The buzzwords of 2021 for investors and traders worldwide were cryptocurrencies, blockchain and its ecosystem. Now, in 2022, the conversation has shifted to an enhanced version called Wrapped Tokens. Simply put, Wrapped Token eliminates the inefficiencies and limitations of existing cryptocurrencies by allowing them to function on different blockchains. So a wrapped cryptocurrency like Wrapped Bitcoin would derive its value from Bitcoin prices but can operate on the Ethereum network.
Wrapped tokens, which can take the form of crypto assets, digital collectibles, stocks, shares, commodities, fiat currencies, and real estate, among others, ensure that non-native assets can be used on any blockchain, thus enabling seamless interoperability . This in turn opens up liquidity and gives investors the opportunity to earn fixed returns made possible by smart contracts.
To understand why it’s slowly becoming a global investor favorite, it’s imperative to understand its benefits.
Decentralized Finance (DeFi) applications have been launched to transition from traditional centralized financial services to their decentralized counterparts. Apps like Compound allow a user to replace banks and provide liquidity in exchange for rewards. It is safe to conclude that Wrapped Crypto was eyed due to the expansion of DeFi for more liquidity and flexibility.
Staking Packaged Crypto
Staking involves earning passive income from the crypto asset without realizing its sale. While several versions of staking protocols are currently in effect, they typically involve the user staking their cryptocurrency into a contract for an agreed-upon time in exchange for rewards. This makes it one of the most well-known DeFi functionalities.
Yield farming packaged crypto
Yield farming is a little different from staking in the sense that farming protocols have shorter retention periods. Additionally, many schemes allow network users to lend their crypto at interest. This makes yield farming another DeFi protocol that continues to gain momentum in the industry.
Wrapped Crypto encourages greater liquidity in the crypto market. Because it combines liquidity with the flexibility of interoperability. Previously, there have been instances where decentralized exchanges and other platforms did not have sufficient liquidity to function optimally, and Wrapped Crypto fills this gap by closing the liquidity loop between many CeFi and DeFi products.
Liquidity and scalability go hand in hand with Wrapped Crypto. Due to the interoperability, the transactions for Wrapped Crypto are cheaper and faster. Because these tokens reside on the Ethereum blockchain, it offers the user more storage options and an increased number of transactions, making scalability another significant benefit.
Needless to say, the scope of Wrapped Crypto offers users more functionality compared to regular Crypto. Smart contracts are considered the core technology of the blockchain sector as they are self-executing pre-programmed protocols.
In a nutshell
These massive benefits for crypto traders have led many investors to embrace the new technology rather than simply acquiring the underlying token itself. This has helped create a new future sector in the blockchain landscape. Over $1.1 billion of Wrapped Crypto is reportedly now in use worldwide, indicating growing adoption. Investors around the world today are seriously considering Wrapped Cryptos as their latest investment. What’s stopping you?
The views expressed above are the author’s own.
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