Canary

Value

Injective

OpenLedger

The&nbsp;<a href="https://bsc.news/post/injective-inj-guide-2025" rel="noopener noreferrer nofollow">Injective</a> community&nbsp;<a href="https://x.com/CTDG_DevHub/status/2016905104553890089" rel="noopener noreferrer nofollow">approved</a> a major tokenomics overhaul on Monday, passing governance&nbsp;<a href="https://injhub.com/proposal/617/" rel="noopener noreferrer nofollow">proposal IIP-617</a> based on staked voting power. The proposal, known as the INJ Supply Squeeze, permanently doubles the network's deflation rate by reducing new token issuance and increasing the burn rate to 8%. Over 22 million INJ tokens were mobilized to vote, with 99.96% approval from stakers.Injective is a&nbsp;<a href="https://bsc.news/post/layer-1-blockchains-ultimate-guide" rel="noopener noreferrer nofollow">layer-1 blockchain</a> focused on decentralized finance applications. INJ serves as its native token for staking, governance, and transaction fees. The network currently has a circulating supply affected by both ongoing inflation from new token minting and deflationary mechanisms through systematic burns.<h2 id="span-span-strong-what-changes-does-iip-617-make-to-inj-tokenomics-strong-span-span">What Changes Does IIP-617 Make to INJ Tokenomics?</h2>IIP-617&nbsp;<a href="https://injective.com/blog/introducing-the-inj-supply-squeeze" rel="noopener noreferrer nofollow">introduces an updated framework</a> that permanently increases the rate of supply reduction by 100%. The proposal tackles both sides of the supply equation through two simultaneous mechanisms.On the issuance side, it tightens parameters to reduce the current annual inflation rate of approximately 8.88%, which mints around 10 million INJ per year. The proposal does not specify exact new parameters but describes the change as "permanently tightening issuance parameters at the protocol level."On the burn side, the framework works in tandem with the Community BuyBack mechanism, which systematically removes INJ through monthly buyback and burn events. The proposal states this combination creates "compounding deflationary pressure" as reduced issuance and recurring burns operate simultaneously.Rather than relying on discretionary burns through governance votes, deflation becomes embedded in the protocol's core mechanics. As network activity grows, burns can outpace minting to create net supply contraction.<h2 id="span-span-strong-how-does-the-community-buyback-program-work-strong-span-span">How Does the Community BuyBack Program Work?</h2>The Community BuyBack launched in October 2024 and serves as a key component of Injective's deflationary model. The monthly onchain event allows participants to commit INJ in exchange for a pro-rata share of revenue generated across the Injective ecosystem.The committed INJ executes market buybacks, with all purchased tokens permanently burned. This replaced the previous winner-take-all burn auction model with a democratized system that rewards all participants based on their commitment level.To date, the program has removed 6.85 million INJ from circulation. When combined with IIP-617's reduced issuance, the deflationary effects compound significantly. The proposal explicitly states this combination positions INJ "among the most deflationary assets in crypto."<h3 id="span-span-strong-expected-outcomes-from-the-upgrade-strong-span-span">Expected Outcomes From the Upgrade</h3>The proposal outlines three critical outcomes for the Injective ecosystem:<ul><li>Accelerated Supply Contraction: By doubling the deflation rate, INJ moves onto an accelerated path toward structural scarcity, with reduced issuance and systematic burns operating simultaneously.</li><li>Strengthened Deflationary Design: The framework reinforces deflation as a defining property of INJ, creating what the proposal calls a "structurally enhanced monetary model built for long-term sustainability."</li><li>Improved Value Alignment: The upgraded tokenomics tighten the link between protocol usage, ecosystem growth, and INJ token value accrual, ensuring network success directly benefits stakeholders.</li></ul><h2 id="span-span-strong-what-is-the-history-of-inj-deflationary-mechanisms-strong-span-span">What Is the History of INJ Deflationary Mechanisms?</h2>Injective has pursued deflationary tokenomics since mainnet launch. The network implemented several major upgrades before IIP-617:<ul><li>December 2021: The first INJ burn of 40,000 tokens made INJ officially deflationary, establishing the weekly burn auction where 60% of exchange dApp fees are permanently removed from circulation</li><li>August 2023: INJ 2.0 expanded the burn auction to all dApps across the ecosystem, not just exchanges. Lending platforms, NFT marketplaces, and prediction markets could participate without limits on burn amounts</li><li>April 2024: INJ 3.0 introduced dynamic supply mechanisms tied to staking activity through IIP-392. The upgrade implemented quarterly reductions to inflation bounds and enabled individual users to participate directly in burns</li><li>October 2024: The Community BuyBack replaced the winner-take-all burn auction model with a democratized system that rewards all participants while accelerating token removal</li></ul>IIP-617 represents the fifth major evolution of INJ tokenomics and the most aggressive deflationary framework implemented to date.<h2 id="span-span-strong-why-does-injective-use-deflationary-tokenomics-strong-span-span">Why Does Injective Use Deflationary Tokenomics?</h2>Deflationary tokenomics create alignment between network usage and token value. As more applications build on Injective and generate fees, more INJ gets burned through the automatic mechanism. This means increased network activity directly translates to reduced token supply.The proposal describes INJ as "the core asset securing the Injective network and coordinating economic activity across the ecosystem." By making deflation automatic rather than discretionary, the framework removes reliance on individual governance decisions for each burn event.For stakers, reduced issuance means less dilution of existing holdings. Enhanced burns funded by network revenue create what the proposal calls "improved alignment between ecosystem growth and INJ token value accrual."The proposal changes parameters rather than deploying new smart contracts, meaning no technical risks from code changes exist. However, the economic model depends entirely on Injective's ability to grow its user base and generate sufficient fee revenue to make burns outpace remaining inflation.<h2 id="span-span-strong-institutional-adoption-continues-across-multiple-sectors-strong-span-span">Institutional Adoption Continues Across Multiple Sectors</h2>Injective attracted significant institutional engagement throughout 2025. In July, Cboe and Canary Capital both&nbsp;<a href="https://www.sec.gov/Archives/edgar/data/2073616/000199937125009309/canaryinj-s1_071725.htm" rel="noopener noreferrer nofollow">filed regulatory applications</a> for a staked Injective exchange-traded fund. Each filing seeks to list a fund that would hold and stake INJ to generate rewards through an approved staking platform.The network also expanded its validator set with institutional participants. Deutsche Telekom MMS, the IT services subsidiary of Deutsche Telekom,&nbsp;<a href="https://x.com/injective/status/1895126846586433575?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Etweet" rel="noopener noreferrer nofollow">joined</a> as a validator in February. More recently, Korea University&nbsp;<a href="https://injective.com/blog/korea-university-korea-s-oldest-university-launches-first-institutional-research-collaboration-and-validator-on-injective" rel="noopener noreferrer nofollow">became</a> the first academic institution to operate a validator and conduct onchain research on the network.In recent weeks, Injective integrated&nbsp;<a href="https://bsc.news/post/openledger-ai-blockchain-guide" rel="noopener noreferrer nofollow">OpenLedger</a> to&nbsp;<a href="https://bsc.news/post/openledger-injective-ai-defi-execution" rel="noopener noreferrer nofollow">enable</a> autonomous AI agents to execute directly within high-throughput DeFi environments. The integration combines Injective's fast onchain execution with OpenLedger's attribution-first AI infrastructure.&nbsp;ConclusionInjective’s IIP-617 passed with 99.89% community support, doubling Injective's deflation rate through reduced issuance and systematic burns. With 6.85 million INJ already removed from circulation and the Community BuyBack mechanism operating monthly, the network has established an automatic deflationary framework where network growth translates directly into token scarcity.<h2 id="span-span-resources-span-span">Resources</h2><ol><li><a href="https://x.com/injective" rel="noopener noreferrer nofollow">Injective on X</a>: Announcements (December, 2025 - January, 2026)</li><li><a href="https://injective.com/blog/introducing-the-inj-supply-squeeze" rel="noopener noreferrer nofollow">Blog article by Injective</a>: Introducing the INJ Supply Squeeze</li><li><a href="https://injhub.com/proposal/617/" rel="noopener noreferrer nofollow">Injective proposal</a>: IIP 617: The INJ Supply Squeeze</li><li><a href="https://docs.openledgerfoundation.com/blogs/openledger-x-injective" rel="noopener noreferrer nofollow">Blog article by OpenLedger</a>: OpenLedger x Injective</li><li><a href="https://www.sec.gov/Archives/edgar/data/2073616/000199937125009309/canaryinj-s1_071725.htm" rel="noopener noreferrer nofollow">Canary filing with the US SEC</a>: CANARY STAKED INJ ETF</li></ol>

Injective to Slash INJ Supply After Community Approval on IIP-617

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