Wrapped Token FAQs

Created On13 May, 2022

Updated13 May, 2022

byhavenprotocol

What is a wrapped token?

A wrapped token is simply a cryptocurrency token that exists on a secondary blockchain This allows the value of a native asset from one blockchain to transfer to another blockchain.

In the case of Haven it is a token that is used on BSC (Binance Smart Chain). It maintains the same value as XHV and is collateralised 1:1 with the native coin at all times.

Why do it on Haven?

The core promise of Haven is to provide a way for anyone to access a stable value cryptocurrency while retaining full user privacy. This vision has been realised with a range of xAssets available on the Haven network, but has however come with a couple of important compromises.

Utilising a wrapped token aims to unlock the potential and reduces the barriers to entry by improving accessibility, liquidity and utility for the network.

Wrapped tokens such as wXHV offer interoperability between blockchains so that people can move assets easily and take advantage of features and applications on other blockchains. Those advantages might be faster transaction times, lower fees, or yield farming opportunities.

How does it work?

Wrapped tokens are created and destroyed by a process called “minting” and “burning.” To mint a wrapped token such as wXHV, the underlying asset, in this case XHV, is sent to a custodian (the multi-sig safe) that stores the XHV in a digital vault. Once the underlying XHV has been locked away, an equivalent amount of wXHV can be minted.

This process can also be understood as “wrapping.” The underlying asset is “wrapped up” in a digital vault using a smart contract, and a newly wrapped asset is minted for use on another blockchain.

To burn wXHV, the same process is followed, but in reverse. The wXHV is removed from circulation, and the equivalent amount of XHV is released from the digital vault and allowed back into Haven.

What happens to my coins when they get wrapped?

Wrapping your coins in it’s simplest form means that you deposit your native coins to a smart contract controlled wallet. The smart contract then checks this deposit and releases the equivalent number of tokens to your receiving address.

The coins you deposited are held in the vault until you decide to ‘unwrap’ the tokens and receive your coins back to your Haven address.

How are they kept safe?

The coins you depositare held in a multi-sig Gnosis Safe. This means that to carry out any transactions it requires a minimum number of people to sign the transaction before any coins or tokens can be moved.

The Gnosis Safe is an open source and formally verified self-custody wallet for use on the Ethereum network and is generally considered to be one of the safest options for mutil-sig storage.

Can I unwrap them whenever I want?

Yes, you can send your tokens back to the wrapping contract address and ‘unwrap’ them back to native coins at any time.

Where can I use my wrapped tokens?

The wrapped tokens will be bridged to BSC (Binance Smart Chain) giving it access to all the DApps and protocols available on that network. An up to date list of those can be viewed here. In future it will be possible to brdige to other EVM chains in order to access their utility and liquidity.

Where can I store my wrapped tokens?

There are many wallets that can be used for storing your tokens while they are not being used. Some of the most popular are listed below:

Do I still have the same privacy when I use the wrapped token?

You do not maintain the same levels of user privacy while using the wrapped tokens as the Ethereum network has greater transparency by default.

However, the core promise of user privacy remains fully intact once you ‘unwrap’ your tokens back to the native coins and transfer them back to your Haven Vault.

It is recommended to always use a dedicated Haven address for all interactions with 3rd party integrations including the wrapped tokens and THORChain.