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Ethereum Classic has announced the launch of ETC (wETC) wrapped to act as a gateway to the Ethereum blockchain, which is today a major playing field for decentralized finance (DeFi) applications. The announcement, which came on Wednesday, means ETC users will have seamless access to the DeFi ecosystem without converting their tokens.
The past few months have seen the DeFi space grow exponentially as more stakeholders are betting on its long-term value. Unsurprisingly, the trend is catching on with other crypto projects, including BTC, which has already found its way to DeFi through Wrapped Bitcoin (WBTC). In fact, DeFi Pulse metrics show that WBTC is the second most blocked asset in the $ 13.5 billion DeFi TVL.
ETC joins Ethereum’s DeFi bandwagon
The recently released wETC is an ERC-20 token, therefore compatible with Ethereum’s blockchain and DeFi applications, ranging from DEX, loan and derivatives. Basically, ETC users will now be able to stake their tokens on Ethereum and leverage the various DeFi services within the ecosystem. ETC Labs CEO and co-founder James Wo said the milestone will attract at least 10% of ETC holders,
“We wanted to make sure ETC could switch to a different ecosystem and use different applications on top of that ecosystem … I expect at least 10% of ETC holders will want to participate and use wETC.”
Notably, Ethereum Classic emerged from the 2016 Ethereum hard fork, triggered by the DAO hack. It now appears that the two communities are ready to work together despite Wo’s position that ETC will maintain a Proof-of-Work consensus as Ethereum moves to a Proof-of-Stake mechanism.
“Not everyone trusts PoS. Some projects believe in PoW … So I think some of the ecosystems will probably stick to ETC or other PoW versions of a blockchain that can enter into smart contracts. “
The concept of token wrapping
As the blockchain and cryptocurrency industry evolves, interoperability solutions have been at the forefront of most innovations. The concept of wrapping tokens and using them on a different blockchain has changed the industry, especially with the growth of an ecosystem like Ethereum. Basically, this involves issuing a blockchain asset like Bitcoin on a different blockchain based on a 1: 1 representation.
The wrapped crypto asset can therefore perform various functions given its compatibility with a particular blockchain ecosystem. In the wETC case, users will transfer their tokens encapsulated on the Ethereum blockchain via the chainbridge, an interface for both ecosystems. A similar amount will be minted for use within the Ethereum ecosystem, after which they will be destroyed when users convert their tokens back to ETC.
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