What is a Wrapped Coin? (WETH, WBTC, DwETH)
Introduction
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1. What is a Wrapped Coin?
1-1. Basic Concept of Wrapped Coin
Today, we’re diving into Wrapped Coins!When you hear the word "wrap," you might think of plastic wrap—like Saran Wrap. And guess what? That image is actually correct! 😆
A Wrapped Coin is a token that represents a cryptocurrency (such as BTC or ETH) on a different blockchain, making it usable in that ecosystem.
At first, this concept might sound complicated, but don’t worry! I’ll break it down with clear examples to make it easy to understand. Let’s get started! 🚀
1-2. "Wrap" Explained Using the Image of Winter Tires
Understanding Wrapped Coins is easier when you think of winter tires (snow tires)!For example, if you try to drive on a snowy road with regular tires, your car might slip, making it difficult to move safely. However, by attaching snow tire covers, your car can drive smoothly on icy roads.
In the same way, assets like ETH or BTC may not function properly in certain blockchain networks or services. That’s where Wrapped Coins come in! By "wrapping" these assets, they are converted into a compatible format that allows them to be used seamlessly in specific environments.
For instance, ETH (Ethereum) itself cannot be used directly in some DeFi protocols or dApps that require ERC-20 tokens. However, when ETH is wrapped into WETH (Wrapped ETH), it becomes an ERC-20 token, making it compatible with various services.
Wrapping is a powerful innovation that enhances blockchain interoperability and expands the usability of crypto assets! 🚀
💡 The mechanism of Wrapped Coins works the same way!
By converting ETH (Ethereum) into the ERC-20 format (WETH), it can be freely used in DeFi protocols and NFT marketplaces on the Ethereum network.
By wrapping BTC (Bitcoin) into WBTC, it can be utilized for lending and liquidity pools on Ethereum.
By wrapping ETH into DwETH (DIVER Wrapped ETH), you can retain ETH’s value while using it seamlessly on the DIVER Chain!
How does that sound? If you’re starting to get the idea, let’s move forward! 🚀
As you start using it hands-on, everything will gradually make more sense!
2. Major Types of Wrapped Coins
2-1.💡 What is WETH (Wrapped Ether)?
As mentioned above, WETH (Wrapped Ether) is a token that wraps ETH (Ethereum) into the ERC-20 token format.
While ETH is the native currency of the Ethereum network, it does not follow the ERC-20 standard, which makes it difficult to use directly in smart contracts and DeFi applications.
To solve this issue, WETH was created—an ERC-20 compatible version of ETH that can be seamlessly used in DeFi platforms like Uniswap, Aave, and NFT marketplaces like OpenSea.
By converting ETH into WETH, users can interact more efficiently with various DeFi and NFT services, unlocking greater functionality within the Ethereum ecosystem! 🚀
For those interested in the technical details, feel free to explore further!
2-2. WBTC（Wrapped Bitcoin）とは？💡
WBTC (Wrapped Bitcoin) is an ERC-20 token that allows Bitcoin (BTC) to be used on the Ethereum blockchain.
Normally, BTC cannot be directly utilized in Ethereum-based smart contracts or DeFi (decentralized finance) applications.
By converting BTC into WBTC (an ERC-20 token), users can leverage Bitcoin in Ethereum’s DeFi ecosystem, including:
DEXs (Decentralized Exchanges)
Lending platforms
Staking protocols
Liquidity pools
This enhances Bitcoin’s utility, making it compatible with Ethereum-based financial applications while maintaining its 1:1 value with BTC! 🚀
2-3. What is DwETH (DIVER Wrapped Ether)?
Just like the examples above, DwETH (DIVER Wrapped Ether) is a Wrapped Coin that allows ETH (Ethereum’s native currency) to be used on the DIVER Chain.
ETH is the native asset of the Ethereum network, but it cannot be used directly on DIVER Chain.
By wrapping ETH into DwETH, users can fully utilize ETH’s value within DIVER Chain’s DeFi ecosystem and NFT marketplaces. This makes ETH more flexible and usable across different blockchain environments.
For those interested in the technical details, feel free to explore further! 👇
2-4. Additional Info: What is an ERC-20 Token?
💡 What is an ERC-20 Token?
Since we've mentioned ERC-20 tokens multiple times while explaining Wrapped Coins, let’s briefly go over what they are!
An ERC-20 token is a set of rules for creating digital assets (tokens) on the Ethereum blockchain.
In the Ethereum ecosystem, anyone can create different types of cryptocurrencies, but if each token followed a different set of rules, it would be difficult for wallets, exchanges, and DeFi applications to support them.
To solve this problem, a universal standard was introduced:
💡 "If all tokens follow the same rules, they can be used seamlessly across various services!"
This standard is known as "ERC-20."
(A deeper explanation of ERC-20 tokens would be quite long, so we’ll keep it simple for now!) 🚀
3. Summary
Wrapped Coins (such as WETH, WBTC, and DwETH) are an essential technology for utilizing assets across different blockchain networks.
As you continue learning about cryptocurrencies, the concept of wrapping will come up frequently, so take this opportunity to understand it well! 🚀