> ## Content Index
> Fetch the complete content index at: https://dexplain.com/llms.txt
> Use this file to discover other available public pages before exploring further.

# What is Injective Protocol? Layer 2 DeFi Protocol for Derivatives Exchange
- URL: https://dexplain.com/what-is-injective-protocol-layer-2-defi-protocol-for-derivatives-exchange/
- Published: 2020-11-05T17:38:00.000Z
- Updated: 2021-12-02T17:39:05.000Z
- Description: What is Injective Protocol? Layer 2 DeFi protocol for trustless derivatives exchange will feature high speed cross chain trading and liquidity mining programs.
- Author: wizardfromspace
- Tags: Injective Protocol, defi, Cosmos, Decentralized Exchange, yield farming, Ethereum

[Injective Protocol](https://injectiveprotocol.com/?ref=dexplain.com) is a cross-chain [decentralized finance (DeFi)](https://dexplain.com/tag/defi) protocol to power deep liquidity trading across various financial products. The protocol aims to build a [decentralized exchange (DEX)](https://dexplain.com/tag/decentralized-exchange) that matches the liquidity and convenience found on centralized exchanges (CEXs). As a result, it will provide users with features such as perpetual swaps, futures, and spot trading. Additionally, it provides rewards, staking, and liquidity mining through the platform’s governance token INJ.

## What is Injective Protocol?

Injective Protocol uses technology in the [Ethereum](https://dexplain.com/tag/ethereum) and Cosmos ecosystem. It features fast [cross-chain](https://dexplain.com/what-is-darwinia-network-cross-chain-transfers-made-easy/) trading without scalability issues or expensive gas fees. In fact, with its **Tendermint Proof of Stake** consensus algorithm, Injective Protocol will provide decentralized trading with **zero gas fees**. This happens by leveraging Cosmos SDK module’s native interoperability [peg zones](https://blog.cosmos.network/the-internet-of-blockchains-how-cosmos-does-interoperability-starting-with-the-ethereum-peg-zone-8744d4d2bc3f?ref=dexplain.com). Essentially, the Injective Protocol intends to create a network that is censorship resistant, publicly verifiable, trustless, and front-running resistant.

## Key Features

- **Layer 2**: Injective Protocol is 100% decentralized much like a DEX on Ethereum, but charges zero gas fees and achieve fast trading speeds.
- **Any Market**: With just a price feed, Injective enables users to create and trade on any derivative market. Meaning users will have opportunities to trade any asset or commodity.
- **Cross Chain**: Both ETH and ERC-20 tokens will be transferable via a bridge (in both directions) between Ethereum and the Injective Chain.
- **Yield Generation**: Injective can also provide users with DeFi yield generating opportunities by accessing Layer-1 blockchain network products such as [Curve](https://dexplain.com/what-is-curve-finance-and-crv/) or [Yearn](https://dexplain.com/tag/yearn-finance) on Ethereum.
- **Liquidity Mining**: The protocol will attract continuous growth that users can capture via its native liquidity mining programs.
- **Community Governance**: INJ token holders will form a Decentralized Autonomous Organization (DAO) to vote on new listings, network changes, and protocol upgrades.

## Injective Token (INJ) Use Cases

The protocol’s native token INJ has a total supply of 100 million tokens. Currently, there are only around 15.2 million tokens in circulation. Furthermore, team plans to distribute INJ tokens over the next 3 years, with the bulk going towards ecosystem development and community growth. As a result, you should keep your eyes open for some attractive [yield farming opportunities](https://dexplain.com/tag/yield-farming) once the platform goes live.

**Other use cases for INJ tokens are as follows.**

- **Discounts:** Users holding INJ will receive a discount on trading fees.
- **Staking:** Earn rewards in INJ tokens by participating in consensus via staking**.**
- **Governance**: Injective Protocol will be a community-driven platform, meaning the INJ token provides voting power over proposals and parameters.
- **Passive Income**: There is a second form of staking where users who choose to lock up their INJ tokens for set periods can receive passive income.
- **Market Making**: Deep liquidity is the key to success for a decentralized trading protocol, therefore, rewards in INJ tokens will be available to incentivize liquidity providers.

## Final Thoughts

Centralized exchanges continue to face regulation and security concerns from their users. Just take a look at [BitMex’s recent legal troubles over money laundering](https://www.reuters.com/article/usa-crime-bitmex-idUSKBN26N08O?ref=dexplain.com) or [OKEx suspending withdrawals](https://www.coindesk.com/okex-suspends-withdrawals?ref=dexplain.com). Given that Injective Protocol’s design should provide the liquidity of a CEX along with its ease of use while ensuring user funds remain in their control, the recipe looks like a winner. Furthermore, the focus on immediate cross-chain interactions with [DeFi enthusiasts on Ethereum](https://dexplain.com/what-is-unilayer-pro-trading-tools-on-uniswap/) sounds very promising for quick INJ adoption.