#Graphic-created-by #anikearn

My entry October 4th, 2020 Steemcryptochallenge Week #2 Diving into Diving into DeFi

Understanding Wrapped Bitcoin

Deep Dive: my layman’s or non-computer coder explanation of wrapped Steem

Native Tokens

Bitcoin is the native Token Bitcoin blockchain
Ethereum is the native Token of the Ethereum blockchain
Steem is the native Token of the Steem blockchain

ERC tokens

Because the Ethereum blockchain introduced the cryptocurrency world to smart contracts, and people owning tokens from other blockchains desired to trade their tokens on Ethereum , so there was a need for what is called Cross Chain trading. Cross chain trading was popularized on the Ethereum blockchain, with what were called ERC tokens. These are the digital representations on the Ethereum blockchain of tokens which are native to another blockchain.

Example :
The ERC token version of Wrapped Bitcoin or WBTC Is an Ethereum blockchain Token, which represents a token Bitcoin, which is the native Token of another blockchain. This process requires the Bitcoin token to be locked in a wallet, and the person who wants to trade Bitcoin on the Ethereum blockchain is given an Ethereum blockchain Token, called an ERC token, to trade on the Ethereum chain. This allows for example Bitcoin to be traded on the application Uniswap. Normally only Ethereum and other Ethereum blockchain native tokens could trade there. But the Ethereum version of wrapped Bitcoin is a ERC token, which is a special Ethereum blockchain native Token, made specifically to represent the value of one Bitcoin on the Ethereum blockchain.

TRC TOKEN

Because the TRON blockchain provides the cryptocurrency world cheaper and faster access to applications which employ smart contracts. So there is also a need for what is called Cross Chain trading, where tokens which not native to the Tron blockchain, wish to trade on applications on the Tron blockchain. Cross chain trading was popularized on the Ethereum blockchain, with what were called ERC tokens. These are the digital representations on the Ethereum blockchain of tokens which are native to another blockchain. This same need for digital representations of non-native tokens on the Tron blockchain has lead to the development of TRC Tokens, which are the Tron blockchain Equivalent of Ethereum ERC Tokens.

Wrap your token for cross chain trading

So if you want to take advantage of an investment opportunity on another blockchain, where your token is not a native Token, you will need a digital representation of your token, which works on the desired blockchain.
In the case of Steem, we have Project-W, which created Tron TRC Token, which is a digital representation of Steem, which can be traded on the Tron blockchain. This allows Steem token holders to invest in the investment opportunity there.

Example:

You want to invest some of your Steem in Tron DeFi investments like Justswap.
First you need to create a digital representation of your Steem tokens on the Tron blockchain. So you find a place to “wrap” your Steem, like www.projectw.io.
Second your Steem is exchanged for a WST Token, which is a TRC20 token, which can now be invested on the Tron blockchain, in DeFi applications running on Tron blockchain.
Third you could transfer your WST to Uniswap and deposit a dollar equivalent pair of WST and TRX into the WST-TRX liquidity pool. Now you are investing in Tron DeFi with your wrapped Steem.

That’s my deep dive into DeFi Wrapped Tokens.
If you have questions please leave them in the comments!

@shortsegments

Title: Wrapped Steem and Wrapped Bitcoin explained.