Tech startup Bender Labs has launched Wrap Protocol (WRAP), a decentralized bridge that allows transferring ERC-20 and ERC-721 tokens between the Ethereum and Tezos blockchains, according to an announcement shared with Decrypt today.
Bridge protocols allow the transfer of tokens outside of their native blockchains by “wrapping” them. The tokens are locked on the blockchain, with the corresponding amount of wrapped tokens appearing on another network.
Notably, wrapped tokens are designed to retain all characteristics of the “originals,” including price. For example, one Wrapped Ethereum (WETH) can always be redeemed for one regular Ethereum (ETH) locked on the native blockchain.
Bender Labs’ Wrap protocol enables users to transfer the two most popular Ethereum token standards into FA2 tokens on the Tezos blockchain. ERC-20 is the technical standard on which the majority of popular Ethereum tokens are based, including Uniswap (UNI), Chainlink (LINK), Maker (MKR), DAI, and many others.
Users will earn $WRAP based on their wrapping activity. $WRAPs corresponding to 1⃣ week of activity will be distributed 1⃣ month later. Check out the $WRAP allocation between the different wrapped assets below#BenderLabs #WRAP #DeFi #Tezos @tezos #12DaysOfWrap @TezosCommons pic.twitter.com/aKJS0lBezA
— Bender Labs (@BenderLabs_) April 23, 2021
ERC-721 is the standard for the wildly popular non-fungible tokens (NFTs), cryptographically unique tokens that can be used to represent digital content such as art and music. Unlike most tokens, NFTs are non-interchangeable, meaning that they can be used to create scarcity for digital content.
To transfer Ethereum-native tokens to the Tezos blockchain, Bender Labs’ WRAP protocol creates “wTokens”—representations of ERC-20 and ERC-721 tokens. While the value of wTokens is pegged to the original assets, they can be freely used within the Tezos ecosystem.
“At the center of WRAP is the $WRAP token, which is both an ERC-20 and an FA2 token,” the developers explained.
Greener DeFi pastures
Per the announcement, one of the main use cases for transferring Ethereum tokens to other blockchains is the rapidly growing and popular decentralized finance (DeFi) sector. The lion’s share of DeFi business is conducted on Ethereum—but issues such as skyrocketing transaction fees and concerns over the environmental impact of its proof-of-work blockchain are prompting users to look for alternatives.
According to crypto metrics platform BitInfoCharts, average transaction fees on Ethereum peaked at over $30 last week—regardless of the amount being transferred. This means that while “whales” can easily transfer thousands or even millions of dollars worth of crypto for a fraction of the cost, it’s becoming increasingly impractical for users to make small transactions.
Additionally, unlike Ethereum’s computationally and energy-intensive proof of work consensus algorithm, Tezos uses proof of stake, which doesn’t require massive amounts of electricity or high-end mining rigs to validate transactions.
“Wrap Protocol is positioned to be a core element of the paradigm shift of decentralized finance and the widespread adoption of an open financial system running on public blockchains,” Bender Labs concluded.
Last December, Tezos development group StableTech also launched wrapped Ethereum tokens, allowing the value of ETH to be transferred to the Tezos blockchain.
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