It’s a vital piece of the Hedera ecosystem that allows for Hedera HBAR holders to fully utilise dApps developed on the Hedera Smart Contract Service.
HBAR is Hedera Hashgraph’s native currency and as such can be used freely across the Hedera Services. However, it does not conform to the standard that EVM dApps normally use.
ERC-20 is the fungible token standard used on EVM networks. It defines what a token is, how they are transferred and adds additional properties such as approving someone else to spend your tokens. It is the most widely used standard within Web3 dApps.
Since HBAR is a native currency built on the Hedera Hashgraph prior to the existence of ERC-20, it does not support the standard. This is where wHBAR comes into play!
Wrapping allows us to use native currencies that would otherwise be unsupported within a dApp. Here’s how it works:
When wrapping, the original HBARs are being deposited in a smart contract and an ERC-20 representation of the HBAR is minted back to the depositor. The key here is that these new ‘wrapped’ tokens are ERC-20 compliant, thus they can be used throughout dApps easily.
In our case, wHBAR is the ERC-20 version of the HBAR token, which makes it compatible with all dApps that support that standard.
If you, at any point, decide to redeem your wrapped HBARs, you can do that by depositing your wHBARs. The same amount of HBARs will be sent back to your address in exchange for the provided wHBARs.
wHBAR is an ERC-20 token that can be issued when HBARs are provided. Every wHBAR is issued 1:1 with the amount of HBARs deposited. ERC-20 HBAR representation enables the usage of HBAR throughout Hedera SCS dApps.