The cryptocurrency space has gotten just a little bit more interconnected after developers created a cross-chain bridge between the Ethereum and Tezos blockchains. Following the launch of the WRAP protocol, created by Bender Labs, Ethereum-based ERC-20 and ERC-721 tokens can be made Tezos compliant, allowing ETH holders to interact with the Tezos ecosystem.
Token wrapping has become a common way of connecting the users of disparate blockchain platforms, and is perhaps best illustrated by Wrapped Bitcoin (WBTC), an ERC-20 version of Bitcoin (BTC) running on Ethereum.
The WRAP protocol packs Ethereum-based tokens into Tezos’ FA2 token standard, meaning they can be used as 1: 1 display without any technical issues or price differences.
Like Ethereum, Tezos has its own decentralized financial ecosystem. Unlike Ethereum, which will have to wait about a year before switching to a Proof-of-Stake consensus algorithm, staking on Tezos is already widely available, giving Ether (ETH) holders a viable early opportunity to earn some passive income to earn.
Users of the WRAP protocol participate in its management through the use of the WRAP token, which is compatible with both Tezos and Ethereum and works on both the FA2 and ERC-20 infrastructure.
Wrapped Bitcoin’s success can be seen in its $ 8 billion market cap, which represents the value of BTC hosted on Ethereum. It is currently the fifth largest Ethereum token behind Tether (USDT), Uniswap (UNI), Chainlink (LINK) and USD Coin (USDC), and the 19th largest cryptocurrency project overall. Just under $ 200 million worth of WBTC is currently on Ethereum’s most popular DeFi protocol, Uniswap.
Temporarily converting tokens to other blockchains is also a way to avoid high costs if the original chain is subject to excessive transaction costs. This may have been the case for WBTC at one point, when Ether fees were only a fraction of those on Bitcoin. This is no longer the case due to Ethereum’s increasing user base and subsequent congestion, which resulted in extravagant transaction costs as average fees exceeded $ 30.
Recent blockchain statistics from Tezos show that transactions worth more than $ 1 million are sent for between $ 0.01 and $ 0.15, suggesting a possible immediate use case for the WRAP protocol. However, it faces competition from layer 2 protocols that already meet this use case for Ether users.
Hugo Renaudin, CEO of Tezos, said code-based blockchain infrastructure was more beneficial to legacy financial systems because of its transparency and immutability, adding that he saw Bender Labs’ work as creating an autonomous bank.
“We are building Bender: a self-managing bank for an open financial system, because we believe that financial markets should be open, transparent and unstoppable and above all should rely on lines of code instead of intermediaries,” says Renuadin.