WBNB (Wrapped BNB) is a form of BNB cryptocurrency that can be used for conducting transactions in the DeFi world if the transaction is on a BEP20 network. Its value is pegged to the price of the BNB asset and can also be exchanged for the original BNB token at any time. Simply put, the value of wrapped BNB is determined by the original token from which it is wrapped.
Wrapped BNB was created to improve the interoperability of BNB Smart Chain (BSC), as having separate blockchains with different functions prevents tokenized interaction and limits cross-chain transactions (read more about cross-chain technology). BEP20, the standard version of BNB Smart Chain that allows you to use it for other applications, is used by WBNB to facilitate transfers between chains. First, to better understand this concept, let’s look at what a wrapped token is.
What is a wrapped token?
A wrapped token is basically a token that is minted for the purpose of being used on other blockchain networks. Imagine you have a one-dollar bill in your pocket and want to call using a payphone. Obviously, you cannot insert your dollar bill into the pay phone. So, you have to exchange your bill for four one-quarter coins. Your coins will have the same value as the bill, but they can be used for making a call. Minting a wrapped token does the same.
Wrapping tokens is done to make a coin usable on a blockchain network other than its native network. For example, you can’t use your Bitcoin on the Ethereum network to use the services of decentralized exchanges (DEX) and DeFi applications on the Ethereum blockchain. Instead, you must wrap your Bitcoin and take your WBTC to a DEX. Wrapped tokens have the same value as the native token and are issued in a 1:1 ratio.
What is the difference between BNB and WBNB?
Binance is by far the world’s leading centralized cryptocurrency exchange (CEX) by volume of trade, according to statistics. Binance was founded in 2017 and launched BNB as a token on the Ethereum network. Two years later, Binance migrated BNB to its own blockchain network, Binance Chain. But BNB’s functionality was limited to trading cryptocurrency as Bitcoin does.
In September 2020, Binance launched its Binance Smart Chain (BSC), which was later rebranded to BNB Smart Chain. The launch of this network was a breakthrough for Binance since it introduced capabilities such as smart contracts and DeFi applications. However, there was an obstacle to its full functionality: BNB coin.
Since BNB was originally designed to work as merely a cryptocurrency, it could not be used for the purposes BSC hoped to follow. As an attempt to solve the limitations of BNB, the Binance Smart Chain development team designed the WBNB token to be more functional than its predecessor. WBNB can interact with complex decentralized applications accurately and comply with multiple smart contracts.
The standard that Wrapped BNB uses is BEP20. This token can be used on the BNB Smart Chain and traded for almost all tokens that are on this network. Wrapped BNB serves as a bridge between blockchains, allowing users to move from one network to another when performing financial transactions.
Advantages of using WBNB
Wrapping tokens adds many features to the token, which is why WBNB has more advantages than the original BNB. Below, some advantages are discussed.
- Exchanging BNB for WBNB is super easy, and it can be done on wallets like Trust Wallet in a matter of seconds.
- Swapping between BNB and WBNB is very cheap, and the only fee you pay will be the gas fee.
- WBNB can be used by developers to develop their own protocols, digital assets, and NFTs.
- Interoperability (transaction on other blockchains than the native one) is easily possible.
Cryptocurrencies such as WBNB and wrapped tokens improve interactions in the cryptocurrency and decentralized finance (DeFi) ecosystem. Wrapped tokens create a world with greater capital efficiency and allow applications to share their network liquidity. CrowdSwap has made it possible for its users to seize the possibilities with WBNB by launching WBNB/CAKE and BUSD/WBNB liquidity pools. Click here to launch the app and start your pleasant DeFi journey with these programs.