Everything about wrapped tokens - A brief insight!

 

Tokens have emerged as an important class of digital assets with massive adoption across the globe. Digital assets like wrapped tokens are driven by blockchain technology and the token market has experienced exponential growth with the growing interest of crypto enthusiasts. Wrapped tokens can find a valid application with smooth, efficient, and instant movement of funds.

Wrapped tokens – What is the concept of this digital asset?

Holding the value of another crypto, a wrapped token is generally a digital asset put in a wrapper which is a kind of vault that allows the creation of a token on another blockchain. With huge potential Token investment can be beneficial to every crypto investor. A wrapped token represents a value that can be redeemed at any point and represents a digital asset that does not exist on the blockchain that it is issued on.

Key Highlights –

·    Wrapped tokens can be lent or used to provide liquidity in exchanges for fixed earnings.

· Wrapped token holders can reinvest their earnings to earn more from compounding returns.

·     Wrapped tokens are digital assets natively surviving on another blockchain.

·     Wrapped tokens are of two types – redeemable and fiat-settled.  

The wrapped token is quite similar to a stablecoin and derives its value from another similar asset which can be a fiat currency as well. These forms of native tokens can help get past some of the common issues faced with the implementation. Wrapped tokens are counted under a multi-institutional asset tokenization structure that adheres to a centralized approach and relies on a consortium of institutions having different responsibilities in the network.

How does a wrapped token work and what are its benefits?

As depicted by crypto experts of Cryptocurrency exchange development in Kolkata, the minting of wrapped tokens is the same from the technical standpoint. These tokens possess the value of another digital asset and the value will be matched according to the value of the original crypto. Ether, the native currency of Ethereum was the first wrapped token and it was developed to allow users to interact with other ERC-20 tokens. These tokens operate on the Ethereum protocol and are widely used in the Ethereum network where coins are issued within the same framework, and smart contracts are executed to interact with all other ERC-20 tokens.

There are several benefits of wrapped tokens which can be listed as –

·   Asset tokenization: Tokenization of digital assets can help in increasing the speed of transactions and Ethereum blocks are created every 15 seconds. Transaction speed is faster as compared to other assets like Bitcoin and fiat currencies.

·         Increased liquidity: Wrapped tokens are best known for boosting liquidity and recourse uses on decentralized crypto exchanges. There are higher chances of wrapping unused assets for a specific blockchain and linking with a blockchain’s liquidity.

·         Improved transparency: Several pieces of information like, the total number of tokens, creation transactions, removal transactions, number of holders, etc. can be viewed on the public block explorer.

·         Higher security: With full control of the private keys, tokenization gives the users the highest security in the industry. It reduces counterparty risks as the users do not need to hold the keys for transactions on exchanges.

Concluding up, wrapped tokens are one-of-a-kind innovation in the cryptocurrency ecosystem. Companies specializing in Cryptocurrency exchange development in Kolkata say – cryptocurrency holders can consider swapping wrapped tokens with other tokens in the market and earn more from every investment.