What is Wrapped Filecoin (WFIL)？

At first, it might seem confusing why we have a token like WFIL. Don’t we already have FIL on the Filecoin blockchain anyway? The first thing to understand is that not every token on Filecoin is technically alike. The network allows developers to create new rules and standards for cryptocurrencies.

One example would be the ERC-721 format that gives us Non-Fungible Tokens (NFTs). These act very differently from FIlecoin or ERC-20 tokens. Developers have a lot of room for customization when creating these digital assets. So while FIL can be used to pay for gas fees on Filecoin, FIL can’t be used in every DApp.

Most DeFi DApps nowadays accept ERC-20 tokens for investment and staking opportunities. If we want to add FIL to a liquidity pool or use it as collateral, it’s much easier to have it in an ERC-20 version. This provides the most compatibility across the blockchain and saves time developing new smart contracts.

Why do we need to wrap FIL?

Wrapped Filecoin (WFIL) is a token pegged to Filecoin (FIL). WFIL is used in several platforms and DApps that support ERC-20 tokens. While FIL is used to pay for network transaction fees, it doesn’t have the same functionality as ERC-20 tokens.

You can easily convert FIL into WFIL through a process known as wrapping. You can also convert WFIL back into FIL at any time. Both wrapping and unwrapping follow a 1:1 ratio, meaning there are no extra costs apart from transaction fees.

You can wrap your FIL manually by interacting with the WFIL smart contract, which will store your FIL and give you back the exact same amount of WFIL.

Filecoin’s DeFi ecosystem is large, and using WFIL provides more opportunities for staking and investing. There are many versions of WFIL, but some are more popular than others. You can even find wrapped FIL on other blockchains to use in their ecosystems. Popular uses for WFIL include NFTs trading, providing liquidity to liquidity pools, and crypto lending.

How to wrap FIL (FIL)?

The process of generating WFIL is simple - you send your FIL to a smart contract that then provides WFIL in return. This means that all WFIL created is backed up completely by FIL reserves. Your FIL is locked in the smart contract and can be exchanged back at any time for WFIL. When your FIL is returned, the contract burns the supplied WFIL.

To wrap FIL, you can interact directly with the WFIL smart contract, so that it takes your FIL and credits your wallet with WFIL at a 1:1 ratio (you still have to pay for transaction fees). Converting back requires another smart contract interaction, but the process is pretty much the same.

However, it’s much easier to swap another token for WFIL using a crypto exchange. Let’s see how you can swap your FIL for WFIL using the Uniswap DEX or directly through your Metamask wallet.