If all goes according to plan, Wrapped XRP (wXRP) will appear on the Ethereum (ETH) blockchain next month, courtesy of Wrapped.com. The move aims to allow XRP holders to interact with aspects of decentralized finance or DeFi, such as implementing smart contracts for use in loans and borrowing, and exchanging digital currencies with native tokens. Currently, the network can only handle sending, receiving and holding XRP.
Encapsulated tokens are digital currencies that are stored in a digital vault and run on a separate blockchain. Wrapped tokens include Wrapped Bitcoin, which runs on the Ethereum blockchain, and Wrapped Ethereum, which converts ETH into the ERC-20 standard. wXRP will have a 1:1 exchange ratio with XRP and custodianship will be provided by the Hex Trust.
In a tweet earlier this week, Ripple CTO David Schwartz stated that wXRP will be “multi-chain.” While Ethereum remains the preferred blockchain for launching encapsulated tokens, high gas taxes have caused some controversy among crypto enthusiasts. According to Ycharts.com, the average gas price of an Ethereum smart contract has risen to $184. Multi-chain integration can allow users to aggregate XRP into chains at much lower gas prices.
Ripple Labs aims to disrupt established financial institutions such as the Association for Global Interbank Financial Telecommunication with lower fees and faster settlement times. To do this, the company created RippleNet for enterprises to facilitate cross-border fund transfers. However, no transactions take place in XRP, and only the coin is used to provide liquidity.
Last December, the US Securities and Exchange Commission (SEC) accused Ripple and two of its executives of making $1.3 billion in unregistered securities by selling XRP to investors between 2010 and 2019. The lawsuit is ongoing.