This picture will be mintable soon
Koen van Schaijk
Koen van Schaijk

Wrapped XRP

On October 29, 2021, announced that they will officially be supporting Wrapped XRP (wXRP) on the Ethereum blockchain. In collaboration with Hex Trust, one of Asia’s leading digital asset custodians, users will be able to use wXRP, backed 1:1 by XRP, on the Ethereum DeFi ecosystem. 

According to Mason Borda, CEO of Tokensoft, Inc., the driving force behind Wrapped, the new connectivity will give XRP users access to several DeFi applications – be it for borrowing and lending, swapping, or for use in automated market makers (AMMs) – unlike the native XRP token.

In a tweet posted at the beginning of November, David Schwartz, Ripple’s CTO, claimed that wXRP would be “multichain.” While Ethereum remains to be the blockchain of choice for launching wrapped cryptocurrencies right now, its notoriously high gas fees have caused some controversy among its users and crypto enthusiasts. During congested times, gas prices rise to exorbitant highs of hundreds of dollars for smart contract executions. These transaction fees stand in stark contrast with the ones on the XRPL, which are nearly zero. Multichain integration could enable users to wrap their XRP on chains that have far lower gas prices. 

SushiSwap Yield Farming

One aspect that perhaps people have overlooked with the wXRP launch on Ethereum is the yield farms and liquidity pools that have been created. One of these is the wXRP/USDC farm on SushiSwap. The farm originally seemed quite promising with an APY of 520% and a total value locked (TVL) of approximately $250,000 back in December. However, it was unfortunately too good to be true… The APY currently stands at 5.26% with a TVL of $869,000.

While the rewards of the yield farm are not paid out in XRP (namely in SUSHI and WRAP tokens), XRP holders have notoriously little staking or interest-bearing options for their tokens, which is why these yield farms pose interesting investment opportunities with little risk.

Wrapped Cryptocurrency: Cross-Chain Interoperability Potential

The biggest challenge to blockchain interoperability is that so many blockchains are out there, none of which speak the same “language.” For starters, many complex ecosystems come with varying levels of smart contract use. Transaction schemes and consensus models in these projects also differ a great deal, which makes connecting them even more complicated.

To overcome some of the underlying issues with cross-chain interoperability, we need to turn to technology that enables universal communication between various blockchains. Open protocols and multichain frameworks have been touted as possible solutions to blockchain interoperability issues. 

Wrapped XRP, and wrapped cryptocurrency in general, are the next steps in cross-chain interoperability, allowing users to spend tokens native to one blockchain on another. Ultimately, the aim is to reach full interoperability between blockchains, which is expected to bring enormous numbers of new use cases and real-life applications.

Koen van Schaijk
Koen van Schaijk