The crypto world consists of several blockchains and different cryptocurrencies running on them. These blockchains are in no way related to each other. You can’t use BNB (BEP-20) on the Ethereum chain and ETH (ERC-20) on the BNBBNB chain.
That is when the wrapped tokens come to the rescue. Now let’s dive deeper into the details and find out why wrapped tokens are useful.
The Wrapped Tokens Explanation
A wrapped token allows a native asset from one blockchain to be transferred to another. It makes the interaction between blockchains easier and faster.
The price of a wrapped token is always equal to the native token’s price. For example, WBNB will cost as much as BNB.
Here are some main benefits of using wrapped tokens:
💵Use of non-native tokens on different blockchains.
💵Increased liquidity and capital efficiency.
💵Reduced transaction time and fees.
Discover How They Work
Let’s take BNB and WBNB as an example. “Minting” and “burning” are the processes that create and destroy wrapped tokens.
💰The “Wrap Up” Process
Beforehand, we’ll review the process of minting or “wrapping” a token.
For minting, a custodian receives the underlying asset, for example, BNB, and stores it in a digital vault. A similar amount of WBNB can be created after the underlying BNB has been locked away.
As a result, the current asset is “wrapped up” in a digital vault using a smart contract. Once wrapped, the asset is minted for use on another blockchain.
🔥The “Unwrap” Process
The burning wrapped tokens process is about “unwrapping” the underlying asset.
From WBNB to WETH, all wrapped tokens are backed by an equivalent amount of their underlying currencies through this minting and burning, or “wrapping” and “unwrapping” process. It means that for every 100 WBNB that has been minted, 100 BNB are being held to back the value of the wrapped token.
Steps of Wrapping a Token
1️⃣User transfers a certain amount of original BNB to the BNB Chain custodian addresses.
2️⃣The original BNB is locked by a custodian.
3️⃣Custodians mint BEP-20 tokens with the equivalent number of real BNB and hold them in custody.
4️⃣The user requests that the wrapped token can be converted back into the original token.
More About Wrapped BNB
As you can understand now, WBNB is a wrapped version of BNB. It was created to improve the BNB Chain interaction and minimize cross-chain transactions’ limitations.
BEP-20 is a standard version of BNB Chain that allows it to be used by other apps. Wrapped BNB uses it to simplify transfers between chains.
The interactiveness that WBNB offers make it unique, as the BNB Chain development team created wrapped BNB as a more functional token than its original.
WBNB can interact with complex decentralized applications and rely on multiple smart contracts to extend the token’s functionality.
Use WBNB on Biswap
Biswap Dex uses WBNB on the BEP-20 network, BNB Chain. So, BNB (BEP-2) tokens need to be wrapped (become WBNB).
You may wrap BNB to WBNB fast and easily by making a swap on the Exchange tab 👉https://bit.ly/3yey1Ea
Once your BNBs are wrapped, you can explore Biswap’s passive income possibilities via:
💰Biswap Fixed Staking
Stake & earn WBNB and explore the benefits:
- Fixed APY up to 20%
- No impermanent loss
- Lucrative rewards daily
There are diverse lock term duration: 30, 60 and 90 days.
Try it here: 👉https://biswap.org/fixed_staking
💰Farms with High APY
Firstly, take these steps to start:
- Provide liquidity to the chosen Farm pair with WBNB
- Get LPs & stake them to enable Farm
- Get our mighty BSW token
Go to the Biswap Farms to earn more crypto: 👉https://biswap.org/farms
To Sum Up
The wrapped tokens are the assets that make interaction and transactions in the DeFi world easier. You can transfer them between different blockchains. There are several benefits of using these tokens, such as increasing liquidity and reducing fees and transaction time.
Biswap offers profitable opportunities with wrapped tokens. Hurry to visit our website to try them all!
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