Wrapped Filecoin (W-FIL) is a new tokenized currency that represents a promise to deliver the full Filecoin network and protocol. FIL has similar characteristics, but it’s not real FIL — at least not yet. So, what is wrapped Filecoin?
What is wrapped Filecoin?
Wrapping is a technology bridge that allows Filecoin to be directly used on other chains. Wrapped FIL offers the ability to use FIL tokens 1:1 within other blockchain networks including Ethereum, Polygon, Solana, Celo etc.
Rather than crossing chains, wrapped FIL is locked on the native chain and new ones are generated to represent the former one on the target chain.
How do I get wrapped Filecoin?
There are diverse types for you to choose from, such as wFIL, BFIL, and eFIL which are managed by a third party and have a lower risk while renFIL and vFIL are managed by smart contracts.
There is much liquidity in it so you can buy some wrapped FIL directly on your target chain.
Besides, you can wrap your token on your own. Open the target network and mint the required amount of Filecoin. The entire process just takes several minutes to complete, which omits the inconvenience of waiting for so long as the cross-chain bridges.
What are the benefits of wrapped FIL?
Wrapped FIL can offer the following benefits:
- Higher liquidity. The price of wrapped FIL is higher than that of native FIL because more investors want to buy and sell it. Additionally, more buyers and sellers in this market make the sale more likely to happen quickly and efficiently.
- Higher price to sell. Because wrapped FIL has higher liquidity, it is also more valuable than native FIL at any given moment. This means you will get back your initial investment faster if you sell your wrapped portfolio early on or hold onto it for a long term—your profit potentially increases as well as your risk level decreases (since you’re less likely to lose money).
- Quick transaction speed. Since there is no need to wait for the chains to update and to confirm the transaction like moving assets across chains, the whole process could be done at a fast pace if you are in a hurry to use it.
The limitations of the wrapped FIL
However, wrapped FIL needs a custodian to hold and guarantee safety, so it’s not decentralized. With the high liquidity and flexibility to trade, the fees to wrap are higher than bridging assets across chains. But there are still many investors in the market who wrap and trade it to make high earnings.
Wrapped tokens allow for seamless application between different networks. This is a huge step toward making Filecoin more accessible to users who are not familiar with the ins and outs of blockchain technology. And it is beneficial to explore more application opportunities and promote communication before one token exists on the other chains.