What makes DeFi complete? Explore Wrapped Tokens in the GT Ecosystem.

Still #1

7 min readAug 24, 2022

A recent Forbes Advisor research places Gate.io in a #1 position as the best cryptocurrency exchange available for the UK traders and investors.

https://www.forbes.com/uk/advisor/investing/cryptocurrency/best-crypto-exchanges/

Gate.io was also listed in the top10 world’s best exchanges by Forbes Advisor at the end of 2021.

https://www.gate.io/article/21047

While Gate.io has got its fair share of recognition around the world, the GateChain ecosystem has grown exponentially.

This is one of the perks of using GT as the native Gate.io token.

In addition, thanks to a diversified ecosystem, and a great team, GT is being setup to a direct course to succeed.

(N.B. — Gate.io is hiring. More details at the end of this article)

The Road To Success

The GT road to success is being paved by a combination of new on-chain built projects and partnerships, along with the power of DeFi which is reflected strongly through Hipo.com and the GateBridge.

Taking into consideration the vast amount of existing Blockchains and DeFi projects, we can safely state that GateChain has put all the puzzle pieces together and is offering you a unique experience thanks to Hipo.

HipoDefi makes DeFi complete by bringing a safe and practical environment for traders and investors.

HIPO.COM

Hipo DeFi was build in an open multi-chain ecology and its purpose is to allow users to enjoy cross-chain transactions on the most popular chains.

But the real power behind the HipoDefi platform truly shines in its ability to aggregate data on the rise and fall from different projects and trading pairs from various blockchains.

It helps investors follow and understand the overall market with only one click.

These are some of the reasons why Hipo.com is considered the only, all-in-one, DeFi platform for many.

If you are already familiar with DeFi, then you will know the possibilities it holds and you would be familiar with some DeFi specific products such as Farming, Trading, NFTs, Wrapped Tokens and so on.

This article will single out Wrapped Tokens on HipoDefi and will spotlight some important must know aspects.

But let’s start from the beginning!

What are Wrapped Tokens?

Wrapped tokens are considered cryptocurrencies that can be traded at the same price of the initial cryptocurrency but on a different blockchain.

To make this explanation more clear we can take as example the traditional BTC and the newer wBTC (wrapped BTC) traded as an ERC20 token on the ETH blockchain.

Even though the ERC20 is the standard, the ETH token is no stranger to the wrapping process. Because ETH was created before the ERC20 standard we now have a wETH(wrapped Ethereum) version as well.

Wrapped tokens are pegged at a 1:1 ratio by their underlying asset, which in most cases is stored on a custodial vault.

Having wrapped tokens around, helped increase interoperability between different blockchains.

How do wrapped tokens work?

Wrapped tokens came into existence through a process called “minting”.

It involves a decentralized method that generates a new token without the help of the government or banks or any other type of centralized authority.

During the minting process the initial token (Ex. BTC) is sent to a custodian wallet which stores it in a blockchain vault(Ex. GateChain).

Once the initial token is being locked in the vault, its equivalent will be released in the wBTC form and it will be ready and suitable for the intended blockchain.

To burn and dispose of the wBTC excess in order to keep the peg at the 1:1 ratio, some wBTC are removed from circulation by a process called “burning”.

Burning a token implies that a token has been completely removed from circulation and will not be recovered, therefore reducing its supply.

Once the wBTC token is burnt, the initial BTC is released from the vault and placed back into circulation.

Pros & Cons

Pros: 1.One of the pros of using wrapped tokens is of course interoperability where non-native tokens can be traded or swapped on any other blockchain.

HipoDeFi includes a various number of blockchains and trading opportunities when it comes to wrapped tokens and DeFi in general.

2. Another advantage is the liquidity boost from popular blockchains leaking into newer ones such as different startups or other ‘isolated’ and less popular blockchains.

This, creates opportunities for investors and traders by activating the true meaning of DeFi which is, in my opinion:

Having the possibility of a decentralized fundraising and giving a chance to newer technologies to thrive without an over-selective centralized conductor.

3.Having the possibility to use wrapped tokens helps increase the transaction speed, for example in the case of BTC where transactions are slow, once wrapped on GateChain the transaction speed will increase considerably.

4. The biggest advantage however is actually having wrapped tokens on HipoDefi.

Hipo can track the best available prices for you, it does not require high gas fees($GT) and can help you reduce impermanent loss.

Low fees, low risk and automated price matching makes Hipo.com one of the most important DeFi platforms in the world.

Now let’s keep it real and mention a few cons as well.

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Cons: Just like any other technology in use, Wrapped Tokens do have certain limitations attached. Here are a few examples:

The most popular wrapped tokens on the market are entrusted to a custodian vault.

This could be an advantage if the vault is a GateChain vault since GT can provide Multi-Sig security and reversible transactions.

Unfortunately this option is not available for other Blockchains, therefore imposing limitations on wrapped token security.

2. Minting wrapped tokens could involve high gas fees as seen in the case of the ERC20 tokens.

3. Another limitation is the traditional risk of automation which could lead to an erroneous user or transaction.

That is why ‘DYOR’ is a healthy crypto habit. It helps the user understand if a project or platform is a suitable investment.

To learn more about how to DYOR go here:

https://www.gate.io/learn/articles/How-to-Do-Your-Own-Research-DYOR/35

4. Certain non-custodial platforms might also require extra collateral assets when minting wrapped tokens.

They do so in order to prepare the platform for possible black-swan type of events where liquidity could be affected by a big market crash.

Wrapped tokens on the GateChain ecosystem:

On the GT ecosystem, wrapped tokens “swim” in pools with enough liquidity and secure transaction protocols.

On hipo.com alone, transactions have long over passed the $737,660,000,000 milestone thanks to our active users that have been supporting DeFi since day1.

While, many love DeFi and prefer to swap or trade wrapped tokens on Hipo or Gatebridge there are also those who prefer the centralized services on Gate.io.

This is the beauty of being part of the GateChain community:

Having an abundance of choices, opportunities and free tools at your disposal 24/7.

Did you know?

1. On January the 14 of 2021, CMC(CoinMarketCap) listed the market cap of the wBTC(wrapped bitcoin) at 432 quadrillion USD, an equivalent of over 1,000x of the entire wealth of the world; fact checked according to an article from the Financial Times. It was an error that lasted a few moments and was corrected within a reasonable delay. https://www.ft.com/

2. ETH’s founder, Vitalik Buterin, appeared to have some pessimistic concerns related to cross-chain applications which involve wrapped tokens as well.

However he felt optimistic about a multi-chain blockchain ecosystem:

“The fundamental security limits of bridges are actually a key reason why while I am optimistic about a multi-chain blockchain ecosystem (there really are a few separate communities with different values and it’s better for them to live separately than all fight over influence on the same thing),

I am pessimistic about cross-chain applications.”

Read the full text here:

https://old.reddit.com/r/ethereum/comments/rwojtk/ama_we_are_the_efs_research_team_pt_7_07_january/hrngyk8/

3. Wrapped tokens have created new arbitrage possibilities.

Some users seek platforms like hipo.com where they can buy wrapped tokens for lower prices thanks to the automated and end up selling the tokens on other platforms at a much higher price.

What do you think about wrapped tokens and have you minted any yet?

Are wrapped tokens here to stay?

Do you know about other wrapped tokens such as wFil, wSol, wDOT, or other ?

Please let us know in the comment section.

Put your Crypto Knowledge to Good Use:

If you are already familiar with wrapped tokens and have already acquired a solid base of crypto knowledge, why not make that work to your advantage!

Gate.io is presently recruiting and is also scouting talented influencers. There are also chances to join the Gate world through fruitful internships.

Working with Gate comes with many advantages and rewards.