Wrapped Tokens - Crypto Academy / S4W6 - Homework post for pelon53

It has been exciting getting lectured on Wrapped Tokens, their benefits, functions as well as their advantages and disadvantages in the world of cryptography.

The concept of Wrapped Tokens has been made simply to understand by @pelon53. Blockchain networks are independent of each other because of their different functionalities. As a result, tokens on one blockchain cannot be simply used on another blockchain.

Wrapped tokens eradicate such barriers and make it possible to use a native token of one blockchain on a different blockchain, thus bridging the gap between those two blockchains.

I am honored to take part in the class and also submit my assignment post

BTC is and continues to best other tokens in terms of mass adoption and utilization and holds above 50% of the total MarketCap, thus its market keeps booming and the need to adapt its functionality on other blockchain adds value to those blockchains.

Two popular blockchain platforms aside Etheruem that utilize Wrapped BTC are Binance Smart Chain (BSC) and Tron Blockchain

Binance Smart Chain seeks to provide its users the opportunity to explore all the potential use cases of Bitcoin which is a fast-growing and widely accepted form of payment. BTC has been wrapped on Binance Smart Chain as BTCB which is a BEP2/BEP20 asset pegged at the same price as BTC (1:1).

BTCB is a wrapped (pegged) on Binance Chain/Binance Smart Chain with a 1:1 peg to BTC locked on the Bitcoin blockchain. The most important use case of BTCB on BSC is allowing users to leverage their BTC for BTCB on Binance Smart Chain and accumulate profits as BTC prices increases. Users can also trade in Defi on BSC with their BTCB gained from locking their BTC.

BTCB is supported on many wallets such as including Binance Chain Wallet, Trust Wallet, BitKeep, SafePal, TokenPoket, and MathWallet. Currently, BTCB is trading at $61,023.31 USD with a 24-hour trading volume of $78,350,240 USD. Contract Address.

From CoinMarketCap

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TRON

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Wrapped BTC is on as WBTC which works as a tokenized version of BTC just as it is on the Ethereum blockchain and is also pegged at a 1:1 value on the network. The WBTC on TRON is held in the custody of a third-party exchange called BitGo. It is a TRC-20 token.

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WBTC on TRON was first issued on December 17, 2020, and has a total supply of 99.89WBTC.

Contract Address and Whitepaper

^Source

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The main difference in WETH on both networks comes from the different functionalities offered on both networks along with their advantages in the blockchain world.

Differences

1. Tron blockchain can boost scalability, faster transaction speed, and low cost due to the use of Delegated Proof of Stake(DPOS) consensus method as compared to Ethereum's Proof of Wook(POW) consensus mechanism. With that advantage, WETH on Tron inherits faster transaction speed and low transaction costs than WETH on Ethereum.

2. Wrapped tokens have their actual tokens held by a custodian. The custodian of WETH on Tron is a third party called BitGo which is a digital assets platform and holds most wrapped tokens on Tron. Other the other hand, WETH on Ethereum has Ethereum as its custodian.

3. WETH on Tron has a total and circulating supply of 1,998.59880WETH. WETH on Ethereum has a total supply of 1,153,917WETH with no current circulating supply.

Other differences

WETH on Tron	WETH on Ethereum
Current price of $4698.05	Current price of $3,842.32
Trading volume of	Trading volume of $1,980,327,969
301 Holders	291,456 Holders
MarketCap od 49,392,694.33	MarketCap of $30,336,175,369.30
Contract Address	Contract Address

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For this illustration, I will trade BTC for WBTC on Binance. To carry out this, you will first need a finance account and some BTC in your Spot wallet to carry out the trade. Binance acts as the custodian in this instance.

Steps

• Log in to Binance

• At the Homepage, Click on Markets at the top Menu

^{Screenshot From Binance}

• First select BTC amongst the listed tokens and Type in WBTC in the search box

^{Screenshot From Binance}

• Click on the WBTC/BTC trading pair
  
  ^{Screenshot From Binance}

• Choose the Buy option, select the order type(Market, Limit, Stop limit, etc) enter the amount of BTC you wish to trade for WBTC, and click on But WBTC to confirm the trade. I purchased 0.00032 WBTC at a rate of 1.0005 which is approximately $19.40

^{Screenshot From Binance}

• Once the order is complete, WBTC will now be listed in your Spot Wallet as shown below
  

^{Screenshot From Binance}

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TRON blockchain provides users good scalability and faster transaction speed based on the use of its DPOS consensus mechanism. Coupled with lower transaction fees, Tron blockchain provides the perfect platform where users can leverage their favorite(BTC and ETH) tokens for wrapped forms and participate in decentralized finances on the network.

The Tron blockchain currently has four Wrapped tokens which can be swapped at the JustSwap interface namely WTRX, WBTT, WETH, and WBTC

^{Screenshoot From JustSwap Interface}

Although TRX and BTT are native tokens on the Tron network, they are merely TRC10 tokens that are not accessible for smart contracts, thus the introduction of WTRX and WBTT respectively

WETH and WBTC are held on BitGo which serves as institutional digital asset custody for WETH and WBTC on Tron blockchain.

In totality, 50 wrapped tokens are running on the Tron blockchain as displayed below.

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These wrapped tokens allow a variety of users to employ their favorite token on the Tron network for faster transactions and also defi uses on platforms such as JustSwap, JustLend, and JustStable.

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Minting of Wrapped Tokens

To understand the concept of minting wrapped tokens, two major parties' terms have to communicate. A merchant and a custodian.

A merchant is a party that receives the minted tokens for distribution to users while the custodian is the party that holds the assets.

Minting involves the creation of new wrapped tokens. Once a merchant requests for a particular wrapped token by sending the actual token to the custodian. The custodian then mints the wrapped token of the equivalent amount and sends it back to the merchant's account provided.

For example, A being a merchant sends 50ETH to B, a custodian who mints 50WETH and sends it back to A's Eth addresses which A distributes to users.

Burning of Wrapped Tokens

The burning of wrapped tokens simply implies exchanging wrapped tokens for the actual tokens.
Here, merchants trade their wrapped tokens back for the actual token by initiating a burn of the amount they wish to redeem. The burnt amount is deducted from the merchant's account and the custodian sends the equivalent amount of the actual token to the merchant's address.

For example, if A wishes to redeem needs 50ETH out of his WETH, he will burn 50 WETH which when deducted, receives its equivalent of 50ETH in his wallet.

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@pelon53