Wrapped Tokens - Crypto Academy / S4W6 - Homework post for pelon53.
Q.1. Name at least 2 Blockchains that use Wrapped BTC, excluding Ethereum, and show screenshots. Explain.
Wrapped bitcoin is simply the tokenization of bitcoin for the purpose of using bitcoin on another blockchain.
Consider it as the use of a passport by a foreigner to be able to stay in a foreign country. In their home country they have no need for a passport, but the passport becomes necessary when they're to travel out of their country.
Wrapping of Bitcoins began after the rise to prominence of DeFi which began in the Ethereum blockchain. There was a need to extend the service to Bitcoins, the biggest Cryptocurrency so as to add it's large community to the growing DeFi community.
Thus, wrapping of Bitcoins began in Ethereum. However, two other blockchains now also wrap bitcoin's for use on DeFi protocols based on their blockchain. They are
Binance Smart Chain (BSC) and
TRON.
BSC Wrapped Bitcoins
Just like Bitcoins can be wrapped for use on the Ethereum chain, they can also be wrapped for use on the binance smart chain. On BSC, wrapping is done by Binance Bridge, where the BTC is wrapped into a BEP-20 token. Upon wrapping your BTC on BSC, it can then be used to access DeFi services on the Binance Smart Chain (BSC)
Bitcoins are also unwrapped on the Binance Smart Chain, still courtesy of Binance Bridge. Binance Bridge is Binance's bridge service for wrapping tokens for use on Binance Chain and Binance Smart Chain. It was made to cater for non Binance.com users.
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Binance Bridge binds tokens on the Binance Smart Chain and converts them to and from the original token locked in.
How Binance Bridge works
The user sends the amount of the tokens they wish to wrap to a public address owned by Binance Bridge and binance.com confirms this.
After confirmation, Binance Bridge sends wrapped tokens equivalent in units to the tokens sent to Binance Bridge.
Wrapping of tokens via Binance Bridge is done in a 1:1 ratio to the tokens sent for wrapping.
Wrapped Bitcoins is pegged to the price of Bitcoins, they're the same.
Wrapped BTC on Binance Bridge is called 'BTCB' rather than 'WBTC' of Ethereum.
TRON Wrapped Bitcoins
Courtesy of BitGo, the guys responsible for wrapping BTC on Ethereum, you can now wrap Bitcoins on TRON. BitGo introduced wrapped Bitcoins to TRON to enable BTC users access the DeFi services on TRON blockchain. Wrapped Bitcoins on TRON, BTC users can send BTC over the TRON blockchain for low fees.
How to Wrap Bitcoins on TRON
Wrapping Bitcoins on TRON is about the easiest thing to do. It's as simple as making a deposit.
You simply create an account on the Poloniex exchange if you don't have one.
Then go to your BTC wallet and select Deposit.
From there, you'll be directed on how to deposit wrapped BTC.
Wrapped BTC on TRON called BTCTRON rather than the WBTC of Ethereum.
Q.2. What is the difference between the wETH of the Ethereum platform and the wETH of the TRON platform? Explain.
The major difference between the wETH of the Ethereum platform and the wETH on the TRON platform is that the wETH of the Ethereum platform is an ERC-20 token while the wETH of the TRON platform is a TRC-20 token.
This means the wETH of the Ethereum platform cannot be used on the TRON platform and the wETH on the TRON platform cannot be used on the Ethereum platform.
Using wETH on the Ethereum platform attract the high costs obtainable on Ethereum's platform while using wETH on the TRON attracts the low costs obtainable on the TRON platform.
Also, wrapped Ethereum on the Ethereum platform is symbolized as wETH while wrapped Ethereum on the TRON platform is symbolized as ETHTRON.
In summary, here are the differences between wETH on Ethereum and wETH on TRON.
| wETH on Ethereum | wETH on TRON |
|---|---|
| ERC-20 token | TRC-20 token |
| Can be used on Ethereum but not on TRON | Can be used on TRON but not on Ethereum |
| Attracts Ethereum's platform fees | Attracts TRON's platform fees |
| Symbolized as WETH | Symbolized as ETHTRON |
Q.3. Make an investment of at least $ 5 of a Wrapped token. Explain the process with screenshots. You can use the JustSwap platform.
I carried out a transaction in my TronLink wallet, where I swapped 60 TRX for wBTC. This swapping was facilitated by JustSwap. Here's the details of the transaction.
- First I opened my TronLink wallet and clicked on markets.
- Next I selected the coins to be swapped. TRX on the left and wBTC on the right. I also entered the amount of TRX to be swapped and then clicked on 'Instant Swap'
- Then I confirm the transaction
- In a matter of seconds, the swap is completed. And the wBTC is sent to my wallet.
Q.4. Explain in detail the Wrapped token of the TRON Blockchain. Show screenshot.
On the TRON blockchain, tokens domicile on other blockchain can be migrated through the process of wrapping. This is to enable the token to be utilized on the TRON blockchain. On the TRON blockchain, the numerous DeFi services are exclusive to TRC-20 tokens. To access them, one must use a TRC-20 token.
BitGo, a global leader in crypto financial services, join forces with Kyber network and Republic Protocol and created the 'Wrapped' project first on the Ethereum blockchain then later on, the TRON blockchain.
Wrapped Tokens on TRON
Upon searching tronscan for wrapped tokens, I found a total of 50 wrapped tokens on the TRON blockchain.
Source
Source
Wrapped BTC
Wrapped BTC was introduced courtesy of BitGo and is tokenized Bitcoin. It provides an avenue for Bitcoin users to use their Bitcoins on the TRON blockchain to access the multiple DeFi services including staking, yield farming, lending, etc. With wrapped Bitcoins, Bitcoin is now used as a TRC-20 token.
Wrapped ETH
Wrapped ETH was also introduced courtesy of BitGo and provides an avenue for Ether users to access the multiple DeFi services on the TRON blockchain using their Ether. With wrapped ETH, Ethereum is now used as a TRC-20 token.
Wrapped TRX
Wrapped TRX may sound superfluous but TRX is not actually TRC-20 standard just as ETH is not ERC-20 standard. TRX was made before the TRC-20 token standard was introduced. So to have TRX as a TRC-20 token, wrapping it was a great idea. Thus, wrapped TRX can be used wherever there's exclusivity to the TRC-20 token standard and TRX users won't be denied utility of their tokens on the TRON blockchain.
Wrapped BTT
Wrapped BTT is also another instance of a token built on TRON blockchain but is not TRC-20 standard. BTT is a token built on the TRON blockchain but with TRC-10 standards. Therefore, in order to make it possible for BTT users to use their tokens where TRC-20 token standards are required, BTT has to be wrapped.
You can swap any token to a wrapped token but the essence of wrapping a token is to make holders of the original tokens to be able to use their tokens on the wrapping blockchain.
Q.5. What is to mint a Wrapped token? What is burning a Wrapped token? What is your function? Create an example explaining the process.
Wrapped token can be swapped to and from any other token available on the exchange. However, those tokens that are swapped were first minted. For every wrapped token I'm the market, there's an original token represented. No wrapped token is created until the equivalent of the original is locked in. The wrapped token is pegged to the original token in a 1:1 ratio.
MINTING WRAPPED TOKEN
MINTING a wrapped token is the process by which a wrapped token is created. Here, create and mint can be used interchangeably. Wrap tokens are created/minted from originally existing tokens. The value of a while unit of a wrap token is pegged to the value of a whole unit of the original token.
For a wrap token to be minted, the original token has to be locked in. The amount of the wrapped token that will then be minted is equivalent to the amount of tokens that were locked. Let's take this example illustration.
Example
A BTC user wants to use their BTC in a DeFi protocol on Binance Smart Chain that only supports BEP-20 standard. They have one BTC and wish to stake it. To do this, they will have to wrap their 1 BTC or exchange it for an BEP-20 token but for this instance, there's a huge APY for staking in a BTCB pool so they decide to Wrap. Here's how it will work.
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Steps to Minting Wrapped Tokens
The user transfer 1 BTC to a public address owned by Binance Bridge from their wallet.
After the transfer has been made, Binance will confirm that the coin has been received.
Once that is done Binance will create 1 wrapped BEP-20 standard BTC (BTCB) and send it to the user's public address, the one the BTC came from.
BURNING WRAPPED TOKENS
After the user is done with the wrapped tokens, they might want to get back their BTC. On a blockchain like TRON this is as easy as withdrawing from you Poloniex exchange account. But on a blockchain like Binance, there has to be a reverse process.
The wrapped tokens is returned and burned then the original token is released back to the sender of the wrapped tokens.
Example
Let's still continue with the previous example as this is just a reverse of it. The user is done with the BTC and thanks to using BNB as fees, he still has 1 BTCB. They wish to retrieve or redeem of reclaim or get back their BTC.
Steps to Burning Wrapped Tokens
The user sends the wrapped BTC to a public address owned by Binance Bridge.
Binance confirms the transfer and burns the tokens
Binance releases a BTC equivalent of the wrapped BTC sent to the user's public address.
THE FUNCTION OF BURNING AND MINTING WRAPPED TOKENS
MINTING and burning tokens is used to bring wrapped tokens into circulation and also take then out. When a wrapped token is minted, it is brought into circulation and when it is burned, it is taken out of circulation.
CONCLUSION
Wrapped Tokens are a very important invention in the crypto industry. They enable user to use their tokens on other blockchains. This provision has verily increased the popularity of DeFi which has been on of the chief purposes of wrapping tokens. Bitcoin especially finds application in decentralized smart contracts as a result of this wrapping of tokens.
Wrapped Tokens are issued ina 1:1 ratio when the original tokens are locked and are burned back to unlocked the original tokens still in the same 1:1 ratio. The price of wrapped token is also pegged to that of the original token in a 1:1 ratio.
Thanks for reading.
Cc:
@pelon53
