We often hear about tokens wrapping (and even more with tron sharkdefi), but we doesn't go deeper, for looking at the background. So, let's learn about wrapped tokens !
Putting a coin, but on another chain
The concept of wrapped coins/tokens is very sample : putting coins on other chains. For example, it allows using Bitcoins on Ethereum or Tron DeFi, and instead of having to sell them.
Since wBTC, concept was often reused, with for example :
- Solana, that allows wrapping bitcoin and ether for enjoying low-fee blockchain
- Harmony, that allows wrapping almost any erc20 token
- Binance wraps so much assets for putting them on binance chain and smart chain
- Tron's SharkDeFi
How does it work ?
For correctly wrapping tokens, there should be a vault/custody that will store deposited assets.
For example, if you wrap 1 BTC (it means u're very rich) on Ethereum blockchain, your bitcoin will be sent to a custody, then a wBTC will be minted. If you want to unwrap this wBTC, you will send it (it'll be burned) to wrapper, and one BTC will be taken from custody.
So, in-custody amount should be equal (or over xD) circulating supply of wrapped tokens, else peg isn't full and could lead to big problems in case of massive unwrap (like a good old bank run).
How to start wrapping tokens
Wrapped tokens are so useful, so I'll tell you how to enjoy their power.
wBTC on ethereum
You can use a verified custody like BitGo or Coinlist !
Wrapping on binance Chain and Smart Chain
For wrapping tokens on Binance Chain (with a binance account)
- Register on binance (my ref link gives u 10% off on trading fees)
- Deposit ur coins binance
- Withdraw them using binance chain or binance smart chain withdrawal method
For wrapping tokens on Binance Chain without binance account
- Go to binance bridge
Wrapping on Tron
For wrapping coins/tokens on Tron using Poloniex
- Register on poloniex
- Deposit your coins on poloniex
- Withdraw them using trc20 method
If you want to unwrap tokens, only deposit your wrapped assets and set WD method to mainnet
For wrapping coins/tokens on Tron using KuCoin
- Register on KuCoin
- Deposit your coins on KuCoin
- Withdraw them using trc20 method (KuCoin withdrawal fees are higher than poloniex ones, be aware of that)
If you want to unwrap tokens, only deposit your wrapped assets and set WD method to mainnet
