Tuesday, 31 January 2023

Crypto News

What is Wrapped XRP (wXRP), and how does it work?

What is Wrapped XRP (wXRP), and how does it work?

Wrapped XRP (wXRP) is a crypto asset pegged to XRP (XRP) and can be used on blockchains other than Ripple’s native XRP Ledger. Ripple is a blockchain-based global payments system providing crypto solutions for businesses, and XRP is the native currency of the Ripple network. Identical in value, its wrapped version, wXRP, can be used in financial payments and settlements on other blockchains.

This article will discuss why we need wXRP, how to buy wXRP, use cases of wXRP, and the purpose and safety of wXRP tokens. 

What are wrapped cryptocurrencies?

Wrapped cryptocurrencies are tokens that are used as cryptocurrencies on blockchains other than the original blockchain they were built on. The value of wrapped crypto is the same as its original cryptocurrency (1:1). This allows cryptocurrencies like Bitcoin (BTC), Ether (ETH) or XRP to be used on chains other than their native blockchains, thereby increasing their utility. 

The purpose of wrapped cryptocurrencies is to help solve the problem of decentralized finance (DeFi) cross-chain liquidity. If each cryptocurrency stays in its own ecosystem, growth is contingent on demand in that ecosystem alone. It would essentially be operating in a closed system. 

Wrapped crypto solves this by providing blockchain interoperability among different cryptocurrencies and blockchains. This opens avenues for improving cross-chain liquidity for DeFi ecosystems and boosts crypto asset utility. 

Related: Wrapped crypto tokens, explained

What is wrapped XRP (wXRP)?

XRP is a cryptocurrency that runs on the native XRP Ledger and facilitates transactions on the Ripple Network. One can purchase XRP for financing transactions, investing or exchanging crypto on Ripple. For a transaction involving the use of XRP on any other blockchain than Ripple, Wrapped XRP will be used.

Wrapping XRP increases the scope and utility of XRP to be used on multiple blockchains other than its native XRP Ledger. For instance, wXRP on the Ethereum blockchain would enable its users to turn XRP into a yield-bearing asset by trading, staking, pooling or utilizing Ethereum wallets, decentralized applications (DApps), games and more to diversify their portfolio.

Is wrapped XRP (wXRP) the same as XRP?

Wrapped XRP is a 1:1 equivalent of XRP. Its value is pegged to XRP due to arbitrage, similar to a stablecoin like USD Coin (USDC) or Binance USD (BUSD) being pegged to the United States dollar. WXRP is fully collateralized and held with a custodian that makes sure…

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