Decentralized storage network Filecoin has launched five FIL wrapped tokens for the Ethereum network. On Crypto Twitter, users speculate that the wrapped assets can potentially have a high impact on the global financial system, comparing wrapped assets to CEX listings. More than that, the project can also disrupt DeFi itself by bringing forth new sets of data.
Corbin Page, a DeFi focused product developer at ConsenSys, revealed his opinion on Filecoin and its wrapped assets yesterday.
On his personal Twitter, Page compared the influx of wrapped tokens and their potential impact on the global financial system and the Ethereum network as well.
He named Filecoin’s wrapped assets and their growing liquidity. For him, these wrapped assets have the same power as token listings on CEXs did in 2017.
But what is Filecoin exactly? As one of the oldest projects and ICOs in the history of cryptocurrencies, Filecoin is a decentralized storage protocol that utilizes the Interplanetary File Storage (IPFS) system.
Customers can utilize the native coin for charging contracts and capturing file storage. All forms of storage have to be paid for exclusively with FIL. Likewise, node operators also earn rewards via FIL.
On November 6, the team announced that it would connect Filecoin with the DeFi ecosystem. In an interview held between Aave’s Stani Kulechov, Ren’s CTO Loong Wang, and Corbin Page, the participants have explained what DeFi is and what Filecoin can bring to the overall market.
Wang stated that on-chain costs and transaction speeds hinder decentralized networks the most. Per the Ren CTO Filecoin already solves one half of this problem while other protocols are looking to solve the rest. Wang has mentioned that datasets in finance are ‘an obvious use case’ and that Filecoin will have to connect with DeFi in order to improve it.
Wrapped Filecoin? Wrapped Bitcoin reigns supreme
To connect with DeFi, the protocol must first connect with the leading smart contract ecosystem Ethereum. Since 2020, developers have worked on a way to connect multiple blockchain networks with each other without losing any fundamental features. As such, they have created wrapped assets.
Wrapped assets are tokenized versions of existing digital currencies that can be used on another network. For example, renBTC is an ERC-20 equivalent of Bitcoin which is backed on a 1:1 ratio. Accordingly, the Filecoin team created its own wrapped asset named Wrapped Filecoin (WFIL) near the beginning of December.
Developers have created the token by implementing the OpenZeppelin ERC20 module, along with other protocols such as Gnosis Safe. In this form, users can convert native Filecoin decentralized data and send it to the Ethereum network. From that point, any DeFi project or dApp can utilize the data by buying WFIL.
At the time of writing, Bitcoin remains to be the most popular wrapped asset. Based on data from market data aggregator DeFi Pulse, Wrapped Bitcoin (BTC) is the second leading DeFi protocol.
WBTC hosts around $2.25 billion in collateralized assets. Interest in tokens such as WBTC has drastically increased in recent months. Since September, the protocol has gained almost $2 billion in TVL.
Will wrapped Filecoin see similar growth? Perhaps not. But if the main Filecoin platform succeeds in establishing itself as the dominating decentralized data network, then it has a chance to disrupt DeFi as well.