Wrapped Centrifuge (WCFG) operates as a synthetic on the Ethereum blockchain ecosystem. The goal of WCFG is to expand Centrifuge users’ functionality and usability. The protocolenables Centrifuge users to leverage the vast Ethereum DeFi ecosystem to further their ROIs. Notably, Ethereum is the largest DeFi and Dapp network in the world.
To understand WCFG, you first need to look at the Centrifuge decentralized finance (DeFi) lending protocol. Centrifuge is a popular P2P lending application that enables users to secure profits via large lending pools. The project is unique in that it introduces credit into the DeFi sector. The goal of Centrifuge is to bridge the gap between several real-world assets by integrating pooled liquidity into the world of traditional finance.
How Does Wrapped Centrifuge (WCFG) Work
Wrapped Centrifuge starts off as regular CTF. When a user wants to bridge the token onto the Ethereum network they will first use the wallet bridging feature to lock the token into a network smart contract. Notably, users can easily swap their tokens from CFG and WCFG using the dashboard. This option can be helpful when attempting to keep up with emerging trends or taking advantage of new Dapps hitting the market. This step locks the tokens up in a bridge account on the Centrifuge chain. The contract will then issue you a WCFG token in return. This token lives on the Ethereum blockchain. It represents the value of CFG on a 1:1 ratio.
What Problems Does Wrapped Centrifuge (WCFG) Solve?
Another goal of WCFG is to make credit more accessible to small businesses. Businesses with good credit can access funding from centralized sources in an undercollateralized manner. Centrifuge seeks to bring that option to DeFi. The Ethereum DeFi ecosystem is massive. You can gain access to near-endless yield generation features. WCFG enables Centrifuge users to leverage these systems without giving up ownership of their original assets.
Lack of Interoperability
One of the main issues that WCFG helps to eliminate is the complete lack of interoperability currently plaguing the DeFi sector. There are a variety of top-performing networks, but few have the ability to conveniently and cost-effectively exchange data and value. WCFG is one way that Centrifuge users tackle this issue head-on.
High Fees
Converting CFG tokens to ETH is an expensive task when done on an exchange. The current gas fees of the Ethereum network add to the overall cost and delays of transactions. WCFG is faster and cheaper to create than converting your tokens directly.
Benefits of Wrapped Centrifuge (WCFG)
There are a lot of advantages that WCFG brings to the table. For one, users can gain access to multiple passive income streams. Once you wrap your Centrifuge, you can then join major DEXs (decentralized exchanges) and arbitrage trade with more liquidity. You can also take advantage of the farming and staking protocols Ethereum has to offer.
Staking is a great option for wealth generation for many reasons. Specifically, when you stake your tokens you don’t risk losing the primary asset. It’s easier to stake than to trade and secure consistent returns. Additionally, most staking protocols have a yield generation calculator that shows you exactly what your rewards will be based on your stake and the time. This feature provides you with a stable yield.
More Centrifuge Uses
Another benefit of WCFG is that it can be used in more Dapps. Dapps are seen by many as the main driving force behind crypto adoption. The more Dapps a protocol has and the more likely there are active users on the network daily. Centrifuge users can now participate in the vast Ethereum DeFi ecosystem using WCFG.
Token
The WCFG token operates as a synthetic asset on the Ethereum blockchain. The system leverages oracles to track and lock the value of CFG to WCFG tokens directly. Users can enjoy the benefits of the entire Ethereum ecosystem using WCFG. They can then convert their tokens back to CFG to leverage Centrifuge’s lending and borrowing services at any time.
CFGs
The native token of the Centrifuge network is CFG. The token lives on the Centrifuge Chain. Notably, the Centrifuge chain is a high-performance decentralized network that was based on Polkadot. CFG holders can take part in a vast array of features including staking, paying for transaction fees, and participating in the network’s governance options.
Governance
WCFG users need to convert their tokens back into CFG tokens to participate in the network’s governance features. The protocol leverages a DAO (decentralized autonomous organization) to provide voting options to all users who hold CFG tokens. Users have the right to put forth network upgrades, changes, fee alterations, and more. They can also vote on token burns and buybacks. This flexibility helps to keep the community in the loop and improves the overall transparency of the network.
The Rise of Wrapped Tokens
The wrapped token concept continues to expand throughout the market. Originally, the wrapped token idea focused on bringing Bitcoin into the Ethereum ecosystem. This maneuver improved the overall liquidity of the Ethereum market significantly. Now, developers of other platforms are eager to follow suit.
WCFG represents the evolution of the wrapped token concept. You now have completely different DeFi ecosystems communicating and leveraging each other’s features via wrapping protocols. As such, you can expect to see this concept only grow in popularity moving forward.
Bottom Line
The timing behind the integration of WCFG is excellent. The DeFi market is on the rise with more platforms entering service weekly. Centrifuge has proven to be a reliable and secure way for DeFi users to secure passive income. The integration of wrapped protocols into this network only strengthens its position in the market. It also provides CFG token holders with another reason to HODL their coins, as the demand for these flexible assets could increase alongside the added functionalities.
