In brief
Wrapped XRP is an XRP-pegged token that can be used on other blockchains besides the XRP Ledger. This wrapped token can be exchanged for XRP in the reserve at a 1:1 ratio by a custodian, facilitating the wrapping of XRP and unwrap of wXRP. .
The price of wXRP is pegged to XRP thanks to the price difference. When the price of wXRP is higher, traders wrap XRP to create wXRP and then sell it, thereby reducing its price. When the price of wXRP is lower, traders buy and open wXRP for XRP to sell, thereby increasing the price of wXRP. This creates a stable peg between the two tokens.
Wrapping XRP allows you to use another blockchain's DApp ecosystem and diversify your portfolio on that chain. If you want to get started, you can buy Wrapped XRP (wXRP) with Wrapped.com's ERC-20 standard via Binance. wXRP reserves are managed by the Hex Trust, a licensed custodian, and you can start generating wXRP by registering an account with Wrapped. You can use wXRP to stake into liquidity pools by offering it in a token pair on platforms like Uniswap and Sushiswap.
Introduce
A typical cryptocurrency portfolio typically includes cryptocurrencies and tokens across multiple blockchains. However, managing and investing all these assets can be quite difficult, especially when blockchains are not interoperable. One way to overcome this is to use wrapped tokens to connect coins from one chain to another. While wrapped versions of Bitcoin (BTC) and Ether (ETH) are already quite familiar on Decentralized Finance (DeFi) platforms and exchanges, we now have one more wrapped asset. New wrapper to do this: Wrapped XRP (wXRP).
What is wrapped token?
Wrapping XRP allows you to use XRP on blockchains other than its native XRP Ledger. For example, XRP wrapped on Ethereum will allow you to transfer, stake, and exchange wXRP with Ethereum DApps and wallets.
Each wrapped token can be opened and converted to the original XRP at a 1:1 ratio. The wrapped token is also pegged to the price of XRP and reflects its price fluctuations. The token symbol wXRP means XRP wrapped on Ethereum created by Wrapped. XRP can also be wrapped on other blockchains through other token wrapping providers.
How does wrapped tokens work?
To peg the price of nwXRP to XRP, each wXRP is backed by a separate XRP in the reserve. When users wrap their XRP, they must deposit funds to a smart contract, which provides the wrapped tokens. XRP is stored and then returned when someone unwraps their wrapped tokens.
The ability to freely convert between wXRP and XRP is similar to BUSD and the US dollar (USD). When the price of wXRP drops below the price of XRP, traders will buy the cheaper wXRP and open up to sell XRP. This price difference will increase the demand for wXRP and decrease its supply, increasing its price until it reaches the anchor. If wXRP rises above the price of XRP, traders will wrap XRP for sale. This action will increase the selling pressure and supply of XRP, reducing its price until it is at par with wXRP.
Why do we need to wrap XRP?
Wrapping XRP offers several advantages to both XRP holders and users on the target blockchain:
1. Wrapping allows the token to access Defi and DApp protocols on other blockchains. For example, Ethereum has a huge, well-developed DeFi ecosystem, and XRP holders will be able to stake and use their tokens in new ways. This opens up even more use cases for XRP.
2. Investors using only the Ethereum blockchain can diversify their portfolio with XRP. Managing assets across multiple blockchains takes time and often requires different cryptocurrency wallets. XRP is a popular large-cap coin and wrapping will bring it new users who can access the coin right from their chosen blockchain.
Who is Wrapped? And what is the Wrapped XRP (wXRP) token?
Wrapped is a blockchain project that provides validated token wrapping services across multiple blockchains and cryptocurrencies. This team includes Tokensoft and its custodians (Anchorage, Hex Trust and Coinmetro), who are responsible for handling the reserves needed to collateralize the wrapped tokens.
Wrapped has managed a basket of wrapped tokens and has offered Wrapped XRP ERC-20 on Ethereum since December 2021. wXRP reserves are held by Hex Trust, a licensed and insured custodian in Asia, and you can easily trade the token on Binance.
How to wrap XRP and unwrap wXRP?
If you want to wrap XRP or unwrap wXRP, you will need to create an account on Wrapped using this Typeform. Wrapped will then contact you with further details on how you can begin converting your XRP and wXRP.
On which DeFi applications can wXRP be used?
If you are looking to invest your wXRP, there are plenty of DeFi DApps on Ethereum for you to explore. You can join or create a liquidity pool with the wXRP pair on almost any Decentralized Exchange (DEX). By providing liquidity, you can receive fees from swap users when they use the liquidity pool.
However, do not forget that temporary losses can lead to a decrease in your deposited amount if the price ratio of the currency pair changes. Additionally, you can stake via SushiSwap with wXRP/wETH and wXRP/USDC pairs. Using an established pool with more liquidity can reduce the risk from temporary losses. Uniswap also has running pools that you can participate in with wXRP and another token in a pair.
summary
Token wrapping is an innovative step in improving cross-chain functionality and interoperability. If you are a DeFi enthusiast on Ethereum, right now you have the opportunity to experiment with holding and investing in XRP. If you are an XRP holder, there are plenty of opportunities for you to explore once you have access to the Ethereum ecosystem. No matter which group you fall into, make sure to use a trusted wrapped token that can be audited.
