Summary
Wrapped XRP is a token pegged to XRP that can be used on blockchains other than the XRP Ledger. Wrapped assets can be redeemed 1:1 for XRP in the custodian's reserve to wrap and unwrap Wrapped XRP.
The price of wrapped XRP is pegged to XRP for arbitrage reasons. When the price of wrapped XRP is high, traders wrap low-priced XRP and sell it as wXRP to drive the price down. If the price of wrapped XRP is low, traders buy wXRP and unwrap it and sell it as XRP, thereby increasing the price of wXRP. In this way, the two tokens establish a stable peg relationship.
Wrapping XRP allows users to use the DApp ecosystem of different blockchains and build a diversified portfolio on the chain. To invest in this asset, buy Wrapped.com's ERC-20 wrapped XRP (wXRP) through Binance. The reserve of wXRP is managed by Hex Trust, a licensed custodian. Users can wrap XRP by signing up for a Wrapped account. Staking wXRP to liquidity pools can provide token pairs for platforms such as Uniswap and Sushiswap.
Introduction
A common cryptocurrency portfolio includes tokens and currencies across multiple blockchains. However, managing and investing in such assets is tricky, especially when blockchains are not interoperable. One way to overcome this difficulty is to bridge various currencies between chains through wrapped tokens. Wrapped versions of Bitcoin (BTC) and Ethereum (ETH) are already commonplace on decentralized finance (DeFi) platforms and exchanges. Now, we have a new wrapped asset available, wrapped XRP (wXRP).
What is Wrapped XRP?
By wrapping XRP, users can use XRP in blockchains other than the native XRP ledger. For example, after wrapping XRP in Ethereum, wXRP can be transferred, pledged, and traded through Ethereum DApps and wallets.
Each wrapped token can be unwrapped and converted to original XRP at a 1:1 ratio. Wrapped tokens are pegged to the price of XRP and reflect XRP's price movements. The token contract wXRP specifically refers to the wrapped XRP created by Wrapped and used in Ethereum. XRP can also be wrapped in other blockchains through other wrapping providers.
How Does Wrapped XRP Work?
To maintain the peg to XRP, all wrapped XRP is backed by a corresponding XRP reserve. When a user wraps XRP, they typically send their tokens to a smart contract that provides wrapped tokens. The XRP is stored and later returned after someone else unwraps the wrapped tokens.
Wrapped XRP is freely convertible to XRP, and the two remain pegged, similar to the relationship between BUSD and the U.S. dollar (USD). When the price of Wrapped XRP is lower than the price of XRP, traders buy the cheap Wrapped XRP and sell it after unwrapping. This arbitrage trade will increase the market demand for Wrapped XRP, reduce the supply, and raise its price to the peg level. If the price of Wrapped XRP is higher than the price of XRP, traders will wrap XRP and sell it. This operation will increase the selling pressure and supply of Wrapped XRP, pushing its price down to the peg level.
Why is XRP wrapped?
Wrapping XRP provides several advantages to XRP holders and users in the target blockchain:
1. After packaging, you can access DeFi protocols and DApps on other blockchains. For example, Ethereum has a large and complete DeFi ecosystem, and XRP holders can stake and use tokens in a whole new way. This advantage creates more use cases for XRP.
2. Investors who only use the Ethereum blockchain can build a diversified portfolio through XRP. Managing assets across multiple blockchains is not only time-consuming, but also usually requires having different cryptocurrency wallets. XRP is a popular large-cap token, and packaging it will attract new users who can access the native token in the blockchain of their choice.
Who is Wrapped? What is Wrapped XRP (wXRP)?
Wrapped is a blockchain project that provides audit wrapping services across multiple blockchains and currencies. The team consists of Tokensoft and its custodians, namely Anchorage, Hex Trust and Coinmetro, who are responsible for pledging the reserves required to wrap tokens.
Wrapped has extensive experience in wrapping tokens and will provide ERC-20 wrapped XRP in Ethereum in December 2021. The reserves of wXRP are held by Hex Trust, a licensed and insured Asian custodian. Users can easily trade tokens on Binance.
How to wrap XRP and unwrap wXRP?
To wrap XRP or unwrap wXRP, users need to create a Wrapped account using Typeform. Wrapped will then contact the user with details on how to convert XRP and wXRP.
In which DeFi apps can wXRP be used?
If you want to invest in wXRP, Ethereum has a wide variety of DeFi DApps to explore. In most decentralized exchanges (DEX), users can join or create a liquidity pool with wXRP trading pairs. Users can provide liquidity and start earning fees from others using the pool to exchange.
However, please remember that if the price ratio of the trading pair changes, impermanent loss will cause your deposit to decrease. A feasible way is to pledge wXRP/wETH and wXRP/USDC trading pairs through SushiSwap. Using established pools with high liquidity can reduce the risk of impermanent loss. Uniswap also runs a pool of funds, and users can join it by holding a trading pair of wXRP and another token.
in conclusion
Wrapped tokens are a great step towards cross-chain functionality and interoperability. Users who are keen on Ethereum DeFi can now try holding and investing in XRP. If you already hold XRP, you have a huge amount of opportunities to explore once you have access to the Ethereum ecosystem. No matter which user group you belong to, be sure to use auditable and trusted wrapped tokens.
