WXX: All You Need To Know About The Wrapped XX Coin

Last Updated on July 16th, 2024

XX Coin has a wrapped sibling as of March 23rd 2024 (10:21:23 PM UTC to be precise), when the first WXX was minted on the Ethereum blockchain as an ERC20 Token.

The WXX ERC20 token contract address is:

0x171120219d3223e008558654ec3254a0f206edb2 0x171120219d3223e008558654ec3254a0f206edb2

Further bridges to other networks are planned, but this article focuses on the XX -> ETH (and vice versa) bridge, which is now live at https://bridge.xx.network

I spoke to Bernie Cardoso who worked on the first bridge between the XX Network’s Layer 1 Substrate-based chain and Ethereum, to find out how it works and how the future of it looks.

You can read a short intro to using the new bridge here.

The Why

Before I go into the guts of WXX, it’s worth mentioning why it exists at all in the first place.

By having a wrapped coin, it presents to the project two distinct advantages:

Compatibility with the major Decentralised Exchanges (DEXs)
A shorter route to being listed by Centralised Exchanges (CEXs)

Both of these things mean more exposure for the XX Network in less time and with less cost, and in some cases also, less frustration from confusion when listing agents see the word ‘privacy’ and run a mile (even though there is absolutely no reason to). This happened recently when attempting to list the XX native coin on a new CEX.

Decentralised exchanges such as Uniswap are extremely well established and offer an easy in-road for ERC20 tokens, meaning listing on there is merely a case of provision of a liquidity pool and setting it up in a few steps, along with possible provision of rewards for liquidity providers.

An interesting side effect of having both native and wrapped XX is that it also presents arbitrage opportunities for day traders who might spot a price difference between exchanges with WXX on one and XX on another and take advantage of that difference to make money. Bots exist to take advantage of this, which increases overall trading volumes.

The How

The implementation from XX consists of relay servers, smart contracts and some amount of governance along the way.

Either way, the ERC20 WXX is listed and traded on both CEXs and DEXs without the bridge necessarily needing to be used.

Coinstore and Biconomy have listed both XX and WXX to create an indirect bridge which has benefits in itself, not least saving the gas fees of moving WXX off the exchange.

The XX team have created 5,000,000 WXX to start, and the Foundation have distributed coins involving multiple parties (as part of multi-sig transactions) to place native XX into the bridge account for this and later ‘other-blockchain’ liquidity.

The native XX in the bridge account is then locked up so that the circulating supply of XX as a whole (native + wrapped) does not go up or down, other than by the normal function of the network’s economics.

If you prefer not to use an exchange, you can send WXX to the bridge which will burn the WXX and unlock the equivalent native XX for their withdrawal. The opposite then applies for folks wishing to obtain WXX – send native coin to the bridge, which is locked and then new WXX is minted for withdrawal.

Post Bridge Launch

Bernie explained that the priority now the bridge is up and running is to use other EVM bridges already around to give them an opportunity to then move the ERC20 token into other EVM-based chains and ecosystems (e.g. BSC, allowing a listing on Pancakeswap which is already in motion), creating further exposure within other DEXs.

The initial set up of the bridge mechanics pre-launch was using a 2 of 3 Gnosis Safe multisig. Now the bridge is launched, this ability will be removed so that only the bridge smart contracts can mint/burn and lock/unlock.

Monitoring tools are being developed for internal review which will eventually become a publicly accessible view which will utilise cMixx so that the relay servers’ IP addresses are never exposed.

Some Governance Admin was Done

Bernie went on to explain that at the inception of the XX Network, there was forethought for this, and funds for a bridge were allocated at the outset. Initially, 50M native XX was set aside for liquidity rewards, but the team believe this is too much. Bernie said:

“There’s already 50M XX locked in the bridge account, but those funds technically belong to community since they’re allocated as part of the rewards pool. The plan is to move some of those funds to the staking rewards pool, and to use some to fund liquidity provider rewards on DEXs. This was the initially intended purpose of the funds (as described in the economics paper), but the 50M value is too much. All of this will be done via public referendum, since like I said, the funds are ‘owned’ by the community.”

The decision was made part of the runtime upgrade 206 in June 2024 to allocate 40M XX to the native staking rewards pool and leave 10M XX in the bridge account for liquidity rewards.

The Future is Trustless

Bringing WXX into existence as quickly as is safe and secure and employing Foundation-run relay servers means that there may be some concern about a single point of failure, or the longevity of such a service. With that in mind, I asked Bernie if the bridge could ever become trustless. He cited the impending launch of the trustless Polkadot bridge Snowbridge which will bridge DOT and ETH completely trustlessly. He added:

“Once this (Snowbridge) is live we can do the work to bring the DOT side of the tech to our network. This will take some engineering time obviously, but it’s a safer option for the future of the bridge. From my understanding, this trustless bridge is still quite slow (like 20m for a transfer), so we will also need to keep up with updates on the Snowbridge tech.”

Eventually, there will be no one party to trust when bridging between XX and WXX on ETH (and subsequent EVM chains) at the very least once this is done.