What is Wrapped Ether (wETH)?

Wrapped ether (wETH) is a tokenized version of the ether (ETH) cryptocurrency. Wrapped tokens are pegged to the value of the original coin or token at a rate of 1:1 and can be unwrapped or converted back at any time.

The concept is similar to that of stablecoins, which are pegged to the value of the U.S. dollar or another currency. Almost every major cryptocurrency has a wrapped version, including ether, bitcoin (BTC), BNB, and AVAX. The only costs involved are the transaction fees.

The Ethereum blockchain is the first popular smart contract platform for developers to build decentralized applications (dApps). As the blockchain ecosystem has expanded, the need for interoperability between different blockchains and decentralized platforms has given rise to the concept of wrapped tokens such as wrapped Ether.

Wrapped tokens were designed to facilitate interoperability, as the native coins from one blockchain cannot be used on any other blockchain. For instance, BTC cannot be used on the Ethereum blockchain and vice versa.

Wrapping coins and applying another blockchains token standard allows them to be used on that blockchain and in any dApps built using that standard.

Wrapping or tokenizing ETH makes it compatible with the ERC-20 standard that is common to tokens built on the Ethereum network. This allows Ether to be used in any dApps and smart contracts that are designed to accept ERC-20 tokens.

Ether itself does not comply with ERC-20, which was created in 2015 after ETH was launched. While ETH is used to pay for transaction processing (gas fees), on the Ethereum blockchain, it needs to be converted to wETH to be exchangeable for other ERC-20 tokens.

Users that convert their ETH into wETH can provide liquidity to decentralized exchanges (DEXs), use their funds for lending or collateral, or engage in yield farming through decentralized finance (DeFi) apps. Unlike ETH, wETH cannot be used to pay gas fees.

To wrap ETH coins into interoperable wETH tokens, the holder deposits the ETH from their digital wallet into a smart contract, which creates an equivalent amount of wETH and sends them back to the Ethereum address in the users wallet.

The smart contract locks the original ETH so that it is secure and visible in the contract on the blockchain while the holder uses the wETH. This means the wETH is always backed by a reserve of ETH. The user can only access the locked ETH when they convert back the same amount of wETH. When wrapped ether is exchanged back into ether, the wrapped tokens are burned, or removed from circulation.

ETH holders can change their coins for wrapped ETH by sending them to a smart contract or swapping them on a cryptocurrency exchange. Traders can also swap other tokens for wETH on an exchange.

The steps to wrap ETH on an exchange are as follows:

Using wrapped coins can reduce transaction times and gas fees by transferring them to other blockchains, as the Ethereum blockchain can become congested during peak periods.

However, it is important to note that wrapping coins involves entrusting a custodian to facilitate the swap and hold of the original coins, which can carry risks such as hacking, and smart contracts can be vulnerable to coding errors or malicious attacks.

The concept of wrapped tokens has gained traction within the blockchain, and there are wrapped versions of various cryptocurrencies, including BTC and ETH, enabling them to be used across blockchains.

By enabling cross-chain interoperability, wrapped tokens allow the assets from one blockchain to be transferred and used on another, expanding the potential use cases for different cryptocurrencies and fostering collaboration.

As the DeFi ecosystem continues to expand, wrapped tokens like wETH will provide liquidity and enable seamless interactions within protocols. This has the potential to increase the adoption of blockchain technology and cryptocurrencies.

It is worth noting over the longer term, however, Ethereums developers aim to eventually update the codebase for ether to make it ERC-20 compliant, which would make wrapped ether redundant.

Wrapped ether is a workaround for the lack of interoperability between blockchains and decentralized applications. Wrapped tokens enable blockchains to interact and facilitate the trading or exchange of cryptocurrencies across platforms. This fosters the development of a more decentralized ecosystem.

Unlike ETH, wETH is compatible with the ERC-20 standard, allowing holders to use their ether in dApps. Wrapped tokens such as wETH can provide cross-chain stabilization, as they help to maintain consistent prices.

As Ethereums developers continue to implement network upgrades, the blockchain is moving towards increased interoperability, which could eventually see the use of wETH phased out.

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What Is Wrapped Ether (wETH)? How Does It Work? - Techopedia

A few days ago, the ERC-223 token standard, first proposed by well-known hacker Dexaran in 2017, was finally added to Ethereums official standards list.

ERC-223 solves some security and usability issues of the classic ERC-20, simplifying the end-user-side experience.

Lets take a look at all the details together.

Before delving into technical issues related to Ethereums token standards, it is appropriate to look back at the history of Ethereums DAO hack and the subsequent hard fork that saw Dexaran as one of the main players in the affair.

Back in June 2016, an unknown hacker attacked Ethereums DAO, known to be the worlds first decentralized autonomous organization committed to supporting and funding the ecosystem of the chain.

3,641,694 ETH worth about $60 million (now more than $7 billion) were stolen by exploiting a native fallback function of the Solidity programming language.

The attacker even sent an encrypted message to the Ethereum team to render the manner in which he had executed the token claim and to clarify that his attack had not violated any US federal law by acting in line with the terms of the DAO smart contract.

He added in the letter that he would defend himself legally if his stolen assets were illegally freed or blocked by Ethereums top management.

The hack shocked the entire Ethereum community, which hung by a thread for the next two months, waiting to find out how things would unfold for the DAO and how the private investors who had funded the project would be liquidated.

After several debates, the Cryptographic Network Foundation chose the hard fork route to go back in time and pretend that the hack had never happened.

More precisely, a new chain ( what we know today as the real Ethereum) was created that was identical to the initial one but resumed address balances at the time before the 3.6 million ether hack.

This fork was the result of internal disagreement that emerged from the decentralized community, which was divided between those who supported the code is law philosophy and those who took a less extreme view and believed that artificial tampering with the code was the right thing to do on such occasions.

One individual in particular, known by the nickname Dexaran, shared the idea of the immutability of transactions and that even in the face of incidents of this character, the code and history of the blockchain should be respected.

Dexaran occupied the faction of those who did not upgrade to the software and remained in the original chain, now known under the name Ethereum Classic.

The same individual personally committed $500,000 of his personal funds to finance some work on Callisto Network, a decentralized protocol aimed at creating experimental improvements for Ethereum and Ethereum Classic.

The figure of Dexaran is well known among the Ethereum community, both for his philosophical stance and for inventing the ERC-223 token standard that solves some bugs and transaction efficiency issues related to the classic ERC-20 standard.

The token standard proposed in 2017 by the supporter of Ethereum Classic Dexaran, was not intended to solve security issues related to the Ethereum DAO hack, whose flaw in the code was fixed soon after the incident.

The ERC-223 standard was designed to put a patch over another critical problem that plagued the ERC-20 standard that caused the loss of $3 million in Ether to users in just a few years.

In detail, we are talking about the fallacy that sees as lost forever all those ERC-20 tokens that are mistakenly transferred to a contract address rather than a wallet address.

In fact, if a user mistakenly sends their tokens to the address of a contract, there is no mechanism that blocks this transaction or returns the assets to the sender (this is because it is not possible to handle incoming token transactions on a contract).

Because of this programming flaw, until 31 December 2017, about $1.3 million in QTUM, $1 million in EOS, $250,000 in GNT, $217,000 in STORJ, and many other small losses have been lost.

Another problem with the ERC-20 standard relates to an issue of efficiency in ERC-20 address-contract communication: when, for example, a user intends to execute an asset deposit on a decentralized platform such as Aave, they must first approve the transaction and then execute it.

This happens because the traditional Ethereum standard sees no difference between the interaction between two addresses or between an address and a contract, invoking the transfer function in both cases.

When you execute the smart contract in question by making the deposit, what is actually performed is a transferfrom callback of a previously approved amount of assets.

This, in addition to being undesirable in terms of ease of use, requires the payment of gas fees on two separate occasions as well as clogging the blockchain with transactions with associated risk of bloating situations.

The ERC-223 standard represents a superset for ERC-20 that allows the use of tokens as first-class value transfer resources in the development of smart contracts.

A few days ago, the ERC-223 was added on the official Ethereum website in the section dedicated to token standards, officially sealing the entry of this category of tokens into the family of the decentralized smart contract development network.

This was announced by Dexaran, which had already introduced this topic in EIP-223 dated 5 March 2017.

As mentioned, it serves as a more secure standard in that it does not allow token transfers to contracts that do not explicitly support receiving tokens, hence avoiding mishaps for users less navigated in the field.

Going more specifically, the benefits of ERC-223 are the following:

It is worth noting that the ERC-223 standard is backward compatible with ERC-20 tokens, hence every feature of the primary standard is applicable to the secondary standard.

All contracts or services that work with ERC-20 hence can also be used with ERC-223.

In addition, there is a converter that allows ERC-20 tokens to be converted to ERC-223 1:1 at any time without cost or restriction. ERC-223 tokens can also be converted back to the ERC-20 origin.

A series of tutorials and guidelines exploring the workflow and operation of ERC-223 tokens will be presented by Dexaran in the coming days.

All the details have been published in a post on Reddit.

We hope that Dexarans proposed standard will play a central role in the Ethereum framework, going on to improve the user experience and eliminate unnecessary risks for users, with a push toward mass adoption of cryptocurrencies.

See original here:

ERC-223 lands among the Ethereum standards - The Cryptonomist

The venture capital world has long been known for its traditional approach to funding and investing in startups. However, the emergence of blockchain technology can potentially disrupt this industry and revolutionize the way venture capital operates.

One significant aspect of this disruption is the tokenization of assets. Blockchain enables the creation of digital tokens representing ownership in assets or companies.

This tokenization allows for fractional ownership and liquidity of traditionally illiquid assets, such as real estate or early-stage startups. It expands investment opportunities, enabling a wider range of investors to participate in ventures by owning tokens, even with small amounts of capital.

Another key aspect is the use of smart contracts. These self-executing contracts with predefined rules and conditions are encoded on the blockchain. Smart contracts can eliminate the need for intermediaries, reducing costs and increasing efficiency.

Investors and entrepreneurs can create and execute investment agreements directly on the blockchain, streamlining the investment process and fostering participant trust.

By eliminating intermediaries, blockchain democratizes access to funding, empowering entrepreneurs globally and attracting investment from a wider pool of investors.

Blockchain technologys global accessibility transcends geographical boundaries, connecting investors and entrepreneurs worldwide. Startups and investors in emerging markets, where traditional venture capital may be limited, now have greater opportunities.

Blockchain-based platforms also facilitate the creation of secondary markets, allowing investors to trade their tokens representing ownership in ventures.

Alex Strzeniewski, founder and CEO of AngelBlock a decentralized fundraising platform told Cointelegraph, With blockchain-based fundraising, tokens representing equity or debt can be traded on secondary markets, allowing investors to exit their investment at any time. He added:

Secondary markets provide liquidity to early-stage investors who traditionally had to wait for exit events, such as acquisitions or initial public offerings (IPOs), to realize their investment returns. The ability to trade tokens on a secondary market enhances the overall attractiveness of venture capital investments.

Rachid Ajaja, founder and CEO of decentralized finance (DeFi) platform AllianceBlock, told Cointelegraph, Traditional venture capital investments involve a higher level of risk and longer lock-up periods for investments, making them less appealing to some investors. Secondary markets allow investors to have the option to exit their positions earlier if they desire, mitigating some of the traditional risks.

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Ajaja continued, saying, Investors are more likely to be interested in participating in the fundraising process when there is a possibility of trading their tokens on secondary markets. This liquidity factor creates a more active and dynamic investment ecosystem, attracting a broader range of investors, which can positively impact a projects value and utility.

Blockchain-based fundraising platforms are decentralized platforms that enable users to invest in projects directly. The process usually works by investors depositing tokens into a smart contract that will send a projects native token to each participating wallet.

For example, if Project A sells Project A tokens (PAT) for USD Coin (USDC) at a 3:1 ratio, an investor will receive 3 PAT tokens to their wallet if they deposit 1 USDC.

Although these platforms operate in a decentralized manner, certain platforms may still necessitate users to verify their identity to adhere to regulatory requirements and safeguard the interests of investors.

This verification process mitigates fraudulent activities and bolsters the platforms overall credibility.

Some platforms also take additional measures to improve security and trust for users. For instance, noncustodial fundraising platform AngelBlock has a milestone-based compensation strategy with built-in governance measures. Investments are based on whether investors believe a startup has reached a set of predetermined goals.

When these requirements are satisfied, the funds will be released. The platforms governance is made more democratic by this technique, which encourages user participation.

The protocol employs an on-chain vesting and token distribution method to ensure that tokens are not accidentally transmitted to the incorrect addresses.

Utilizing decentralized fundraising platforms can foster a sense of community and collective objective by enabling direct interaction between a projects proprietors and its backers.

Several blockchain fundraising platforms integrate governance structures and voting mechanisms. Tokenholders can engage in decision-making procedures using voting, thereby exerting influence over project-related determinations such as the allocation of funds, the direction of the project or significant governance modifications.

Implementing decentralized decision-making processes empowers the community and fosters the alignment of interests among stakeholders.

Strzeniewski told Cointelegraph, Integrating governance structures and voting mechanisms in blockchain fundraising platforms brings a new level of community involvement and transparency to the process. It empowers the community by giving tokenholders a voice in key decision-making processes, such as project development milestones and budget allocations.

Strzeniewski continued, This aligns stakeholder interests as everyone has a say in the projects direction and success, creating a mutually beneficial environment where the projects success directly translates to the success of its investors.

Democratizing fundraising in the Web3 sector holds immense significance for various reasons. Firstly, it promotes inclusion and access by providing investment opportunities to individuals and communities previously excluded from traditional funding channels.

This democratization breaks down barriers, fostering diversity and innovation by enabling a broader range of projects to receive financial support.

Furthermore, democratized fundraising empowers entrepreneurs by granting them greater control over their fundraising efforts. Instead of relying solely on traditional venture capital firms or angel investors, entrepreneurs can directly engage with a global network of supporters who are genuinely interested in their projects.

This shift in power dynamics allows entrepreneurs to maintain ownership and independence while aligning their goals and values with the interests of their community of supporters.

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AllianceBlocks Ajaja said, Involving a broader community in the fundraising process has multiple advantages. First, it serves as a form of validation. If a large number of diverse investors show interest in a project, it is a strong indication of its potential.

The CEO continued, It also contributes to community engagement, as investors are more likely to promote a project they have invested in, creating a network effect that can significantly boost a projects visibility and reach.

See the original post here:

How blockchain is transforming fundraising for startups and ... - Cointelegraph

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Investors often flock to an asset class after a major rally, leading to potential losses as prices correct. However, now may be an opportune time to build a cryptocurrency portfolio. While Bitcoin (BTC-USD) has experienced significant gains this year, it is still below its all-time highs. Other cryptocurrencies that have lagged behind could see substantial growth if the Bitcoin rally continues.

This article highlights three cryptocurrencies with the potential to deliver significant returns. While the crypto rally could be powerful, investors should always do their own research before investing in any asset.

Source: Shutterstock

Solana (SOL-USD) has experienced a significant price surge in the past month, increasing by over 45%. Its bullish momentum is expected to continue in July due to its reputation as a high-performance blockchain with a growing ecosystem. With the ability to process 50,000 transactions per second and low transaction fees, Solana is a favorable choice for decentralized applications (dApps) requiring high throughput.

Solanas adoption by institutions, including its comparison to the Visa of the digital asset ecosystem, adds to its growth potential. While there is a prediction of a 16% gain to $25.43, its essential to consider the volatile nature of the cryptocurrency market and the presence of unpredictable factors.

Moreover, SOL is often referred to as an Ethereum killer and is projected to experience significant growth by 2025. With its low fees, scalability, and interoperability, Solana has gained prominence in the DeFi and non-fungible token markets. The platforms focus on stability improvements and its growing ecosystem, demonstrated by the migration of Helium, is attracting developers and expanding its market share.

Source: shutterstock.com/BT Side

Ethereum(ETH-USD) has significantly impacted tokenization, bringing tangible assets onto the blockchain. Industry leaders, including BlackRocks CEO, recognizethe potential of this transformation. With a strong performance this year, Ethereum offers investors an enticing opportunity. However, the crypto market remains unpredictable, and competition from platforms like Solana challenges Ethereums dominance.

Ethereums pioneering role in smart contracts is crucial. While there are othersmart contract technologies, Ethereums first-mover advantage has attracted a large developer community, giving it a significant lead over competitors. The high switching costs make it unlikely for other platforms to achieve mass adoption in the smart contract space.

One reason for optimism is Ethereums ongoing developments, including the transition fromproof-of-work to proof-of-stake, which is expected to drastically reduce energy consumption. This positions Ethereum favorably in the face of energy regulations.

Source: FellowNeko / Shutterstock

Avalanche(AVAX-USD) is gaining attention not just as a speculative asset but as a pioneering blockchain platform. Its focus on scalability and speed makes it well-suited for the demanding DeFi sector. The platform has experienced increased transaction activity and user growth, likely influenced by its partnership with Amazon Web Services. With advanced security measures and innovative subnets, Avalanche caters to both public and private blockchains. After a successful rebound from the 2022 bear market, Avalanche showcases its resilience and potential. It could be the promising future that crypto enthusiasts have been seeking.

Moreover, Avalanche stands out for its network speed, processing over4,500 transactions per second (TPS), surpassing Bitcoin and Ethereum. Its compatibility with the Ethereum Virtual Machine attracts developers seeking a faster and cost-effective blockchain solution.

At the moment, Avalancheis pricedat $15.01, showing a 0.55% increase in the past 24 hours. It holds the #14 ranking on CoinMarketCap, with a live market cap of $5.193 billion. The circulating supply of AVAX coins is 345,851,337 out of a maximum supply of 720,000,000 coins. The 24-hour trading volume stands at $258.411 million.

On the date of publication, Chris MacDonald has a LONG position in SOL, ETH. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonalds love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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Massive Crypto Rally Ahead? 3 Tokens That Will Shoot Sky-High - InvestorPlace

The year 2022 was not a very good year for Cosmos and its vision of inter-blockchain communications (IBC). The collapse of the Terra Luna ecosystem (the biggest protocol on Cosmos at the time), tension between co-founders and a fall in the tokens price all cast a shadow on its future prospects. That said, projects such as dYdX and cross-chain oracle protocol Seda continue to call the network home and are adamant about its IBC vision.

Currently, Seda says it enables over 12 million data feeds across 24 networks. In an interview with Cointelegraph at EthCC Paris, Jasper de Gooijer and Peter Mitchell, co-founders of the Seda protocol (formerly known as Flux), discussed the importance of oracles in cross-chain bridges and how they protect the value they enable.

Cointelegraph: How do oracles add value to IBC?

Jasper de Gooijer: The current problem is that smart contracts can only query data outside of blockchains themselves, right? That greatly limits the amount of use cases that smart contracts have, such as in lending markets. So in those markets, if you want knowledge on price on, say, six chains at once, you need six oracle providers, and that's when you need multichain oracles.

CT: What is the biggest accomplishment or technological breakthrough thus far in the Seda ecosystem?

Peter Mitchell: We launched Seda about a year ago. And within eight weeks, we became the second-largest oracle, securing over $2.7 billion in total value locked. And then we realized that we couldnt monitor and scale this into something like 200 chains, right? It would be impossible to have robust monitoring of price feeds.

So the innovation weve built on Seda is that the main chain aggregates the data and then pushes the smart contracts to the subchain. And so, rather than deploying the oracle contract on every new chain, we just deploy this single smart contract.

CT: In light of recent high-profile oracle exploits, what are some ways of keeping the technology secure?

JG: The main point is really just education. People should know that they should not build a bridge with hundreds of millions of total value locked if the [underlying] token only has like $10 million of liquidity on decentralized exchanges. The second thing is building smart price data modules, so you can swap tokens for something like time-weighted average price, which makes it less likely to slip in volatile environments.

PM:Like Jasper was saying, if you have a token that's being borrowed against $100 million, and you only have, lets say, $10 million in liquidity on-chain, then you cant really liquidate $100 million or $50 million positions against that kind of liquidity. So setting up metrics like liquidation thresholds and collateralization ratios beforehand can really set up the protocol for success.

This interview has been edited from its original format for clarity.

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Seda co-founders discuss intersection of oracles and multichain - Cointelegraph