WXTZ | Wrapped Tezos on Ethereum
An ERC-20 token to trade Tezos on Ethereum markets
First announced August 16th, 2020 in a tweet.
WXTZ sounds like a radio station, I know. It also sounds anathema to Tezos maximalism…I know. But, this little gem is a proverbial ambassador that will bring billions of dollars in value from Ethereum over to Tezos.
I assure you, despite what seems to be an act of heterodoxy (and dare I say apostasy!) we are orthodox Tezos maximalists.
One day this coin will be obsolete, but while ‘W’ coins on Ethereum are all the rage (if not us, someone else will do it) we might as well make one that will not only expose Ethereum traders to the Tezos ecosystem but will benefit the Tezos community as well:
- To make sure the collateral XTZ is responsibly staked
- To stake the collateral with many different community bakers
- To lend collateral to low-capital individuals, so that they may set up new Tezos baking nodes around the world (one of the goals of Tezfin)
First, let’s take a look at WBTC (Wrapped BTC) which tokenizes Bitcoin on Ethereum. That’s Bitcoin wrapped in an ERC-20. WBTC is approaching a billion-dollar market cap (and just beginning). Furthermore, the value of all ERC-20s combined has exceeded the value of Ethereum itself.
Not only is WBTC growing in market cap and volume, but it is also expanding inclusion in Ethereum yield generation markets. For example, WBTC can be lent or borrowed on Aave, Compound, and many other yielding platforms.
What is WXTZ token?
Like Bitcoin (BTC), Tezos (XTZ) cannot be traded on Ethereum markets directly, because XTZ runs on its own blockchain (the Tezos blockchain), as do Tezos FA tokens. ETH runs on Ethereum blockchain, as do Ethereum ERC tokens.
By tokenizing the ‘tez’ (the currency of Tezos) onto Ethereum as an ERC-20 token, we will provide a low-friction path for Ethereum DeFi participants (i.e. Ethereum money) to enter the Tezos space and Tezos DeFi.
We’re calling this token WXTZ (Wrapped XTZ / Wrapped Tez).
This naming should sound familiar to DeFi participants as it is akin to the nomenclature of the very popular Wrapped Bitcoin (WBTC).
WXTZ will help quicken the movement of market forces from the Ethereum DeFi ecosystem toward a Tezos DeFi Ecosystem by giving the Uniswap/Curve/1inch-trading crowd a tool to begin their Tezos journey.
When we deploy the contract address, we will post it here and on the WXTZ website. We will also post the XTZ reserve address:
Not posted yet. Stay tuned.
Do not trust any contract address claiming to be WXTZ/Wrapped XTZ/ Wrapped Tez/or Wrapped Tezos. unless it is posted here and on the WXTZ website https://WXTZ.network
DeFi markets will begin on Tezos soon, come the September launch of Dexter followed by Quipuswap. These markets will grow to become massive behemoths that will rival the size of Ethereum-based DeFi which dominates the markets today. As Tezos DeFi grows, we will usher movement from Ethereum DeFi markets, by removing frictions and creating systems compatible with what they know and already use.
These participants use exchanges like Uniswap, 1inch, Curve, and so forth. These marketplaces are Ethereum smart-contract based protocols running on the Ethereum network. The tokens these marketplaces facilitate are Ethereum tokens, mostly ERC-20.
It’s not that these participants aren’t considering joining the ever-growing number of people who are buying Tezos every day, it’s that Tezos isn’t facilitated on their DEXs because their DEXs are Ethereum DEXs.
Therefore, to facilitate trades with Tezos and help Ethereum-only folks get their feet in the pool, we are launching WXTZ (Wrapped XTZ)
How does it work?
When WXTZ is minted, XTZ is deposited from the user’s Tezos wallet into a reserve that lives on the Tezos blockchain. The user who minted the WXTZ receives the WXTZ in their Ethereum wallet.
If the WXTZ minter wanted to redeem their WXTZ for XTZ, the WXTZ is burned, and then the XTZ is transferred to the user’s Tezos wallet.
Within the reserve, the Tez (XTZ) is responsibly staked, preferably by distributing delegation to many different qualified community baking nodes. This too will benefit the Tezos community and Tezos ecosystem.
Much of the unstaked XTZ in circulation (~20% is unstaked), is the result of XTZ being used for high-frequency trading, by those who see their returns in terms of the immediate price fluctuations of XTZ on the fair market, and not from keeping even with inflation. Even though Tezos Liquid-Proof-of-Stake enables traders to stake and trade, many do not utilize that ability.
With a wrapped version of WXTZ, the WXTZ reserve governance can responsibly stake the underlying collateral for the benefit of the Tezos ecosystem regardless of whether or not the WXTZ token holder cares for that to happen or not.
Who governs Wrapped XTZ (WXTZ)?
WXTZ will have its own autonomous governance system in the future with its own governance token, provisionally called ‘gWXTZ’. Most of this token will be yielded by staking WXTZ.
Slightly over 50% of gWXTZ will be earned by staking. The genesis supply of gWXTZ will be allocated to the Trustees (TRU token holders who receive a genesis allocation of technologies produced by Tezos Stable Technologies, in association with the issuer, Tezos Stablecoin Foundation — a non-shareholder foundation. TRU will be distributed to project development partners, founders, backers of Tezos Stable Technologies. A public sale of TRU will be announced soon.)
WXTZ is an open-source ecosystem collaborative project, with efforts and resources contributed by many firms and participants. The project is under the coordinating aegis of Tezos Stable Technologies Ltd. — a wholly-owned subsidiary of the Tezos Stablecoin Foundation, a non-shareholder foundation.
What happens to the baking rewards from collateralized XTZ?
The baking rewards received by the WXTZ reserve is, of course, a topic of great importance and this will advance over time. Governance will decide more advanced steps to advance the WXTZ ecosystem, such as:
- Supplying liquidity to Tezfin for lending and borrowing
- Supplying liquidity to Tezos exchanges like Dexter and Quipuswap
- Providing ecosystem grants to those building for/with WXTZ
Can WXTZ holders stake their WXTZ to receive baking rewards?
Baking rewards will be the first stream of yield return for WXTZ staking. We’re working on securing a scalable and precise model on this front. This will be aided by many of the tokenized staking projects being built on Tezos now. (Example: Trustless Staking Token)
The better/broader question to ask is about ‘yield’ in general since yield can be generated in DeFi in more ways than baking alone.
How else could a person earn yield with WXTZ?
WXTZ will open yield-generating opportunities on Ethereum markets. These include supplying one’s WXTZ to:
- Liquidity Pools (to AMMs for pairings of WXTZ + other ERC-20s)
- Lending Pools (earn rewards or collateralize it and borrow against it)
Liquidity pools for WXTZ will be available first, through automated market makers like Uniswap. We’re working with Ethereum DeFi platforms to enable yield generation markets for supplied WXTZ.
Natively, WXTZ holders can (as mentioned) stake their WXTZ, for a token provisionally called yWXTZ. yWXTZ would be the collateralized version of wXTZ, which yields growth for the user on the basis of a changing exchange rate. That is, the yWXTZ becomes more valuable over time because more earnings are added to the yield reserve, and so expectedly the yWXTZ/WXTZ exchange rate becomes more favorable to the user over time.
What else can be done with WXTZ?
WXTZ is Ethereum dApp-programmable. By standardizing XTZ to an Ethereum ERC-20 contract, Ethereum-based transaction calls involving XTZ value are thereby much easier and more writeable for a smart-contract (let alone multiple) than a cross-chain call. This includes not only programmatic aspects of the WXTZ contract but other Ethereum contracts that would utilize WXTZ as well.
What that means for a user is that WXTZ can be integrated into the mechanics of yield-generating DeFi platforms on Ethereum today and tomorrow, whereas XTZ by itself cannot.
Despite the massive growth in 2020, yield generation technologies and methodologies are just getting started, with many new wonders to come. WXTZ will be there for all of it.
How can I keep up with the Wrapped Tez (WXTZ) project?
Stay in touch for updates. Connect with us on these platforms.
Visit our website: https://WXTZ.network
Follow us on Twitter: https://twitter.com/WrappedXTZ
Join us on Telegram: https://t.me/WrappedXTZ