As we know in our previous class that blockchains are very special community which functions in diverse ways from another blockchain. This means it is difficult for a crypto in a certain blockchain to be traded on another blockchain which will be like a trespassing in from community A to community B.
Due to this reason some people thought about it, then decided to create a solution to the problem and this is what brought about what is known as wrapped token today.
Basically, a wrapped token is a token created in another blockchain to suit the characteristics and functionality of another token in a different blockchain. For example, if community A has a very popular token call Kadosh, but community B loves the token but because they don't have authority to trespass from their community to community A, so they create a token which will be wrapped to the Kadosh token in their own community which will have the same characteristics of the Kadosh token, This token is then called wrapped Kadosh.
In a bid to achieve this someone from community B must have gotten a hold of some.of the original version of the other community token or liased with someone in that community so as to have the original version of the recreated token which enables the new one to be wrapped version of the original one.
Name at least 2 Blockchains that use Wrapped BTC, excluding Ethereum, and show screenshots. Explain.
One of the major characteristic of a wrapped token is that it always have the same value with the original token and it is able to be sold back immediately without delay and this is the reason for the acquisition of the original token by the other community.
Now that we understand how the wrapped token works, there are various blockchains or ecosystem that has been developed since the launch of crypto, which varies from Ethereum to Tron, to binance smart chain and many more. We will be looking at the most popular crypto which is Bitcoin and some of the ecosystem that has it's wrapped token without using the Ethereum blockchain since that one is very popular.
1. HUOBI ECO CHAIN (HECO)
Source: https://medium.com/block-insight/what-is-huobi-eco-chain-heco-6028c061415b
Heco ecosystem is a Decentralized and low cost public chain that enables Ethereum developers to easily start developing on the blockchain and also allows smart contract which allows seamless Trànsactions.
Heco is actually EVM compatible which means it was built on the Ethereum protocol but it has a special feature of cross chain functions and a low gas fee which is an advantage over Ethereum.
It also allows developers to enjoy developing of smart contracts on either the etheruem blockchain or other public chain due to its cross chain ability. It has built a well developed defi system, wallets, assets , exchange etc. It's exchange is ranked 3rd among all crypto exchbagea.
Example of a wrapped BTC on the heco ecosystem, it is known as HBTC token, we can see that it has the same price as that of BTC,it has a total supply of 11,672.022 HBTC and same value for the circulating supply. It has a market cap of $657,274,902 and has been transacting well on the ecosystem. It is a HRC-20 token because it was built on the heco ecosystem.
2. BINANCE SMART CHAIN
BTCB is a token built on the binance chain which is backed by a BTC reserve which price is pegged to Bitcoin at the ratio 1:1 meaning 1BTCB = 1BTC. Also the reserve address is available for the public for verification.
It was launched in April 2019 by the founder and CEO of Binance Changpeng Zhao which is one of the largest crypto exchange in the world.
The token was created because of the inability of Bitcoin to come.fully into the defi world which made cz clone Bitcoin issuing BTCB. It always have same price with the actual BTC and this has given users of the binnace chain the ability to trade BTC with ease.
There are other blockchains which also have a wrapped BTC like the Tron network and the likes.
What is the difference between the wETH of the Ethereum platform and the wETH of the TRON platform? Explain.
TRON Wrapped ETH vs ETHEREUM Wrapped ETH
Ether also known as Ethereum is the native currency of the Ethereum blockchain. The token was created before the standardization of the ERC-20 and other ERC tokens, hence the ether token isn't Erc-20 compatible and can't be used in exchange for Erc-20 tokens in a Decentralized way except conversion on a centralized exchange.
Developers then decided to have a wrapped version of ether which will also be an ERC-20 standard, and this can allow for the exchange of the wrapped ether with other ERC - 20 tokens.
The wrapped Ether token (WETH) is the upgraded version of the ERC - 20 compatible version. To create a WETH token, ether is sent to a smart contract where the real Ether is reserved, then in place the WETH ERC-20 token is given in return in a ratio of 1:1. The WETH token can also be sent back into the smart contract to redeem it back to the original Ether.
While the TRON version
Source:
TRON liased with BitGo (a well known digital assets financial service) the developer of the wrapped Bitcoin on the etheruem blockchain has also successfully launched WETH which is newly minted on the Tron blockchain as a TRC token.
The wrapped Ether is pegged to Ether as well. This is done to help the development of decentralized finance on the Tron ecosystem. This also allows the the traidng on Decentralized exchanges, loan, payment system and everything defi has to offer on the Tron blockchain.
MAKING AN INVESTMENT IN A WRAPPED TOKEN
We will be making an investment on one of the wrapped token in the Tron blockchain making use of the justswap platform. To access justswap platform we will make use of the tokenpocket wallet, then we navigate to the discover section where we will see the justswap icon them click on it, but we must ensure the blockchain on the wallet is that of Tron.
Then we navigate to the swap version where we choose the coin we want to swap to get a wrapped token, in this tutorial we will be investing in the WBTT coin exchanging it with the usdt. After setting the amount of usdt we want to invest we then click on confirm if we are satisfied with the amount of wbtt to receive.
WRAPPED TOKENS ON THE TRON BLOCKCHAIN
The Tron blockchain presently have four wrapped token and planning to have more of the wrapped tokens at later times. The present tokens are the WETH, WBTC, WBTT and WTRX. WETH and WBTC been controlled by BitGo in conjunction with the Tron developer.
These wrapped tokens are been used in the defi of the Tron platform for lending, borrowing and staking on the platform. All tokens are been pegged in a ratio 1:1 to the original asset.
WRAPPED TOKEN MINTING
Minting is the act of developing or creating new wrapped tokens, this is carried out between the custodian and the merchant. To mint a wrapped token the process is as follows let's use Bitcoin as an example;
Bitcoin holder goes to a merchant to start the trànsaction, the merchant then starts a trànsaction by giving order to the custodian to mint WBTC to the merchant address.
The merchant then sends the Bitcoin holder BTC to the custodian, the custodian then wait for sex confirmations of the BTC transaction, after confirmation the custodian starts a trànsaction to mint a new WBTC token on the blockchain.
The Bitcoin holder then requeat the WBTC token from the merchant, in some cases doing the KYC is needed by the user. The operation is then completed when the merchant sends the WBTC to the user and the user has sent his BTC as well.
BURNING IN WRAPPED TOKEN
Burning is the act of exchanging WBTC to received BTC back, this can only be done by the merchant address. This is then deducted from the merchant WBTC balance and the WBTC supply is reduced. Burning is literally the reducing of the supply of a token.
The most important people in the burning and minting of a token
- Custodian: this are the group of people that holds the token and also the key to minting the token
- Merchant: this is the middle man between the custodian and user, this are the people who receive the minted wrapped tokens and also responsible for the burning of the token.
- User: this is you and I who hold the wrapped token, which can be used for transferring and every other trànsaction.