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2. Intermediate Course

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  1. 1. What is Layer 0 in Blockchain technology?
  2. 2. What is layer 1 in Blockchain?
  3. 3. Second layer (layer 2) - what is it? 
  4. 4. Blockchain and its layers - What is layer three in Blockchain (L3)?
  5. 5. Ethereum 2.0 - What is it? 
  6. 6. Ethereum Proof-of-Stake (PoS) - what should you know?
  7. 7. Ethereum London Hard Fork - what is it ? 
  8. 8. What is the Ethereum Name Service (ENS) and how does it work?
  9. 9. Arbitrum: Ethereum scaling solution - everything you need to know
  10. 10. Polygon 2.0 - the value layer for the Internet
  11. 11. Ethereum ERC-4337 - what is it and how does this standard work?
  12. 12. What is an ERC20 token and how is it created?
  13. 13. The ERC-721X VS ERC-721 Standard – Key Differences!
  14. 14. What is cryptocurrency burning?
  15. 15. Examples of the use of WEB3 on the blockchain
  16. 16. What is Web5? 
  17. 17. Blockchain Oracle - what are oracles? 
  18. 18. Polkadot - Decentralized blockchain and DOT cryptocurrency
  19. 19. Polkadot Parachain - Next-generation blockchain
  20. 20. Interoperability in the world of cryptocurrencies and blockchain
  21. 21. What is Blockchain sharding?
  22. 22. Mainnet versus Testnet on the Blockchain. The complete guide!
  23. 23. MINA Protocol: the lightest blockchain in the world!
  24. 24. Sustainable Blockchain - Proof of Useful Work & Flux
  25. 25. Cosmos SDK: Building the Blockchain Ecosystem
  26. 26. What is cross-chain interoperability in Blockchain technology?
  27. 27. Blockchain trilemma - explanation of the problem. What is the impact on cryptocurrency payments?
  28. 28. Non-fungible tokens and NFT exchanges
  29. 29. How to make money with NFT?
  30. 30. What is the NFT licence fee?
  31. 31. NFT Gas Fee - what is it? How can you reduce your gas fee?
  32. 32. The main differences between static NFT and dynamic NFT
  33. 33. What is minting an NFT?
  34. 34. What are NFT Ordinals? A guide to Bitcoin NFT.
  35. 35. What is KnowOrigin NFT, and how does it work?
  36. 36. ERC-6551 - the new NFT standard. What does it bring to the non-exchangeable token sector?
  37. 37. What is NFT Lending all about? An innovative solution in the world of cryptocurrencies!
  38. 38. The Metaverse – a new virtual world
  39. 39. Metaverse – TOP 15 virtual reality projects
  40. 40. Technical analysis – is it worth using?
  41. 41. Trading order types: stop loss, trailing stop loss, LIMIT
  42. 42. Market Cap versus Fully Diluted Market Cap - the most important differences you should know!
  43. 43. Set up of Stop Loss and Take Profit orders
  44. 44. What are DeFi liquidity pools?
  45. 45. Real Yield in DeFi - what is this trend? What does it consist of?
  46. 46. Vampire Attacks in Decentralized Finance (DeFi): Explanation and Examples
  47. 47. What are wrapped tokens 
  48. 48. What are security tokens?
  49. 49. What are Social Tokens? 
  50. 50. Liquidity Provider Tokens (LPs). What are they, and why are they so important?
  51. 51. What is the Lightning Network, and how does it work?
  52. 52. What is Play-to-Earn (P2E) and how does it work?
  53. 53. Cryptocurrency steps - What is move to earn M2E?
  54. 54. Segregated Witness - what is Segwit Bitcoin all about?
  55. 55. What are Decentralized Cryptocurrency DEX Exchanges?
  56. 56. What is Curve Finance?
  57. 57. What is GameFi and how does it work?
  58. 58. What is Proof of Reserves (PoR)? How does it work?
  59. 59. DAO Investment: A revolution in the world of finance and investment
  60. 60. What is MakerDAO and DAI Stablecoin?
  61. 61. What is the SubDAO protocol, and how does it work?
  62. 62. How to Create Your Own Decentralized Autonomous Organization (DAO)?
  63. 63. Atomic Swap: What is an atomic swap, and how does it work with cryptocurrencies?
  64. 64. What Is Cryptocurrency Vesting? What Are Its Advantages?
  65. 65. What Is the Metaplex Candy Machine Protocol? How Does It Work?
  66. 66. What Is the BNB Greenfield Ecosystem?
  67. 67. What Is Slashing in Cryptocurrencies?
  68. 68. Royalties – What Are They? How Does This Type of Licensing Fee Work?
  69. 69. What is TradFi? The importance for cryptocurrencies!
  70. 70. What is the Real World Asset (RWA) trend in cryptocurrencies? Explanation and examples!
  71. 71. Pyth Network: a powerful oracle harnessing the power of Solana!
  72. 72. What are stables in the world of cryptocurrencies?
  73. 73. What Is Binance Oracle?
  74. 74. Shibarium: A new era in the Shiba Inu ecosystem?
  75. 75. What is an ETF? How will an exchange-traded fund on bitcoin work?
  76. 76. Symmetric and asymmetric encryption - key cryptography techniques!
  77. 77. Hedging in cryptocurrencies - great portfolio protection against risk!
  78. 78. How to create your own cryptocurrency? 
  79. 79. What is a Dusting Attack in cryptocurrencies? How to protect against it?
  80. 80. What is a Black Swan?
Lesson 47 of 80
In Progress

47. What are wrapped tokens 

Wrapped tokens allow cryptocurrencies to be used on a different blockchain than the one on which they were originally built. They are backed 1:1 by the underlying asset and ideally solve the problem of blockchain interoperability. 

What are wrap tokens? 

They are digital assets that allow the value of native assets to be transferred from one blockchain, to another. For example – Bitcoin and Ethereum are two separate, distributed databases. The blockchains on which these two cryptocurrencies are based are unable to connect to each other. You cannot use Bitcoin directly on the Ethereum blockchain, because only the Bitcoin blockchain “knows” that you own BTC. And vice versa. In this case, we can use wrapped tokens, which will effectively solve our problem. We will move BTC onto the Ethereum blockchain and be able to use it across the cryptocurrency system. 

This type of token is often compared to stablecoins. The most popular wrap token is wrap Bitcoin (wBTC). wBTC is pegged to the price of Bitcoin at a 1:1 ratio; however, it is available as an ERC-20 or TRC-20 token, so we can successfully use and trade it on the Ethereum and Tron blockchain. 

Operation of wrap-around tokens 

This type of token is created and destroyed in a process called “beating” and  “burning”. To create wBTC, the underlying asset, in this case, Bitcoin is sent to a depositary and stored in a digital vault. Once the BTC is locked in there, a corresponding amount of wBTC can be minted. Simply put, imagine that the underlying asset is wrapped by a smart contract and minted as a new asset for use on another blockchain. 

To take wBTC out of circulation, the reverse process is used. The wrapped token is burned, and an equal amount of BTC is released from the digital vault and allowed to circulate. So you see that all wrap tokens are backed by an equivalent amount of base currency. For every 100 wBTC that is minted, there is 100 BTC that secures the value of the wrapped token. 

Liability for wrapped tokens 

The constancy of token value is explained by a combination of two factors: 

∙ The presence of a custodian holding the exact amount corresponding to the number of wrapped tokens put into circulation 

∙ A procedure for firing the packaged token to recover its initial stock at any time The custodian can come in several forms, including a smart contract, a wallet or a DAO (Decentralized Autonomous Organization). 


1. wBTC – wrapped BTC so we can use it on the Ethereum blockchain.  Supported by the wBTC DAO. 

2. wETH – a wrapped ETH, an ERC-20 version of Ethereum, which can be used as an asset in DeFi protocols. 

3. renDOGE – a wrapped Dogecoin that can be minted using RenBridge on the RenVM protocol 

Advantages of wrap tokens 

They provide interoperability between blockchains, so we can easily transfer our assets and use features available on other blockchains. What are the benefits?  Faster transaction times, lower fees or even the ability to receive rewards in exchange for sharing your assets. 

At this point, it is also worth noting that as the number of wrap tokens increases, the number of blockchain bridges increases. That is, a solution that also enables the transfer of digital assets between blockchains. And as we know from our previous lessons, this comes with the risk of hacks and hacking attacks. 

Threats to wrap tokens 

Blockchain interoperability has its drawbacks. The main risk associated with wrapped tokens is based on the presence of a trusted third party. Indeed, to ensure the implementation of wrapped tokens, the trustee is required to store the exact equivalent in the native token. 

If 100 wBTC is made available to users on the Solana blockchain, then the custodian must store 100 BTC in its vault. 

The well-being of this process depends on the stability of the custodian so that it can live up to the trust that users place in it. Like any solution, bridges are not immune to the risk of hacking. This is exactly what happened in the case of the space-time tunnel. An attacker exploited a vulnerability in the issuance of contracts to empty their substance – and thus their value – into the ETH present on the Solana blockchain, as they seized their ETH equivalence in the bridge offered by the space-time tunnel. 


You already know what wrap tokens are and how they work. In the crypto world, you will also find them under the name of wrapped tokens. They make trading digital assets possible on a much larger scale. They answer some problems for which answers have not yet been found. In particular, we could mention scalability and increased transaction costs due to network congestion. 

However, their use is not without risk and we can hope for a better decentralization of the mechanism in the future to reduce the risk of failure of the native token custodian.

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