Ethereum and Tezos connected via blockchain bridge
The cryptocurrency space is now a bit more interconnected as the developers created a cross-chain bridge between the Ethereum and Tezos blockchain.
Following the launch of the Wrap Protocol, developed by Bender Labs, Ethereum-based ERC-20 and ERC-721 tokens can be made Tezos-compatible, giving Ether holders access to the Tezos ecosystem.
Token wrapping has become a common way of connecting users from different blockchains and Wrapped Bitcoin (WBTC) is the best example for this, which is an ERC-20 version of Bitcoin (BTC) running on Ethereum blockchain.
The Wrap Protocol will wrap ERC tokens in the Tezos FA2 token standard, which will be represented without any technical fluctuations or price differences.
Same as Ethereum, Tezos has its own decentralized finance ecosystem. But unlike Ethereum, staking on Tezos is widely available, rather than waiting around a year before it shifts to a proof-of-stake consensus algorithm.
Wrap Protocol users will be allowed to participate in its governance using the WRAP tokens, compatible with both Tezos and Ethereum, operating on both the FA2 and ERC-20 infrastructure.
The success of Wrapped Bitcoin could be seen in its $8 billion market capitalization, representing the value of BTC hosted on Ethereum which is currently the 5th largest Ethereum token behind Tether (USDT), Uniswap's UNI, Chainlink's LINK and USD Coin (USDC). Currently, $200 million worth of WBTC is on Ethereum’s most popular DeFi protocol, Uniswap.
Converting tokens onto other blockchains is a way to avoid high fees that the original chain requires which is subject to excessive transaction costs. This may have been the cause of the success of Wrapped Bitcoin when Ethereum fees were a mere fraction compared to Bitcoin, although this is not the case anymore. Due to Ethereum’s massively increased user base and subsequent congestion, extravagant transaction costs as average fees rose to the sky.
Recent Tezos blockchain statistics show transactions of more than $1 million even being sent for as less between $0.01 and $0.15, suggesting a possible immediate use-case for the Wrap Protocol. However, the protocol is facing a competitive environment created from layer-two protocols already fulfilling this use case for Ethereum users.