The Injective blockchain is built on Cosmos SDK, a toolkit that makes it easy to set up and run your own blockchain.

The basis of the Injective blockchain is:

• IBC (Inter Blockchain Communication) protocol
• Tendermint core
• Cosmos SDK (Software Development Kit).

The IBC protocol allows communication between two or more blockchain networks, acting essentially as a network node that communicates and connects different servers, connecting entire blockchain networks together. IBC enables the creation of an interchain account that will be the same across all blockchain networks that support IBC. This connection enables you to stake, trade, or participate in DeFi protocols across multiple blockchain networks from a single location.

All blockchain networks connected to IBC have a Tendermint core. Together with the Cosmos SDK, these are the building blocks of the network. This foundation allows  these blockchain networks to quickly communicate, as the IBC takes data from one blockchain, wraps it, and unpacks it on the other blockchain in the correct format. This communication is possible despite different programming languages due to utilization of the same core.

Injective uses 8 modules that ensure the operation of the entire system:

Auction module: The auction module regularly accumulates a basket of assets collected from trading fees by the exchange module and auctions the basket to the highest bidder in an open English auction for $INJ. The winner of the auction receives the asset basket, and the winning $INJ bid from the auction is burned.

Exchange module: The Exchange module is a key component of the Injective ecosystem, allowing users to trade any asset in a decentralized environment. This means they don't have to worry about withdrawal closures or centralized exchange (CEX) suspensions, and can keep their assets under control throughout trading. The Exchange module is closely integrated with other chain modules, such as the Auction, Insurance, Oracle, and Peggy modules, enabling comprehensive ecosystem functionality and providing users with a wide range of features and services.

This module allows for two types of assets exchange:

• Derivatives Markets
• Spot Markets

Insurance module: The Insurance module is maintained by Params. Params is the table containing important information and settings that govern how the insurance module works.

OCR module: The OCR module is used to store Chainlink's OCR information on-chain by verified members.

Off-chain reporting consists of N nodes (oracles), gathering data from external sources. Reports are being exchanged in a P2P fashion between oracles to get signatures of approval. A subset of nodes (transmitters) is identified by the OCR module on-chain; these nodes must submit their reports to the module.The first transmitter who hits the chain gets an extra reward to cover gas costs. Other transmitters are not. All oracles participating in the round are getting paid. Finally, the OCR module stores median value from the reports.

OCR Terminology

The protocol periodically sends oracle reports to the OCR module. The reporting protocol consists of three components: pacemaker, report generation and transmission.

• Pacemaker: The pacemaker drives the report generation process which is structured in epochs. Each epoch has a designated leader who the pacemaker then tasks with starting the report generation protocol. If the leader does not produce a valid report in time, the pacemaker also aborts the current report generation and starts a new epoch.
• Report Generation: For a given epoch, the report generation protocol enters into rounds where observations are gathered and (given certain conditions are being met, such as heartbeat and deviation) a signed oracle report is generated. The rounds are controlled by a leader node who controls the frequency of rounds, gathers the observations and generates the report.
• Transmission: The transmission protocol then transmits the generated report to the OCR module.

Oracle module: This module is responsible for delivering the requested information.

Peggy module: It is a key element in the ecosystem that allows interoperability with the Ethereum blockchain. It has three security components that ensure the secure transfer of assets:

1. The Injective Chain Validator node (injectived) for block signing
2. Fully synchronized Ethereum node
3. The Peggy orchestrator, which runs:

• Ethereum Signer, which signs requests using the Operator's Ethereum keys and sends them via messages
• Ethereum Oracle, which monitors events from full Ethereum nodes and passes them via messages
• Relayer, which sends updates to the Valset and batch transactions to the Peggy contract on Ethereum

Tokenfactory module: Allows any account to create a new token with the name factory / {creator address} / {subdenom}. Because tokens are namespaced by creator address, this allows token minting to be permissionless, due to not needing to resolve name collisions. A single account can create multiple denoms, by providing a unique subdenom for each created denom. Once a denom is created, the original creator is given "admin" privileges over the asset.

This allows them to:

• Mint their denom to any account
• Burn their denom from any account
• Create a transfer of their denom between any two accounts
• Change the admin. In the future, more admin capabilities may be added. Admins can choose to share admin privileges with other accounts using the authz module. The ChangeAdmin functionality allows changing the master admin account, or even setting it to "", as a null value, meaning no account has admin privileges of the asset.

Wasmx module: Ensures the functioning of smart contracts. Smart contracts are autonomous agents that can interact with other entities on the Injective blockchain, such as accounts owned by people, validators, and other smart contracts.

Each smart contract has:

• A unique contract address with an account where funds are stored
• A code ID where its logic is defined
• A custom key-value store where it can store and retrieve data

API Provider:

These API nodes serve two purposes:

1. Data layer: Injective API nodes index block events from the Injective blockchain and serve as a data layer for external clients. API nodes rely exclusively on publicly available data from the Injective blockchain, so anyone can run their own API node without permission and use it as an untrusted data layer for interacting with the Injective blockchain.
2. Fee delegation: Injective API nodes can also optionally provide fee delegation services on a per-transaction basis for other users, with the exchange API node paying gas fees on behalf of third-party users. This allows users to trade on the Injective chain with zero fees.

Injective collects 60 % of trading fees from users (the remaining 40 % is passed on to exchange applications). Every week, an auction is held that allows community members to use INJ coins to bid on the basket of trading fees collected by Injective in that week.

At the end of the auction, the winning bidder receives the entire basket of assets, and their bid (paid in $INJ) is burned. Each basket won with INJ coins usually has a higher value than the amount the user paid. If someone pays 95 $INJ for a basket worth 100 $INJ, the paid 95 $INJ will be burned. This mechanism could create deflationary pressure on $INJ in the future, which has a 7 % inflation rate, and reduce their annual inflation to as low as 2 %. With increased demand and the expansion of the Injective blockchain among more users, the INJ coin will become very strong. You can follow ongoing and completed auctions here.