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20 Ethereum ERC-20 tokens will be coming to Tezos (XTZ) DeFi in Q1 2021

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On the 2nd of February, Bender Labs tweeted about their new whitepaper here. In the whitepaper it was stated that V1 of the Wrap Protocol, a new protocol to help bring Ethereum assets over to Tezos DeFi via wraps will launch in quarter 1.

The whitepaper stated the whitelisting of 19 ERC-20 Ethereum assets that can be wrapped into FA2 Tezos assets including AAVE, BUSD, CEL, COMP, CRO, FTT, HT, HUSD, LEO, LINK, MKR, OKB, PAX, SUSHI, UNI, USDC, USDT, WBTC, WETH.

The WRAP token of the Wrap Protocol will also be wrapped as an FA2 and we have included in this ’20’ figure.

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Bender Labs

Bender Labs, a French team with many members residing in the Greater Bordeaux Metropolitan Area was created to:

“ … build  an  open  financial  system  running  on  Tezos”

Bender are looking to bring assets from other chains into the Tezos DeFi ecosystem. For example, on Ethereum there are close to 350,000 ERC-20 tokens. When considering that trading on Tezos is on average, over 3,000 times cheaper than on Ethereum, there could be large incentives to look to trade such assets on Tezos decentralized exchanges in order to avoid such large fees.

In order to build an open financial system running on Tezos that enables assets from other chains to be traded Bender will use a form of ‘wrapping’ assets which they describe as:

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…a way to transform any blockchain A into a pegged sidechain of a blockchain  B.  This  way,  one  can  use  the consensus mechanism and specific infrastructure of  blockchain A to use assets or information stored with both A and B.

Bender will use an ‘Off-Chain Federation’ which is otherwise often known as a ‘Federated Peg’. The idea of a Federated peg was developed by Blockstream in 2016 (built further on a design called ‘Federated Pegs’ by Back et al which was first put forward in 2014).

This is where a ‘group of oracles gather facts, run their own consensus mechanism, and trigger transactions on both chains’. This is done through the aid of a set of co-integrated smart contracts sitting on the Ethereum and Tezos blockchains.

Bender wants to start with Ethereum first, before moving onto other chains.

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 Why Off-Chain Federation?

Bender…

designed  Wrap  Protocol  as  a  quick-to-implement,  easy  to  use  and  understand, and with a  reasonably low level of trust decentralized protocol that will allow to quickly and securely bring assets and liquidity on Tezos.

For those reasons they chose off-chain federation as the method to use for the Wrap Protocol as:

off-chain federations offer a good level of “trustlessness” (its members cannot be trusted but the  federation  can  –  under  certain  conditions).  It  is  easy  to  implement,  without  important  technical dependencies and offers interesting features in terms of speed and transaction cost.

This last part is extremely interesting as Tezos already has much lower transaction fees for Ethereum, so making the method as cheap as possible would make sense to emphasize this difference.

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They attached the following image to elaborate how they came to the off-chain federation decision:

20 ERC-20 Tokens To Be Wrapped As FA2 Tokens (Including The Wrap Token)

In the Wrap Protocol Whitepaper it was stated that the following assets would be available as whitelisted to be wrapped in Quarter 1:

  • AAVE
  • BUSD (Binance USD)
  • CEL (Celcius)
  • COMP (Compound)
  • CRO (Crypto.com)
  • FTT (FTX Token)
  • HT (Huobi Token)
  • HUSD (Huobi USD)
  • LEO (UNUS SED LEO – iFinex Ecosystem)
  • LINK (Chainlink)
  • MKR (Maker)
  • OKB (Okex)
  • PAX (Paxos)
  • SUSHI (Sushiswap)
  • UNI (Uniswap)
  • USDC (USD Coin)
  • USDT (Tether)
  • WBTC (Wrapped BTC)
  • WETH (Wrapped ETH)

These coins represent some of the largest trading coins on the biggest Ethereum exchange Uniswap. In addition, the Wrap Protocols very own WRAP token will also be wrapped as an FA2 token. As the tokens mentioned above will be whitelisted users will be able to create markets.

The Wrap Token

As part of the Wrap Protocol a Wrap token will also be created where:

…the  governance  and  the  economic  profit generated by the protocol are distributed to $WRAP token holders. $WRAPs are distributed  weekly  to  users  of  Wrap  Protocol,  with  the  idea  of  distributing  its  ownership  to  members of the Wrap community.

The token has both on-chain and off-chain governance mechanisms that have benefits and a DAO will be created which has rights over things such as fees and supply on the Wrap Protocol.

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On-chain governance mechanisms can be used to vote on things such as fee levels and off-chain governance mechanisms (using tools such as BaseDAO) can be used to vote on things such as the introduction of new tokens to be wrapped.

The Wrap Token Economics

The Wrap token is an ERC-20 token that is wrapped 100% into a Tezos FA2 token to enable trades on both blockchains.

The Wrap token will start with a supply of 100 million tokens, but this can be changed via the DAO governance processes. With the current set of parameters laid out at launch, the full distribution is likely to take around 7 years, however this can be changed.

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The recipients of the Wrap token fall into 3 distinct groups: Quorum Members, Users of the protocol and the Dev Pool.

The distribution ratios to these groups are as follows: Quorum Members (50%), Users Of The Protocol (40%) and the Dev Pool (10%). This distribution can also be amended by the DAO later down the line.

The Signers Quorum will initially be comprised of 5 members of the Tezos community, including Bender  Labs.  All  wrapping  and  unwrapping  transactions  will  be  governed  by  a  3-of-5  governance.

Wrapping and unwrapping fees will both be set at 0.15% and will be paid by users in wTokens. Fees will be shared by Signers, $WRAP holders and the Dev Pool as follows:
– Signers: 0.04%
– $WRAP holders: 0.10%
– Dev Pool: 0.01%

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The Signers Quorum undertake an important job on the protocol described here:

Wrap  relies  on  an  off-chain  federation, that we called the Signers Quorum, which makes sure that at any given time the amount  of  wrapped  tokens  (that  we’ll  call  wTokens)  issued  on  the  Tezos  blockchain  corresponds to the amount of original tokens locked on Ethereum.

For more information on the Wrap Protocol, it is advised to read the whitepaper here.

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Ethereum

Ethereum competitor Near launches $800M developer fund as DeFi competition heats up

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Smart contract ecosystem Near Protocol has earmarked $800 million for new funding initiatives aimed at growing its decentralized finance capabilities, offering the latest evidence that the highly lucrative DeFi market is still in its infancy. 

The new funding, which includes the $350 million grants program announced by Proximity Labs last week, gives ecosystem developers added incentive to create new product offerings on Near, the company announced Monday.

Roughly $250 million will be allocated to existing ecosystem developers; another $100 million is earmarked for startup grants, with Near planning to fund more than 20 startups at a rate of $5 million each. The remaining $100 million will be spent on so-called regional funds across Asia, Europe and the United States.

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Value locked in DeFi protocols has surged 936% over the past year, with Ethereum competitors such as Binance Smart Chain, Solana and Avalanche seeing considerable uptake, according to data from DappRadar. Ethereum projects account for roughly 66% of the total value locked across DeFi, according to industry sources.

Despite Ethereum’s overwhelming dominance, the DeFi market is growing at a torrid pace and is currently valued at over $247 billion — leaving plenty of room for competing platforms to capitalize. One year ago, the total value locked in DeFi projects was less than $13 billion.

Near accounts for a tiny sliver of the total DeFi market, but that could soon change as more developers tap into the new funding campaigns and users continue to search for alternatives to Ethereum-based protocols. As Cointelegraph recently reported, Ethereum’s competitors have seen an influx of users fleeing the high fees on the ETH network.

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$2 Billion Worth of Ethereum Burned Since August

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$2 billion worth of Ethereum could have been dumped on the market, but thanks to EIP-1559 it has been burned

Due to the rapid growth of the cryptocurrency market and the popularity of the NFT and DeFi industries, the Ethereum network reaches another milestone: more than $2 billion worth of Ethereum has been burned recently. The significant USD value of the burned tokens is also followed by a recent 15% price increase.

Ethereum burn rate

With the implementation of the EIP-1559 update, the fee-burning mechanism has been introduced to the network. Since then, Ethereum mining rewards are getting burned instead of going directly to miners’ pockets.

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Ethereum burns
Source: Dune Analytics

With network load increasing due to the popularity of the DeFi and NFT industries, the burning rate is moving up gradually with 616,000 Ethereum burned while a little bit over one million ETH have been minted.

At the current pace, the Ethereum burn rate remains at 0.58 with more Ethereum burned than earned by miners. If the network remains in the same condition until around the year 2023, Ethereum will become a deflationary coin, which means that the circulating supply will start to decrease progressively.

Effect on the price

While deflationary blocks are not something new, various fund managers and wealthy investors have expressed their feelings about the future of the coin by predicting that it will remain growing due to the constant reduction of the supply.

Ethereum daily chart
Source: TradingView

At press time, Ethereum is trading at $4,145, after reaching the previous ATH of $4,380 on Oct. 21. Cryptocurrency traders and investors have not yet moved Ether past the previous high, leaving it hanging close to the local peak.

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Ethereum Price Analysis: ETH still holds below $4,200, swift breakout to follow today?

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  • Ethereum price analysis is bullish today.
  • ETH/USD set a higher low at $4,000 yesterday.
  • Ethereum looking to break $4,200 today.

Ethereum price analysis is bullish today as another higher low was set yesterday, leading to a move higher overnight. Therefore, we expect ETH/USD to continue higher and break the $4,200 mark later today.

Ethereum Price Analysis: ETH still holds below $4,200, swift breakout to follow today? 1
Cryptocurrency heat map. Source: Coin360

The cryptocurrency market traded in the green over the last 24 hours, with Bitcoin up by 3.36 percent. Meanwhile, Ethereum gained 1.32 percent, while Solana (SOL) is the top performer with an 8 percent gain.

Ethereum price movement in the last 24 hours: Ethereum sets higher low at $4,000, returns below $4,200 resistance

ETH/USD traded in a range of $3,967.12 – $4,175.12, indicating substantial volatility over the last 24 hours. Trading volume has increased by 13.58 percent and totals $16.559 billion, while the total market cap trades around $488.65 billion, resulting in market dominance of 18.82 percent.

ETH/USD 4-hour chart: ETH ready to break $4,200?

On the 4-hour chart, we can see bullish momentum strong today as the $4,200 mark gets tested again.

Ethereum Price Analysis: ETH still holds below $4,200, breakout to follow today?
ETH/USD 4-hour chart. Source: TradingView

Ethereum price action has seen a strong performance so far in October. After breaking out of a more than week-long consolidation on the 1st of October, a strong advance followed until the first resistance at $3,650.

Over th next weeks, two further waves higher were set. The first one took ETH/USD to just under $4,000, while the second one all-the-way to the previous all-time high at $4,400.

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Since then, the Ethereum price has retraced again. Previous swing highs were retested over the weekend, with support found at $3,900. Yesterday, ETH/USD moved to $4,200, with no further upside seen, leading to another retracement. 

Another higher low was set, pushing ETH back to $4,200 earlier today, which will likely lead to more upside over the next 24 hours.

Ethereum Price Analysis: Conclusion 

Ethereum price analysis is bullish as a new high thigh was set yesterday, leading ETH back to the $4,200 local resistance. Therefore, we expect ETH/USD to break higher over the next 24 hours.

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While waiting for Ethereum to move further, read our guides on LTC wallets, Gero wallets, and  DeFi wallets.

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