The buzzwords of 2021 for investors and traders, globally, were cryptocurrencies, blockchain, and their ecosystem. In 2022, the conversation has now shifted to an advanced version called Wrapped Tokens. Simply put, Wrapped Token eliminates the inefficiency and limitation of existing cryptocurrencies by permitting operability on different blockchains. So a wrapped cryptocurrency like Wrapped Bitcoin would derive its value from Bitcoin prices but can operate on the Ethereum network.
Wrapped tokens, which could be in the form of crypto assets, digital collectibles, equities, stocks, commodities, fiat currencies, and real estate, among others, ensure that non-native assets can be used on any blockchain and can thus allow seamless interoperability. This, in turn, opens up the liquidity and gives the investors the scope to earn fixed income enabled by smart contracts.
In order to understand why it is slowly becoming an investor favourite, globally, it is imperative to understand its advantages.
Decentralised Finances (DeFi) applications were launched to transition from the traditional centralized financial services into their decentralized counterparts. Apps such as Compound enables a user to replace banks, as well as, provide liquidity against rewards. It can be safely concluded that Wrapped Crypto was envisaged due to the expansion of DeFi for greater liquidity and flexibility.
Staking involves earning a passive income from the crypto asset without realizing its sale. While there are currently multiple versions of staking protocols in effect, it typically involves the user putting up their cryptocurrency into a contract for an agreed time in exchange for rewards. This makes it one of the most renowned DeFi functionalities.
Yield farming-wrapped crypto
Yield Farming is a little different from staking in the sense that the farming protocols have shorter lockup periods. Further, many systems allow the network users to lend out their crypto with interest. This is making Yield Farming another DeFi protocol that continues to gain momentum in the sector.
Wrapped Crypto promotes higher liquidity in the crypto market. This is because it amalgamates the liquidity with the flexibility of interoperability. Previously, there were instances where decentralized exchanges and other platforms did not have adequate liquidity to operate optimally and Wrapped Crypto plugs that gap by closing the liquidity loop between many CeFi and DeFi products.
Liquidity and scalability go hand in hand with Wrapped Crypto. Owing to the interoperability, the transactions for Wrapped Crypto and more economical as well as swifter. Since these tokens exist on Ethereum’s blockchain, it provides the user with more storage options and an enhanced number of transactions, making scalability another significant advantage.
Needless to say, the scope of Wrapped Crypto provides users with more functionality compared to regular Crypto. Smart contracts are considered a core technology of the blockchain sector due to them being self-executing pre-programmed protocols.
In a nutshell
These massive benefits for crypto traders have led to many investors using the new technology instead of simply acquiring the underlying token itself. This has helped in creating a new sunrise sector in the blockchain landscape. According to reports, there are now over $1.1 Billion in Wrapped Crypto in use globally, indicating its growing adoption. Investors, today, globally, are seriously considering Wrapped Cryptos as their latest investment. What’s stopping you?