bruijne: "What is your opinion on the FCA banning the sale of crypto derivatives to retail consumers? Does that impact you guys in any way? If not now, what about potential future regulations that might limit your go to market or pose ome hurdles with your operations?"
➖ Eric Chen: "Yeah we noticed this trend from a long time ago. Although Bitmex has recently faced charges we are not new to seeing other exchanges combat legal issues. Just yesterday it was reported that OKEX is also facing mounting legal pressure and has ceased all customer withdrawals. This is inherently contradictory to the ethos of what blockchain is supposed to be which is true decentralization and freedom for all.
What is very sad to see today is that many so-called “DeFi protocols” are actually much more centralised than they appear and are only controlled by a few stakeholders. We see this often with rug pulls happening constantly with new DeFi projects.
At Injective Protocol we have built into our network true decentralisation from day one. The biggest fundamental difference between Injective Protocol and other exchanges is that we make exchange a decentralised public utility which gives our users and community the resultant value capture from our exchange protocol.
Our technology brings an order of magnitude speedup by scaling trade execution and settlement on layer- 2 all while being fully decentralised. Injective’s fully decentralised nature uniquely allows individuals to permissionlessly create and trade derivative markets that even centralised exchanges cannot support.
In my mind there is no doubt that derivatives will hold the largest market share. In the traditional markets derivatives are actually worth trillions of dollars (much higher than equities, bonds and other asset classes combined). If we are successful with bringing derivatives to the crypto and DeFi space, we will see immense growth the likes of which this space has never seen and greatly accelerate the adoption of DeFi tech globally".
➡️ Trung Thành: "What would you consider as your main market globally at the moment? What are your plans regarding the global expansion of Injective Protocol?"
➖ Eric Chen: "Our goal at Injective Protocol is to unlock the full potential of borderless decentralised finance. On the technical side, we are working to build a fully decentralised, trustless, censorship-resistant and open-source protocol that users can access from all around the world. On the business side, we have several institutional partnerships for bootstrapping liquidity and providing other valuable services on our protocol, and are backed by some of the largest market makers in the world.
We are also working with top projects in the industry backed by Binance such as Elrond (EGLD) and Kava (KAVA). On the community side, we are always working on growing a global community base, from users, traders, stakers, delegators, liquidators and much more. We plan to release incentivized staking, liquidity mining and exchange referral rewards soon.
Community has always been the most crucial element of our exchange and mission. Thus, we welcome everyone to create DeFi markets, build specialised clients, and host nodes on top of our chain. We have a lot in store and can’t wait to hear what our users think and how we can bring a better exchange that’s truly decentralise and trustless to the community".
➡️ Isnain Dhuha: "Liquidity mining, Yield farming has been a very popular concept and a strategy for DeFi projects to boostrapping nowadays, does Injective ProtocolInjective Protocol have similar planning to incentivize protocol adoption?"
➖ Eric Chen: " Injective Protocol has a strong incentive system for liquidity introduction like make order rebate, referral fee rebate, and market maker incentives. From day 1, we have multiple market making partners and investors who will be helping us provide institutional grade liquidity. Beyond the make order rebates, we also have a huge relayer incentive where people can host nodes and earn 40% of the exchange fees they route. In addition, individuals can refer other users to our DEX which would make them eligible to earn 40% of trading fees (we are the first ever DEX to have on-chain referral like this)."
➡️ Putri Ayu: "Partnerships seem to be very important. How’s the status of Injective's partnerships? Can you share some of the partnerships you have formed with existing blockchain foundations recently?"
➖ Eric Chen: "You are right in assuming that partnerships are an integral component of our continued growth. We recently formed relationships with top projects in the space such as Polkadot (DOT), Elrond (EGLD), Kava (KAVA), Wootrade, Frontier (FRONT) and Findora. More information regarding our partnerships can be found on our medium page here: https://medium.com/injective-labs".
➡️ Putri Ayu: "As the first incubated project by Binance Labs to debut its public sale via Binance Launchpad. How excited are you about this? Can you share the next step of your journey with us?"
➖ Eric Chen: "We are extremely excited! We have been a part of the Binance family since 2018 so this is a big step for us. We plan to release the testnet very soon and have a lot more planned. Check out our roadmap here: https://static.tildacdn.com/tild6638-6137-4236-a665-646530616465/Roadmap.svg"
➡️ David Lie: "What is the role of the sidechains on injection protocol platform and how contribute in terms of liquidity?"
➖ Eric Chen: "Injective has a strong incentive system for liquidity introduction like make order rebate, referral fee rebate, and market maker incentives. From day 1, we have multiple market making partners and investors who will be helping us provide institutional grade liquidity. Beyond the make order rebates, we also have a huge relayer incentive where people can host nodes and earn 40% of the exchange fees they route. In addition, individuals can refer other users to our DEX which would make them eligible to earn 40% of trading fees (we are the first ever DEX to have on-chain referral like this).
In terms of speed, we scale Ethereum (ETH) transactions on our own chain to ensure that users can enjoy fast block-time and more importantly finality brought by Tendermint consensus. So, the overall user experience for an average trader will feel just as nice as a centralised exchange, but there is no server whatsoever!"
➡️VeneCoin: "How is Injective Protocol different?"
➖ Eric Chen: " VeneCoin Injective is the first layer-2 decentralised exchange protocol that unlocks the full potential of borderless DeFi. It allows any individual to create and trade arbitrary DeFi instruments with just a price feed. Users are empowered to create their own markets within Injective Protocol. Our DEX is based on the Cosmos-SDK and Ethereum network that integrates a verifiable delay function (VDF) to prevent transaction fraud and front-running. We use a Tendermint-based Proof-of-Stake (PoS) to facilitate cross chain DeFi trading across Cosmos (ATOM), Ethereum (ETH), and many other layer-1 protocols.
Our protocol features zero gas fees when trading, the ability to earn cross-chain yield generation for a multitude of assets, and the opportunity to create and trade on any market using only a price feed. In addition, we are the first DEX to introduce on-chain referral via which any user can earn 40% of exchange trading fees as a reward for referring their friends.
Injective is fully open and permissionless, allowing you to freely trade, and even create new markets on the Injective Protocol exchange. Injective Protocol is the first universal DeFi protocol for cross-chain DeFi trading across a plethora of financial products".
Ask me Anything, Oct 18th @ 6:00PM (UTC)