The Impact of CW20-Reflection Standard on Injective Ecosystem
Background
Injective has become the key financial hub among major layer one ecosystems by not only fostering the adoption of financial primitives but also embracing open standards to prompt major innovation in the crypto world. This includes Injective’s recent release of new token standards such as CW404 for NFT fractionalization in collaboration with DojoSwap, with more than 10 projects having launched different variants of CW404 already.
Although there are currently many variants of reflection tokens in the EVM world, such standards until today were absent on Injective and the broader Cosmos ecosystem. This absence in turn has led to a potential gap that may prevent developers from creating new forms of financial derivatives, thus hindering the development of a new category of DeFi applications altogether. Thus, the Injective ecosystem found the need to create a flexible standard that allows developers to conveniently use and potentially launch tokens.
Introducing The CW20-Reflection Standard
Injective and DojoSwap are jointly introducing the CW20-reflection standard, which will be open-sourced for all Injective and Cosmos ecosystem developers. The CW20-reflection standard was inspired by the EVM counterparts, with the CosmWasm version being customized for the CW20 function signatures.
The CW20-reflection standard can unique function in two ways:
As a pure taxed token: Each token transfer incurs a tax. This tax portion is then either burnt or sent to a treasury contract for withdrawal. This mechanism provides intriguing use cases for developers looking to create "tax-on-transfer" tokens, where the taxes can be incorporated into their tokenomics.
As a reflection token: The collected tax is used to obtain a target token such as via the DojoSwap DEX. These tokens are to be distributed back to the reflection token holders.
Other properties of the token standard include:
Customizable tax parameters allow the creation of any variant of a taxed token.
The standard is designed to be compatible with the CW20
Note that while the CW20-reflection standard has been audited, it's crucial to read the source code and documentation to understand the standard's usage.
Why is CW20-Reflection Standard the Best Fit for Injective?
Injective has the lowest gas fees among major blockchains. This is a significant benefit for reflection tokens which typically consume high gas fees because all token transfer events involve complex transactions. Following the recent Volan mainnet upgrade, transfers that could cost over $40 on Ethereum mainnet now cost less than $0.03 on Injective!
Injective exchange dApps offer the deepest trading liquidity compared with other DeFi ecosystems, providing an efficient environment required by the reflection token. This ensures very low slippage for orders even exceeding $50,000 in a single transaction, crucial for the reflection token standard to operate efficiently.
What Value Does CW20-Reflection Standard Bring to Injective?
The introduction of the CW20-reflection standard encourages the creation of a new class of financial primitives that meet market and user demands. Developers can flexibly mix and match all the functionalities included in the CW20-reflection standard to create their own unique implementations. For example, parameters such as tax rates and target tokens can be customized to fit the needs of different projects.
The first use case of this new standard has been built and tested on DojoSwap, the first native AMM DEX on Injective. Liquidity pools on DojoSwap generate fees that can eventually be sent back to DojoSwap users using this standard. Open-sourcing this standard will allow other applications to potentially utilize the CW20-Reflection Standard as well.
Closing Remarks
The CW20-reflection standard enables developers to build unique financial primitives. With its launch, Injective continues driving innovation and solidifying its position as the leading L1 for finance.
