The need for crypto tokenization on Ethereum strengthens as the decentralized finance (DeFi) market continues to advance. Noteworthily, the Ethereum blockchain serves as the go-to network for DeFi and its related protocols. In a way, this makes the usage of non-Ethereum digital currencies on the market quite challenging. The lack of proper blockchain interoperability isn’t helping either. This results in the creation of tokenized assets, which keep gaining traction amid the recent boom in the DeFi market.
In this same cause, Anchorage and Tokensoft announced the development of an Ethereum version of Zcash. Dubbed Wrapped Zcash (WZEC), the token aims to bring DeFi to ZCash holders, while still maintaining anonymity for users.
Wrapped Zcash for DeFi
For starters, Zcash (ZEC) is a privacy-focused digital currency that uses several cryptographic protocols to offer anonymity. Zcash runs on its separate blockchain, which warrants the creation of Wrapped Zcash, based on the ERC-1404 smart contract standard. Interestingly, this standard is primarily designed for security tokens on Ethereum. Basically, WZEC reflects the same price of ZEC cryptocurrency in a 1:1 ratio. Thus, only the equivalent of the contributed ZEC supply can be minted as WZEC.
Anchorage provides custody for original ZEC assets, while Tokensoft handles the technical and development aspect of the Wrapped Zcash. The development today is quite a milestone for the entire Zcash community. It ultimately allows investors to participate in yield farming and other DeFi services, as well as decentralized applications (dApps). It provides interoperability of Zcash with decentralized applications such as Maker, Uniswap, and Compound.
More liquidity sources for DeFi protocols
Meanwhile, it’s worth noting that Wrapped Zcash is not the first DeFi-compatible token representing the privacy cryptocurrency. About five months ago, Ren enabled a similar token for the Zcash community via its tokenization platform, RenVM. The platform offers renZEC, an ERC-20 token for Zcash, among its first batch of tokenized cryptos.
These tokenization protocols allow crypto traders to participate in DeFi with their favorite assets. As more Ethereum-compatible tokens launch, DeFi protocols cap tap into additional liquidity sources, thereby increasing the market’s valuation. Currently, the entire DeFi market has up to $12.07 billion worth of locked digital currencies, according to DeFi Pulse.
The decentralized exchange (DEX), Uniswap, still dominates the market at 22.58 percent, with about $2.72 billion in assets. Maker and WBTC follow the list with $2.09 billion and $1.37 billion in assets, respectively. These three top platforms continue to make their mark on decentralized finance.