The difference between XDC and WXDC (wrapped XDC) is a common topic of confusion between liquidity providers and traders when interacting with DeFi protocols.
XinFin (XDC) is the native token or currency of the XDC Network. It is used to pay for gas or transaction fees when interacting or executing contracts on XDC Network.
In the early days, many projects started launching their own tokens with their own functions in order to create an ecosystem of tokens where they can interact with each other, To set rules and regulations as the blueprint for tokens on the XDC Network.
For example, the XRC-20 standard defined certain mandatory rules for every token contract, such as totalSupply, balanceOf, transfer, transferFrom, approve and allowance.
The XRC-20 standard allowed for not only interoperability between tokens but also a set of standards that would be useful for exchange listings and transferring tokens from one user to another.
Without the XRC-20 standard established, developers could not easily integrate other tokens into their projects without knowing how to call the functions in the token contract.
Examples of XRC-20 tokens are all over the place, such as the Xswap token (XSP), Comtech Gold CGO token, or Plugin PLI token.
XDC was developed before the XRC-20 standard was established
However, the XRC-20 standard was developed after the native token XDC was released, and XDC in its original form does not conform to its own XRC-20 standard.
In order to facilitate smart contract exchanges for other XRC-20 tokens on decentralized exchanges, XDC must first be converted or wrapped into an XRC-20 compliant version — WXDC — a standardized format like other XRC-20 tokens.
Wrapping XDC into WXDC does not impact its value, i.e., 1 XDC = 1 WXDC, and users can easily unwrap WXDC into XDC in a couple of clicks on any DEX.
It’s a simple principle that applies: the native network token has to be first wrapped to facilitate swaps with other tokens in a decentralized manner.
If you have questions regarding the XDC Network, please post them on https://xdc.dev.
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