Wrapped assets are becoming increasingly popular in the Blockchain ecosystem because they are able to generate many new yield opportunities and use cases for crypto holders. But there are different ways of wrapping assets, some of them assuring more legal and technical security than others. StakeHound is a new service that provides users the best of both worlds: a secure way of wrapping and liquid staking on coins such as Ethereum.
Wrapping is a new original
Simply put, a wrapped token is an asset usually hosted on another Blockchain with a value identical to its underlying asset. Most commonly, these assets can be found on the Ethereum blockchain as an ERC-20 token.
As users are shifting away from centralized exchanges (CEX) to decentralized exchanges (DEX) built on Ethereum, ERC-20 tokens are key to enable listings and trading on a DEX. The way to bridge the gap for non-ERC-20 tokens is through wrapped tokens.
From a user perspective, this opens not only the door to decentralized exchanges such as Uniswap but also enables many use cases around decentralized finance (DeFi) such as lending, borrowing, or providing liquidity for all kinds of trading pairs. By wrapping their tokens, users can now gain exposure to various services available on the Ethereum blockchain.
Centralized vs. Decentralized wrapping
An important question to ask here is whether these wrapped tokens are safe. But what are actually the options here?
There are two main ways of wrapping tokens: wrapping through a centralized institution or through a decentralized method. WBTC or Wrapped Bitcoin is an example of a centralized approach. By wrapping the original Bitcoin through a centralized institution such as Bitgo, users put their tokens with a licensed custodian.
On the other hand, a decentralized method uses smart contracts to verify that the original assets of their wrapped versions exist. Ren Protocol is an example of that. The critical difference between the two is that having a centralized institution as a custodian provides more security and legal protection to users.
As we see more and more institutional and retail money flowing into DeFi and specifically into these wrapped assets, we at StakeHound believe that user protection and legal compliance on a global scale is key to building the next generation of financial products.
With StakeHound, users can create wrapped assets that are instantly transferable and can be immediately used in DeFi products and services. Users can soon purchase wrapped assets with their favorite tokens such as ETH, Dash, XZC (Firo), RADIX, or XEM and XYM. The user assets are then put into custody by our institutional-grade custodian partner. StakeHound itself is a Swiss-registered company.
Wrap and earn yields on your original assets
Once the tokens have been received, StakeHound instantly generates and sends the user a one-to-one ERC-20 representation of their original tokens. The amazing thing for users is the yield options that this allows.
How is this possible? As StakeHound focuses on wrapping crypto assets with staking options, we can generate yield on the original assets. So, StakeHound stakes the tokens it receives, stakes, and distributes the staking rewards directly to users. This way, the user does not have to do anything. Once every day, the user will simply see an increased token balance in their wallet.
For the user, this enables a whole new way of earning staking rewards, most notably, because they earn those rewards without locking up their tokens. The staked version generates passive income and can be used at any time, either to trade or to participate in all popular DeFi applications.
For users who are worried about not participating in decentralized finance because of not owning ERC-20 tokens, this innovative technology of wrapping tokens is the answer. With StakeHound, users can now enjoy the benefits of staking without the need to experience the limitations that come with it. But that’s not all. And on top of that, users will also receive HOUND, our native governance token.
Ethereum 2.0 – the perfect use case
With the launch of Ethereum 2.0 in the near future, many users are facing exactly the problem we just described: They can potentially earn yield by staking their ETH, but they have to accept a long lockup period. As their ETH is locked up, it is essentially an illiquid asset in their portfolio. So, for the user, it comes down to choose between yields or liquidity.
Stakehound solves that problem by giving the user the wrapped version of Ethereum named stETH. This way, the user is receiving a wrapped version of ETH – stETH that is not only liquid; but also secure as it is held by a trustable and regulated custody provider.
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