If you interview crypto investors who survived the year 2022, they all will claim that the third worst word they've heard is "depegged" following bankruptcy and insolvent. This year we have gone through lots of drama, FUD, and hacking since the last all time high and the depegged assets have brought tons of problems.
When UST by LUNA depegged, the whole crypto market got serious damage as a consequence of a corrupted reserve system. These days crypto investors are stressed as both the wrapped form of Bitcoin (WBTC) and Ethereum (WETH) lost their peg partially.
To what extent are they harmful to the crypto ecosystem?
Wrapped BTC Occasion
Of course these Wrapped tokens are not created out of thin air; they are created with the fundamental of locking the asset on a smart contract to mint Wrapped version of it.
BitGo did not want to stay quite against it:
We just want to see 1:1 ratio for any stablecoin or wrapped aseet in crypto. The fractional reserves banking system is the fundamental concern of today's era. In crypto, you are hunted by smart money when you try to manipulate the way the financial projects operate on chain.
If you want to check Wrapped BTC, visit WBTC Network to reveal the data.
On Ethereum Mainnet, we can see 102% backed WBTC Reserves.
WETH Depeg FUUD
WETH shares a similar operational mechanism to WBTC. Even more, WETH is the wrapped version of the coin of Ethereum blockchain. Just turning ETH into ERC-20 form token with a smart contract ✌🏼
WETH is the tradable version of ETH on De-Fi ecosystem. If you want and/or need to use your ETH for different purposes, you can easily Turn ETH into wETH on OpenSea and several other service providers. Like this example, minting wETH requires Native ETH token to be locked in a smart contract.
Wrapped Security
It is always my priority to keep the asset itself rather than a different form of it. However, I also use WETH in De-Fi ecosystem to make profits. Essentially, the wrapped assets are nearly the same as the original forms thanks to their simple but effective use cases.
Any "possible" depeg being mentioned on social media will only result in the transfer of money from less knowledgeable to those who take smart action! though crypto is too risky, the wrapped assets and the depegs on them do not terrify me to be honest.
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I hope you’re sure about this. Im not exactly a fan of wrapped assets especially when it comes to Ethereum. I remember the WLEO hack that year, although it was rectified and taken care of and we’ve not had anything of such, a lot of other hacks were from wrapped Ethereum assets. I just feel they are very vulnerable.
Please do your research properly and take necessary actions, I wish good tidings and safety. Nice title by the way
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I trust the smart contract system dear, wETH is coded by 60 simple lines to lock ETH to mint wETH. Of course not all smart contracts are as secure as wETH or wBTC, though 😌
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I think the only downsides to these wrapped tokens are the bridges themselves and the blockchain itself. So in a way, I don't think it's very likely to happen though and I don't think it can really get depegged that much.
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