The competition in the decentralized finance (DeFi) derivatives sector is becoming increasingly fierce, and @Injective has taken a differentiated and highly promising path with its native on-chain order book model. This article will analyze from a professional perspective why this model is the key to the evolution of DeFi derivatives.
Limitations of AMM: The Pain of Derivative Trading
Most mainstream DeFi protocols adopt the automated market maker (AMM) model. Although AMM performs excellently in long-tail assets and initial liquidity, its inherent flaws are evident for complex derivative trading (such as futures and perpetual contracts): high slippage (especially for large orders), impermanent loss troubling liquidity providers, and inability to support advanced order types like limit orders and stop-loss orders. This severely limits the participation of professional traders, causing DeFi derivatives to remain in the 'niche experiment' stage for a long time.
Injective's on-chain order book: CEFi experience, DeFi core
Injective has directly migrated the mature order book model from centralized exchanges (CEX) onto the blockchain. This means:
1. Advanced order execution: Users can place limit orders, market orders, and stop-loss orders just like on Binance, achieving precise trading strategies.
2. Deep liquidity: Market makers (including professional on-chain market-making bots) can provide concentrated buy and sell orders on the order book, significantly reducing slippage on large trades.
3. Zero gas fee experience: Through an innovative pre-execution auction mechanism, Injective shields users from gas fee hassles, offering a trading experience comparable to CEX, while assets remain self-custodied.
Technical implementation and cross-chain empowerment
Achieving a high-performance on-chain order book is no easy task. Injective is built on the Cosmos SDK and utilizes Tendermint consensus to achieve sub-second block finality, which is the foundation for the order book to respond in real-time. At the same time, its native cross-chain capability allows this order book to trade not only INJ or assets within the ecosystem. Users can directly cross assets from chains like Ethereum and Solana and trade their corresponding derivatives (such as perpetual contracts for certain ERC-20 tokens) on Injective, even trading traditional asset tokens like gold, forex, and US stocks. This greatly expands the trading categories and user sources of the order book.
Impact on the value of $INJ
$INJ is the core of this financial infrastructure. It is used for paying transaction fees (part of which is burned), network governance, and as collateral for node staking. The high-frequency and large-scale professional trading attracted by the order book model will directly increase network fee generation, thereby accelerating token deflation. The more prosperous the ecosystem, the more active the trading, the faster the deflation rate of $INJ, and the stronger the value foundation.
Conclusion
The order book model of Injective is not a simple replacement for AMM, but a paradigm upgrade conducted in a more specialized vertical field (derivatives). It combines the efficiency of traditional financial markets with the transparency and permissionlessness of DeFi, opening the door for professional capital to enter. This is an important sign of DeFi's transition from 'inclusive finance experimentation' to 'mature financial market infrastructure.'
