Wrapped, like a burrito
When we are served a Mexican burrito, we can see how the wheat tortilla is necessary to wrap the delicious filling that is certainly the essence of the burrito, which determines its value and quality. Thus, the tortilla is the support that allows everything inside to stay together and work and, above all, be easily transportable so that we can eat and enjoy our burrito anywhere.
Separate culinary comparisons, in the present moments we are experiencing a boom of so-called wrapped tokens, whose popularity has helped boost the DeFi (Decentralized Finances) ecosystem. Today there are already many types of DeFi services, such as decentralized exchanges, payment networks, key infrastructure development, investment engines, stablecoins, and more. Certainly, the decentralized financial ecosystem is proliferating and in clear growth.
To be able to operationalize the above it is necessary that liquidity is available and that the largest number of cryptocurrencies are involved to be a dynamic and agile ecosystem. But there is one drawback and is that the currencies that exist on a given blockchain cannot be simply transferred and used in another, so wrapped tokens are a way to circumvent this limitation and be able to use non-native assets on one blockchain because in DeFi interoperability is essential.
Let’s remember that there are currently a wide variety of active DeFi platforms, running mainly on the Ethereum blockchain, which stands as the most important blockchain for the DeFi movement.
So, what is a wrapped token? A wrapped token is a crypto token pinned to the value of another crypto, that is, it is a tokenized version of another cryptocurrency that does not live natively on the issuing blockchain. It is called a wrapped token because the original asset is placed in a “wrapper”, a kind of digital chest that allows the “wrapped” version to be created on another blockchain, and can be redeemed by it (“unwrapped”), at any time.
Wrapped tokens can then increase liquidity and capital efficiency for both centralized and decentralized exchanges. The ability to wrap inactive assets and uses them in another chain can create more liquidity connections than would otherwise be isolated.
It should be noted that wrapped tokens typically require a custodian, that is, an entity that saves an amount of the asset equivalent to the “wrapped”. This custodian can be a merchant, a multi-sig wallet, a DAO, or even a smart contract.
A perfect example that illustrates all this new panorama very well is the recent partnership made by the Divi Project and its DIVI currency with liquid staking enabler StakeHound who will deploy a wrapped token version of the DIVI coin with the ticker stDivi on the Ethereum network, to allow DIVI coin holders to reap the rewards of decentralized finance by now having the opportunity to participate in various DeFi mechanisms, from liquidity extraction and arbitration, to microcredits and betting.
This new token will represent DIVI wagered in a one-to-one ratio, which takes into account bet rewards earned for coins allocated for stDivi.
With the entry into DeFi and the next launch of your mobile wallet, certainly, the Divi Project is living a great moment. The partnership with StakeHound is an important element in DIVI’s mission to make cryptocurrencies easy, and work to help provide a new standard of financial services that is truly decentralized and accessible to everybody. This will undoubtedly be reflected in the increase in the value of the currency in the market, which is a must-see investment opportunity.
As a liquid participation enabler, StakeHound provides DIVI users with a bridge to access both DeFi and staking benefits and eliminates the requirement of lock-up or high minimum participation and the binary option between earning staking rewards and liquidity rewards.
By removing barriers to entry, innovating in new technologies without friction, and providing use cases for the developed and developing world, DIVI is helping people around the world participate in cryptoeconomics and achieve financial freedom and inclusion.
Everything DIVI does is at the service of its vision: the delivery of a new paradigm for financial services, one that is truly decentralized, accessible to all and works for all.
For more information, visit: www.diviproject.org