Tuesday, June 6, 2023


by Hideo Nakamura

Wrapped Tokens (also known as Wrapped Coins or WTokens) are a type of cryptocurrency asset that is created to allow users to exchange one cryptocurrency for another without needing to use traditional exchanges. These tokens provide a bridge between different blockchains and platforms, allowing users to easily switch between different types of coins. The most common form of wrapped token is the ERC20-based wrapper, which allows Ethereum-based coins such as Bitcoin, Litecoin and Dogecoin to be exchanged on the Ethereum network.

To create a wrapped token, an issuer must first deposit the desired amount of coin into a smart contract on the blockchain they wish to wrap them in. This creates a digital representation of the deposited currency known as an “ERC20 Token” which can then be traded on any platform that supports it. For example, if someone wants to trade their Bitcoin for Etherum (ETH), they would send BTC into an ERC20 wrapper contract on Ethereum and receive ETH back within minutes – all without having to leave their wallet or make any other transactions with traditional crypto exchanges!

The benefits of using wrapped tokens include faster transaction times than those experienced when trading directly through exchanges; increased liquidity due to more traders being able access multiple markets at once; improved security by avoiding putting funds in custodial accounts; lower fees associated with decentralized exchanges; and additional features like automated market makers providing price discovery services across different chains. Additionally, since these tokens exist independently from any particular platform or network, they can often be used outside their native environment – enabling cross-chain swaps amongst various currencies even if they don’t have direct support from each other’s networks!

In conclusion, wrapped tokens offer users greater flexibility when exchanging cryptocurrencies while also improving both transactional speed and security over conventional methods such as centralized exchanges. Although this technology is still relatively new compared with other forms of digital assets such as stablecoins or non-fungible tokens (NFTs), its potential applications are vast – ranging from facilitating interchain trades among disparate blockchains all way up building entire financial ecosystems around themselves!

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