Injective is a decentralized exchange, meaning it has no central authority in charge of accounts or buying and selling various currencies. Many decentralized exchanges are automated market makers (AMMs), which use mathematical formulas and money pools to create caches of currencies (liquidity) for buyers and sellers to access. Injective is different: It relies on the order book model, with relayers (volunteers who are paid for the service) helping to match buyers and sellers by price. It is also a “layer 2” solution, which means that it performs most of its computational work on its own side system, called Cosmos, which can communicate to bigger, slower blockchains such as Ethereum and Bitcoin, but does not have to wait for them to perform every computation. Layer 2 systems reduce fees and network congestion, allow for easy trades across sovereign networks (from Bitcoin to Ethereum, for example), and can be scaled to many users.
Traders can buy and sell through markets on Injective’s system. Other users can earn fees by validating transactions, running relayer nodes that connect buyers and sellers, or staking their own money to support the network. Developers or traders with coding expertise can launch new exchanges and markets on top of Injective’s architecture, particularly derivatives markets, in which people can hedge or bet against various risks and price changes. Derivatives trading can be lucrative in the volatile crypto ecosystem, and as a result, such markets are a rapidly growing sector of cryptocurrency trading.