Injective (INJ) tokenomics

Issuance Mechanism and Supply Dynamics

The native token of the Injective Protocol is INJ. It was initially launched as an ERC-20 token on Ethereum with an initial total token supply of 100 million INJ.

The token supply is designed to be dynamic, fluctuating around the 100 million soft cap through a combination of inflationary and deflationary mechanisms:

• Inflation (Minting): New INJ tokens are minted and distributed to validators as rewards for securing the network, which operates on a Delegated Proof-of-Stake (DPoS) consensus mechanism. The inflation rate is variable, ranging between 5.00% and 10.00%, and is determined by the amount of INJ staked, aiming for a desired staking rate of 85.00%.
• Deflation (Burning): A significant deflationary mechanism is the Token Burn Auction. This mechanism collects protocol fees and burns the INJ used to bid on the auction basket, effectively reducing the overall token supply. The INJ token economics have been optimized over time, notably with the INJ 2.0 upgrade, which allows any decentralized application (dApp) built on Injective, not just exchange dApps, to contribute up to 100% of their collected fees to the burn auction basket.

As of November 27, 2023, the total token supply of native INJ on the Injective Chain had inflated to approximately 76.4 million.

Allocation Mechanism

The initial total supply of 100 million INJ was distributed across various categories, with a strong emphasis on ecosystem growth and development.

The initial token allocation breakdown is as follows:

The largest portion, 36.33%, was allocated to Ecosystem Development, highlighting the protocol's focus on growth and adoption.

Usage and Incentive Mechanism

INJ serves multiple critical functions within the Injective ecosystem, acting as the core utility and governance asset:

Core Utility

• Payment for Gas Fees: Native INJ is used to settle transaction gas fees on the Injective Chain.
• Medium of Exchange: INJ is used as a medium of exchange across the ecosystem for activities like trading on decentralized exchanges (DEXs), buying NFTs, and taking out loans.
• Collateral: INJ can be used as collateral for derivative trading pairs where it is the quote asset, supporting leveraged exposure in derivative markets.
• Governance: INJ is the governance token. Tokenholders can initiate on-chain governance proposals by depositing 500 INJ, and any staked INJ holder can participate in voting on all protocol parameters and modules.

Incentives and Rewards

• Staking Rewards: Users can operate a validator or delegate their INJ stake to an active validator to participate in network security and earn INJ rewards. Rewards are sourced from inflationary token minting and block rewards. The advertised Annual Percentage Rate (APR) for staking was approximately 16.66% as of November 27, 2023.
• Trading Discounts: Users who stake native INJ receive trading fee discounts when interacting with Injective’s order book.
• Trade and Earn Rewards: This program distributes INJ rewards to participants trading incentivized pairs. A key update (IIP-93) introduced a staking requirement for the Trade & Earn program: users must stake INJ to earn rewards beyond a minimum threshold (e.g., 100 INJ).
• Open Liquidity Program (OLP): Native INJ from the community pool is continuously allocated to the OLP to incentivize users to provide liquidity to the Injective order book. The OLP operates in 28-day epochs.
• Exchange Application Incentives: Applications built on Injective that originate an order using the order book receive 40.00% of the exchange fees they generate.

Locking Mechanism and Unlocking Schedule

Locking Mechanism

The primary locking mechanism is staking within the Delegated Proof-of-Stake (DPoS) network.

• Unbonding Period: Tokenholders delegating to an active validator must observe a 21-day unbonding period to unstake their INJ. If the validator is not part of the active set, the delegated tokens are unstaked immediately.
• Vesting: Initial allocations for the project team and advisors were subject to vesting schedules. The allocations for the Team (20.00 million INJ) and Advisors (2.00 million INJ) were scheduled to be fully vested by January 2024.

Recent Unlock Events

The following table details recent unlock events for the INJ token, showing the amount unlocked and the corresponding impact on the circulating supply: