WRAPPED TOKENS: A BEGINNER’S GUIDE
Wrapped tokens and what they contribute to the Oasis ecosystem: a tutorial for beginners.
What is a Wrapped tokens?
To address this, it’s probably best to start with Bitcoin, the first cryptocurrency ever developed. People keep Bitcoin as a store of value or expect to utilize it in place of actual money, making it one of the most popular and sought after digital assets. Whatever the case, Bitcoin is connected to its own blockchain, making it exceedingly difficult to incorporate it into another blockchain environment without significant alterations; this is where the concept of ‘wrapping’ a coin comes into play.
The original asset, in this example, Bitcoin, is placed in a digital escrow on the Bitcoin blockchain, allowing for the minting of the same amount of “wrapped” Bitcoin on a separate blockchain. WBTC, for example, is a widely used wrapped coin that is a “wrapped” BTC produced on the Ethereum network. The benefit of this “wrapped” BTC is that it can be used with any Ethereum smart contract, protocol, or dApp. Consider the wrapped Bitcoin, WBTC, which has been transformed into an ERC-20 token with a price decided by a smart contract mechanism that replicates its value in real-time.
Wrapped token users receive a comparable amount of value “wrapped up” in an asset that decentralized apps can readily use in return for escrowing the original assets. Furthermore, because a wrapped currency can access the other blockchain, it opens up new possibilities by connecting the liquidity of one chain with the functionality of the other.
Other assets, like as gold, stock, and real estate, can also benefit from wrapping if their values are linked to a blockchain token. This allows the user to trade their asset’s wrapped form on the blockchain.
Wrapping provides a number of advantages, including fractionalized ownership of assets that may be a small fraction of a high-cost stock or fractions of a costly NFT. Users manage their tokens using their own private keys, of course, because the assets are on the blockchain.
Using the blockchain’s capabilities, financial transactions may be settled in real time and with total transparency. Furthermore, because the unit of value may only be transferred once, any concerns with double-spending are eliminated. Anyone using a blockchain explorer may see the entire amount of wrapped tokens and any associated operations, such as minting, burning, one-way transfers, atomic swaps, multi-sig transactions, and so on, offering unprecedented levels of transparency.
Wrapped tokens allow developers to code financial and physical assets using the programmability of smart contacts. Payments or transfers, for example, might be triggered if specific smart contract criteria are satisfied. The smart contract will function autonomously once it is deployed to the network, operating on the logic of its code without the need for intermediaries.
Because there is no need to wait for physical exchanges to open for trade, blockchain transactions are instantaneous and may be carried out 24 hours a day, 365 days a year. Furthermore, the blockchain’s atomic nature ensures that all elements of a transaction, which may include several participants, must be completed in a single transaction or the entire transaction will fail. This eliminates the requirement for reconciliation by allowing for real-time automatic settlement.
Wrapping ROSE tokens
Oasis recently collaborated with Knit Finance to integrate ROSE with the Multichain platform and issue wrapped K-ROSE for cross-chain transactions in order to offer the benefits of DeFi to everyone.
Knit Finance is a decentralized technology that allows traditional and crypto assets to be “wrapped” in smart contracts and insurance, allowing them to be traded across different chains, bridges, and in real-world marketplaces. Knit Finances interoperability, as part of the Polkadot ecosystem, provides DeFi to the people and opens potentially billions of dollars in assets.
Oasis Network’s ROSE token will be incorporated into Knit Finance’s multichain platform as part of this exciting new cooperation, allowing users to take advantage of cross-chain DeFi services and transactions enabled by the ROSE token’s “k” wrapping standard.
Knit Finance is a system that connects different real-world and crypto marketplaces, allowing for easy cross-chain asset fluidity while maintaining assured custody. Knit Finance also allows real-world assets to be incorporated into the DeFi ecosystem, such as equities, gold, and fiat currencies. Knit aims to speed up the shift from centralized to decentralized financial services by providing institutions with these capabilities.