Today, we’re announcing 21.co Wrapped Tokens, our upcoming suite of wrapped assets designed for cross-chain functionality and greater security than purchasing the underlying assets outright. As cross-chain security evolves, the initial suite of centralized wrapped assets provides a stable opportunity to maintain momentum while the DeFi community scales.
DeFi Needs Interoperability
There are many ways to interact with decentralized finance (DeFi). From simple use cases like banking to conducting complex transactions, onchain interactions create an indelible, traceable ledger of actions and accountability. Each blockchain network is built for a specific use, and holding a token— Aave or Solana, for example—signals confidence in the success and application of that network. The utility is what makes this tech so promising for billions of people.
Reaching mass adoption means supporting a wide range of DeFi use cases and bridging liquidity across them. As Simran Jagdev from Consensys noted in late 2022:
“One of the key factors hindering mass adoption of blockchain technology and Web3 today is its siloed nature. While users of one independent blockchain, say Ethereum, can seamlessly interact with the decentralized applications built on that particular blockchain—communicating with other blockchains, say Polkadot or Avalanche, is still difficult. As a result, users are forced to split their liquidity among different chains, while developers ineffectively spend time and resources on these separate chains.” Cross-chain interoperability is the future of DeFi.
Interoperability introduces the ability to work across blockchains without constraint—all of your liquidity within reach of your favorite smart contract.
However, the primary method for cross-chain transactions, known as bridging, has been deemed unsecure. Bridges are regularly targeted for exploits— so many have occurred that DefiLlama now keeps a record of Total Value Hacked, with an entire subcategory devoted specifically to bridge hacks. They’ve calculated that bridge hacks make up nearly half of the total value lost—$2.6 billion out of $5.52 billion.
Exploits Have Occurred for a Variety of Reasons
Sometimes the vulnerability lies in how certain smart contracts are built: While smart contracts are a viable long-term option for managing onchain activity and securing assets, smart contract security can be difficult to get right. The consequences of even a simple oversight can be enormous.
Other times the vulnerability occurs in the bridge: Trustlessly verifying bridge transactions requires the target blockchain to interpret the consensus of the origin chain. While ideal from a trust perspective, these so-called light client bridges are complex and expensive to both build and operate.
And occasionally the issue is with the keys: Sometimes hacks are a result of a failure to custody private keys. The lack of transparency and regulations in this case offers the worst of both worlds: centralized, but very unsafe.
Getting to mass adoption will require better solutions for interoperability.
That’s why we’re excited to announce 21.co Wrapped Tokens, our upcoming suite of wrapped assets designed to allow for cross-chain functionality while providing greater security.
21.co Wrapped Tokens to Bring Cross-chain Security and Liquidity at Scale
21.co Wrapped Tokens rely on our time-tested proprietary operating system, Onyx, to power the mint-and-burn redemption process, which has been adapted for onchain tokens. All underlyings are held in cold storage by institutional custodians, offering separation between the issuer and the native blockchain token. Operations are executed by approved and verified institutions that can mint and burn tokens to maintain their peg with the underlying assets.
All operations are reviewed with both automated and manual checks conducted over multiple steps, each required to approve the transaction. The keys necessary for sending cryptoassets to and from the custodian are shared through Multi-Party Computation (MPC) cryptography with multiple segregated participants.
“DeFi needs cross-chain interoperability to be successful, but up until this point traditional solutions have been plagued by serious security vulnerabilities,” said Hany Rashwan, co-founder and CEO at 21.co. “We firmly believe DeFi is the future, and have long been committed to bridging traditional finance and decentralized finance with our experience and our products. With the launch of centralized wrapped tokens, we are thrilled to be offering this much-needed technology to the DeFi community that will help DeFi continue to win.”
The new 21.co Wrapped Tokens are specifically designed to support interoperability, and the first use case of the Wrapped Tokens will power the launch of Index Coop’s first multi-blockchain index, the Index Coop Large Cap Index ($ic21).
Interoperability Made Easy
The premiere suite of 21.co Wrapped Tokens hold the underlyings of the top eight cryptoassets by market cap. Seven of the top ten tokens on CoinGecko are L1 tokens and crypto users deserve the ability to utilize these tokens across protocols:
- 21BTC - 21.co Wrapped Bitcoin
- 21BNB - 21.co Wrapped BNB
- 21XRP - 21.co Wrapped XRP
- 21ADA - 21.co Wrapped Cardano
- 21SOL - 21.co Wrapped Solana
- 21LTC - 21.co Wrapped Litecoin
- 21DOT - 21.co Wrapped Polkadot
- 21BCH - 21.co Wrapped BitcoinCash
Through the mint and burn process by Onyx, users of the 21.co Wrapped Tokens get the full security of a centralized, robust system while gaining access to their favorite tokens. With a track record of processing mint-and-burn at scale with ETPs, 21.co Wrapped Tokens provide the perfect infrastructure for handling complex DeFi use cases onchain.
We will be going into detail about the release of 21.co Wrapped Tokens at Permissionless II. Join us for our talk, Secure Bridging: Crosschain Liquidity and the Future of Onchain Allocation, on Wednesday, September 13 from 2:50-3:30 PM Central Time, as we look at the future of blockchain and what it will take to achieve interoperability.