Complete Guide to Wrapped HIVE on Uniswap | Written Edition

in LeoFinance2 months ago (edited)

Complete Guide to Wrapped Hive  Written Guide.png

Yesterday, I released the video guide that I put together which explains wHIVE and how to use it for swaps and liquidity pools on Uniswap. A lot of people asked for a written version along with a LeoPedia entry, so here we go.

In This Guide:

  • What is Wrapped HIVE?
  • How do Wrapped Tokens Work?
  • Example: Wrapping HIVE to receive wHIVE
  • Example: Swap wHIVE into ETH
  • Example: How to Add Liquidity to Uniswap and Earn Fees on wHIVE Swaps
  • Other Use Cases and the Future of wHIVE

What is Wrapped HIVE?

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Wrapped HIVE (wHIVE) is an ERC20 token that was created on the Ethereum blockchain about 2 weeks ago (mid August 2020). There are now 2 tokens to be aware of here: HIVE and wHIVE.

HIVE tokens live on the Hive blockchain. wHIVE tokens are equal in value to HIVE tokens, but live on the Ethereum blockchain. By using wHIVE tokens, you're able to interact with various Ethereum-based applications and protocols that you wouldn't be able to interact with using the native HIVE token.

The value in using a wHIVE token that is pegged to the HIVE price is that you get to stay invested in HIVE while still using Ethereum protocols. For example, if you want to use $100 on an Ethereum-based protocol but don't want to sell your HIVE into ETH or another ETH token and miss out on future gains in the HIVE token, then you can wrap your HIVE and receive the same $100 equivalent in wHIVE. This allows you to participate in the price gains of HIVE while simultaneously using ETH protocols and DeFi projects.

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1 Wrapped HIVE is equivalent to 1 HIVE. The supply of wrapped HIVE tokens and their HIVE equiavlent is verifiable on the official wHIVE website:

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https://www.whive.network/verify.html

wHIVE was created by @fbslo and supported by @theycallmedan. There were also a few other Hive community members involved in various processees like creating an interface for wHIVE.network and testing. See their official post for those details.

How do Wrapped Tokens Work?

Understanding how Wrapped Tokens work in general will help you understand how wHIVE works and why creating a bridge to Ethereum is a worthwhile endeavor.

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Wrapped Bitcoin is probably the most important wrapped coin out there. It brings the value and community of HODLers that exist on Bitcoin and deploys an easy access bridge to the ETH blockchain for these people. Many of whom would have never used an ETH protocol if this bridge didn't exist.

Other wrapped tokens are becoming popular on the ETH blockchain. You send the native token (in this case, HIVE) and receive the ETH-based token (in the case, Wrapped HIVE). Wrapped HIVE is simply a pegged version of HIVE. Each wHIVE represents 1 real HIVE that is custodied in the @wrapped-hive Hive account

When you wrap a HIVE token, you’re sending 1 “real HIVE” from your Hive blockchain account to @wrapped-hive and then you’re receiving 1 Wrapped HIVE to your ETH blockchain address.

When you’re ready to unwrap your wHIVE and come back to the Hive blockchain, you simply send the wHIVE back to your designated Wrapped Hive ETH address and you’ll receive “real HIVE" back to your Hive blockchain account.

The wHIVE that you unwrapped on the ETH blockchain will then be burned. That means that if you unwrap 50 wHIVE and receive 50 HIVE in exchange, the system balances itself out by burning the 50 wHIVE since your 50 real HIVE are no longer custodied by the system. The system will always keep 1 wHIVE for each 1 HIVE

Example: Wrapping HIVE to receive wHIVE

Wrapping HIVE and getting wHIVE over on the ETH blockchain is a very simple process. The first thing you need is an Ethereum address. Personally, I use the Metamask Extension coupled with a hardware wallet. My hardware wallet plugs directly into Metamask which lets me use all the major ETH dApps without having to trust a desktop wallet for signing transfers.

If you don't have a hardware wallet, then I recommend just downloading Metamask and following the steps as laid out to generate keys and backup the wallet seed phrase.

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Once you've done that, you'll have an ETH address locked and loaded in Metamask. Take that address and then go to the Official Wrapped Hive Website.

On the page linked above, it will show a spot for you to enter your ETH address and wrap your HIVE:

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Input your ETH address, then hit submit and choose how much HIVE to send

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After about 30 seconds, you can check your wallet on the Hive blockchain and see that the transfer went through successfully. @wrapped-hive will refund extra the HIVE that it didn't end up using for tx fees (in my case, I sent 1700 HIVE and got refunded 14.225).

Now that you've wrapped your HIVE, you can go back over to the Metamask extension. Click assets and then scroll down to the bottom to find "Add Token".

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After you click Add, it will show a page with "Search" and "Custom Token". Select Custom Token and then enter the wHIVE contract address:

0x11d147e8d39f59af00e159c4b1fe3a31d58a2c66

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After you add the wHIVE token, you'll now see wHIVE in your Metamask extension and wallet. From here, you can send wHIVE to other ETH addresses and see your balance at any time.

Example: Swap wHIVE into ETH

Okay, now we've successfully wrapped HIVE and took our HIVE from the Hive blockchain and effectively moved it over to the Ethereum blockchain in the form of wHIVE.

Wrapped Tokens have a lot of potential use cases. As of right now, wHIVE is being swapped on Uniswap or used for liquidity pools which yield passive income in the form of pool fees. This part of the guide will show you how to swap wHIVE into ETH and other ERC20 tokens.

Head over to the Token Page for wHIVE on Uniswap. On this page, you can see the dashboard for wHIVE along with the total volume, liquidity, price history and available token pairs.

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You can see here that the liquidity has been growing a bit and 3 pairs have already been added:

  • wHIVE-ETH
  • wHIVE-DAI
  • wHIVE-USDT

In my example here, I'll swap between wHIVE and ETH but the process is the same regardless of which pair you decide to use.

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First, you have to "Approve WHIVE" - this is something that you have to do anytime you send an ERC20 token for the first time out of a particular ETH address. It simply allows Uniswap to interact with your ERC20 token balance.

One you've approved WHIVE transfers on Uniswap, you can enter the amount of wHIVE you want to swap and how much ETH you want to receive (or vice versa). There are a few extra pieces of data below the swap menu. The main one to focus on is the Price (1477.47 WHIVE per ETH in this example) and the Price Impact (4.96% in this example).

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When your swapping tokens on Uniswap, there is an algorithm that calculates a price impact depending on the size of your transaction compared to the overall liquidity of the pool. To avoid people doing large transfers that negatively impact liquidity, Uniswap will add in a price imapct that makes you pay more per token if your transaction is above a certain threshold against the liquidity.

Just play around with your swap and do a manually (wHIVE to ETH) calculation to see how much you're paying in USD per wHIVE and then you'll know if its too expensive for the size of your tx. As the pair gains more liquidity providers, the size of possible swaps without crazy high price impacts will increase.

This is why it is vital that we get more liquidty added to the wHIVE pairings on Uniswap. As of right now, the liquidity pool is very low. I personally own about 10% of the liquidity pool on the wHIVE-ETH pairing as of this writing and I'd like to see more people add liquidty to that so we can rank higher on Uniswap and get more transaction volume.

Example: How to Add Liquidity to Uniswap and Earn Fees on wHIVE Swaps

As I just mentioned, it's vital that we get more liquidity added to the wHIVE pairings on Uniswap (and on other DEX's as they arise). Liquidity is the key to volume - especially because of the high price impact % that accompanies low coin liquidity.

To add liquidity, visit the pair page that you would like to add liquidity to. I chose the wHIVE-ETH pair but you can choose the USDT or DAI one and follow the same steps. Click the "Add Liquidity" button in the top right.

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On the Add Liquidity page, you can enter how much wHIVE you want to provide and it will fill out the corresponding ETH amount. Important Note: you have to provide an equivalent amount of liquidity on both sides when using liquidity pools on Uniswap (other DEXs have different rules). In this example, I choose to provide 1 ETH and have to also provide 1 ETH worth of wHIVE (1589.22).

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Again, you might have to approve wHIVE transactions before being able to hit the "Supply" button. Once you approve wHIVE, hit Supply and you'll see the following confirmation screen:

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wHIVE/ETH Pool Tokens represent your tokenized share of the liquidity pool on Uniswap for the pair of wHIVE-ETH. This screen will also show you your share of the pool at the current liquidity amount. Keep in mind that your % share of the pool will fluctuate with the total liquidity in the pool. i.e. if the pool has $10,000 in it and you deposit $1,000, you'll own 10% of the pool. If $10,000 more gets added to the pool and it becomes $20,000 USD, then your share of the pool will dilute to 5%.

That might sound like a bad thing, but it's not. The more liquidity the pool has, the more transactions there will be. With more transactions comes more users of wHIVE and ultimately, more transaction fees for the whole pool. If the liquidity is low, then there won't be many fees to earn from. That's why I hope to help a few experience Hive users jump into the liquidity pool game and increase the viability of our Uniswap pairs on one of the most popular exchanges in all of crypto.

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Here you can see that I confirmed the TX and added 1580 wHIVE and 1 ETH to the liquidity pool. This earned me 5% of the pool (at the time) and it shows my tokenized position in the pool. As people use the wHIVE-ETH swap pair for token swaps, I'll collect approximately 5% of the Uniswap fees that they pay.

Other Use Cases and the Future of wHIVE

One of the interesting parts of wHIVE is that it is simply a bridge to Ethereum. What we choose to do with that bridge is up to us.

Right now, our community has done well in setting up 3 token pairs on Uniswap and I know several people who are actively looking into other exchanges like Balancer and even protocols like MakerDAO to get wHIVE listed there.

As of now, you can use wHIVE to transact with other ETH tokens and eventually unwrap back into HIVE. It allows you to stay a HIVE HODLer but still participate in this explosive DeFi movement. As we see the addition of more protocols that accept wHIVE, we'll see a lot more use cases for the token bridge. Uniswap is the tip of the iceberg for wHIVE and I'm excited to work on getting wHIVE accepted in more places so that.

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But the gas fees.... :o

ERC20 token & P-o-W inherent weakness. You could hv added exclamations to that quote comment. 😄

Nice 👍 I'll add some liquidity tomorrow - ✅

Great! I think it's an awesome way to particpate in DeFi while also HODLing/supporting HIVE.

Posted Using LeoFinance Beta

That price impact is why we really need to get liquidity up. A 200 wHive swap having a nearly 5% price impact... is not ideal. We need to get it up so people can do 50 buck trades without swinging the price.

100% an even beyond just $50. If you look to other coins on Uniswap of similar (or even a lot less) market cap, they have $100k+ liquidity at a bare minimum. Hive has less than $10k on each pair. It's only a few days old, but we need some more participation

Posted Using LeoFinance Beta

Thanks, I've bookmarked this and will definitely be coming back when I finally get involved.

Also, exciting to see the little Posted Using LeoFinance Beta footnote. Keen!

Posted Using LeoFinance

Glad to hear it. I've been enjoying the foray into DeFi while still carying the HIVE banner.

Yep, things are getting closer and closer to open beta. I'm replying to you from the interface now :)

Posted Using LeoFinance Beta

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Good explanation, thank you for this. Maybe we need some fund here in Hive to connect with uniswap pair whive-eth to rise liquidity?

I’m almost half way there.

Thank you for sharing this guide my man

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Informative

I use the https://www.whive.network/ for sending Hive to my Eth Adress. I have MEW online wallet. I create there custom token WHIVE with whive contract adress (on Etherscan). How much time needed from the hive to the whive in wallet?

Great work, @khaleelkazi!

WOW...awesome post.

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