In brief

  • Wrapped ETC will enable Ethereum Classic users DeFi participation on the Ethereum blockchain.
  • Ethereum Classic users will now have greater access to the expanding decentralized finance DeFi market.
  • Activity and interest in the DeFi market has been growing rapidly since June.

This isn’t a bridge to nowhere. 

Ethereum Classic users will now have the option of a new bridge to the $13 billion DeFimarket with the launch of Wrapped Ethereum Classic tokens (WETC). 

ETC users, who were previously unable to access the full array of non-custodial financial services available to ETH users, will now be able to stake their ETC holdings to gain entry into the world of decentralized finance, which currently exists predominantly on Ethereum.

The launch of WETC is aimed to provide another entry point into the rapidly expanding DeFi space. Users holding WETC can also take advantage of transacting with and selling WETC on decentralized exchanges and on lending platforms to borrow assets or create loans with WETC as collateral, James Wo, founder and CEO of ETC Labs, told Decrypt.

Decentralized finance (DeFi) is a broad term for the diverse world of cryptocurrency and blockchain financial applications with no intermediaries. Rather than relying on financial middle-men—brokerages, exchanges or banks—DeFi utilizes blockchains to execute smart contracts between parties. 

The wrapped ETC launch comes at a time when the total value locked in DeFi is growing rapidly. Just a few months ago, the total value locked in DeFi was under $7 billion. Now it’s nearly double that.

The wrapped token will convert from Ethereum Classic to an Ethereum-compatible ERC-20 version of the token, which is self-listing on exchanges like Uniswap, Wo noted. ETC users turning to WETC can access all of the Ethereum protocols including smart contracts and decentralized apps (dapps) on the blockchain.   

“Basically, it’s a bridge for all the ETC token holders to use different services on top, to make sure their tokens are more valuable,” Wo said. “It’s actually about improving the efficiency of the products by improving all the value of the tokens.”

Wrapped tokens, the digital assets pegged to the cryptocurrency they represent, are hosted on the Ethereum blockchain. The price is the same as the underlying asset even if it is not on the same or any blockchain.

Ethereum Classic users can transfer to wrapped tokens from ETC tokens through the decentralized application Chainbridge, which interfaces with both Ethereum blockchains. When transfers are made by the bridge an amount of ETC is locked in a smart contract and the same amount of WETC is then minted on Ethereum. Users are also able to convert their tokens from WETC back to ETC through the ETC bridge, and WETC tokens are then destroyed, with the equal amount of ETC unlocked on the Ethereum Classic chain. 

Ethereum Classic is the original version of Ethereum, prior to the DAO hack, where users’ values  were drained. Ethereum Classic then diverged from the Ethereum blockchain following a change to the rules of the protocol, known as a hard fork in 2016. Following the hack and hard fork, Ethereum usersfewer than todayagreed to a one-time fork of the protocol to return the hack funds but the entire community wasn’t on board.

The holdouts felt that forking to return hacked funds would violate the core principle of unchanged cryptocurrency blockchains, and were against forking to return the funds. These users continue today to maintain the original Ethereum Classic blockchain and comprise the contemporary Ethereum Classic community.        

There’s been a natural tension between the camps since the two split. Ethereum Classic Labs created Wrapped ETC to bridge the two. Prior, ETC Labs made a similar gesture when it announced that DAI stablecoins would be coming to the Ethereum Classic blockchain via Chainsafe late last month. Dai is a critical lubricant for the MakerDAO lending system. When a loan is made, Dai is minted, and it is the currency users borrow and pay back. 

Interest and activity around wrapped tokens has increased since June as shown by the number and prominence of wrapped tokens now available. Several tokens, including Bitcoin—the largest with $2 billion of synthetic BTC tokenized on Ethereum—have launched wrapped versions in recent months. Wrapped BTC, currently the most popular option for synthetic Bitcoin on Ethereum, launched in early 2019.  

Ethereum Classic’s active user base is an estimated 120,000, based on the active number of community members globally, a spokesperson explained. 

“We have 10% of ETC locked in the product,” Wo said. “We think this will add probably another 10 to 15% of the total ETC to WETC and that amount will definitely be valuable for the price of Ethereum Classic.”

Additionally, Wo hopes that launching WETC will increase the value of Ethereum Classic by growing the entire Ethereum blockchain ecosystem, he said.

 

Editor’s note: This article was updated after publication to clarify details that applied to Ethereum Classic and not “Ethereum.”

(Excerpt) Read more Here | 2020-11-18 08:55:00
Image credit: source

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