# Welcome to WrapX WrapX is a **permissionless** on-chain liquidity protocol that allows users to wrap native assets into **WToken**, generating a dynamic, usage-based representation of user-protocol relationships. > *WToken is a non-fungible token created through the wrapping process. It represents tokenized access to specific services or functionalities on platforms integrated with WrapX, and its value is influenced by factors such as market demand and the amount of wrapped assets. By holding WTokens, users can access exclusive platform features while also benefiting from potential appreciation in WToken value as more assets are wrapped.* ### How It Works In the WrapX protocol: 1\. Users generate WToken through on-chain interactions such as wrapping assets, adding liquidity, and calling smart contracts; 2\. WToken has **no pre-mine**, requires **no identity verification**, and is minted **purely based on on-chain activity**; 3\. There are **no seed rounds, no private allocations**, and **no privileged accounts**—every WToken is minted transparently via usage; 4\. All operations are executed by smart contracts, ensuring **trustless**, **transparent**, and **decentralized** mechanics; 5\. **Users are the protocol**—the consensus structure is built on actual usage data, not governance fiction. ### How Can WToken Do? WToken is a fully composable, on-chain representation of user rights and contributions. It serves multiple core functions: • ✅ **Governance Participation**: WToken grants users proposal and voting power within the protocol; • ✅ **Feature Access**: Acts as a gate to unlock advanced platform features and permissioned modules; • ✅ **Revenue Allocation**: Protocol revenue or incentives will be distributed according to WToken weight; • ✅ **Contribution Tracking**: Captures user engagement through verifiable on-chain behavior; • ✅ **Composable Asset**: Integrates natively with external protocols, offering utility across the DeFi stack. ### Design Philosophy WrapX is founded on the principle that “**real usage equals ownership**”. It rejects traditional distribution models in favor of a decentralized, open, and sustainable incentive framework. The goal of WToken is not to drive speculation—but to progressively return protocol control to those actively building and participating in the ecosystem. This **trustless, behavior-driven** model positions WrapX not just as a liquidity protocol, but as a new foundation for structuring participatory relationships across Web3. ### Integration & Composability WrapX is highly composable and easily integrates with staking protocols, launchpads, and other crypto-native applications. Once integrated, project participants can wrap supported tokens into WToken as a verifiable identity primitive, enabling: • ✅ Access Eligibility: For whitelists, airdrops, staking pools, and other gated systems; • ✅ Feature Unlocks: For higher-yield opportunities, governance rights, or premium modules; • ✅ Behavior-Based Credit Models: Quantifying real user activity and engagement levels; • ✅ Cross-Protocol Incentive Sync: Enabling cohesive user journeys and deeper retention. By turning every verified interaction into an asset relationship, WrapX helps projects build healthier growth models and sustainable incentive loops. By turning every verified interaction into an asset relationship, **WrapX helps projects build healthier growth models and sustainable incentive loops**. ### For Builders & Partners WrapX offers developers a **permissionless, on-chain-verifiable credential system** that transforms “interaction into consensus, and participation into entitlement.” This radically lowers the cost of building robust user incentive structures, while aligning protocol control with actual user contributions. # Introduction Gateway to DeFi future WrapX introduces a new layer of utility for on-chain assets by enabling users to wrap tokens into dynamic WToken representations. This mechanism enhances liquidity, unlocks access rights, and strengthens user alignment through verifiable on-chain behavior. By integrating token wrapping with decentralized interaction, WrapX sets a foundation for programmable asset utility across DeFi applications. #### **Core Innovations** **1. Tokenized Access to Decentralized Services** * **Platform-Integrated Services:** WrapX integrates a variety of decentralized tools, allowing WToken holders to access a range of platform-specific functionalities. * **Tokenized Access Control:** Access to these services is governed by WToken ownership, ensuring a decentralized and permissionless user experience. * **On-Chain Pricing Curves:** The pricing and utility tiers for services are dynamically determined based on on-chain token economics, adapting to market conditions. **2. WToken as a Financial Instrument** * **Transform Fungible Tokens into WTokens:** Users can **wrap fungible tokens** into WTokens, which function as **enhanced financial assets**. * **Dynamic Liquidity Mechanism:** WrapX employs a [**Function Oracle Automated Market Maker (FOAMM)**](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5141660) model, ensuring efficient liquidity allocation for **WToken** transactions. * **WTokens as Certificate Proofs:** These wrapped WTokens can serve as **proof-of-access credentials**, unlocking services and gated utilities. **3. Decentralized Trading & Market Impact** * **WToken DEX Integration:** WrapX functions as a **decentralized marketplace**, enabling users to **trade, stake, or redeem WTokens** based on their embedded value. * **On-Chain Revenue Sharing:** A **1% transaction fee** is applied to all wrap/unwrap actions, distributed among network participants and stakeholders. * **Marketing & Attention Economy:** WToken-based access models **drive engagement**, enabling projects to offer exclusive utilities and reward early adopters. *** #### **How It Works** **1. Wrapping Assets (Tokens → WToken)** Users can deposit tokens into the WrapX contract to wrap WTokens, unlocking AI tools and services. These WTokens hold inherent **financial value** and can be transferred, traded, or redeemed. **2. Unwrapping NFTs (WToken → Tokens)** When a user wants to **redeem** their WToken for its underlying asset, the **unwrap function** burns the WToken and releases the stored ETH or ERC20 tokens back to the recipient, minus transaction fees. **3. WToken Utility & Trading** * Wrapped WTokens **unlock AI services** based on on-chain pricing curves. * Users can **trade** their wrapped WTokens with **the deployed pool directly** or external marketplaces such as Opensea.io. * Projects can **distribute wrapped** WTokens **as premium access passes**, ensuring engagement in the **attention economy**. *** #### **The Future of Tokenized Services** WrapX represents the **next evolution** in decentralized finance and platform accessibility. By integrating decentralized liquidity, tokenized access to services, and the utility of WTokens, WrapX creates a new model where WTokens serve as **functional assets that enable real-world applications**.
# Background FOAMM is motivated by the limitations of current pricing mechanisms. This chapter introduces AMM, bonding curves, and auction curves, highlighting their advantages and challenges or drawbacks. **Economics whitepaper on SSRN:** {% embed url="" %} **Motivation** Liquidity constraints pose a fundamental challenge in decentralized systems, particularly for unique or infrequently traded assets. To establish a trustless asset ecosystem, the Function Oracle Automated Market Maker (FOAMM) is designed to facilitate automated on-chain price discovery and liquidity provisioning through transparent and verifiable smart contract mechanisms. * **Key Features:** Automated On-Chain Price Discovery + Liquidity Optimization.

Schematic Diagram of Asset Price Trends

The curves related to on-chain automatic price discovery and liquidity

### On-chain Assets Pricing {% embed url="" %} Automated Market Maker(AMM) curves Utilized for token swaps, with constant product formula **`x * y = k`** gaining the most consensus, employed by [Uniswap](https://app.uniswap.org/). **Advantages:** • Most widely used token swap solution. • Strongest consensus for ERC20 exchanges.

AMM Price on x * y = k

At the same time, there are also drawbacks: * Challenges in sourcing and managing liquidity. * Vulnerability to MEV attacks. * Limited to ERC20 assets. In conclusion, while AMMs with the constant formula are widely used for token swaps, they face challenges such as liquidity management, vulnerability to MEV attacks, and limitations to ERC20 assets. Despite these drawbacks, they remain essential for decentralized exchanges and will need improvements to address these issues. #### Bonding Curve mechanism Bonding curve directly quotes based on factors like supply, with examples including [curve.fi](/readme/background) and [pump.fun](/readme/background). 1. **Key Components:** * Supply Token: The underlying assets of the liquidity pool. * Issued Token: The amount of another token that can be purchased, calculated based on the curve after using the supply token. * Curve (determines price): It is used to determine prices. Based on the key components above, the bonding curve offers two advantages that are rarely matched by other mechanisms, as the curve determines the price. 2. **Advantage** * No reliance on initial liquidity. * Suitable for Curation Markets. Compared to AMM curve , the main advantage of the Bonding Curve lies in its independence from initial liquidity. Token issuers do not need to provide substantial liquidity upfront; instead, they can issue tokens and rely on user-contributed liquidity to maintain the price. This is particularly beneficial for Curation Markets, such as pump.fun, where curators issue MEME tokens, and participants buy them according to the Bonding Curve. [Friend.tech](/readme/introduction) is another example of a uration Market. #### Auction-based mechanism On-chain auctions often use Dutch auctions for efficiency, with notable examples including GDA, VRGDA (Progressive Dutch auctions), and UniswapX’s Dutch auction mechanism. • VRGDA allows for fungible and non-fungible token issuances in a single launch, eliminating the need for manual initiation of each auction. • Unlike GDA, VRGDA incorporates a time element, enabling the issuer to set a release curve for tokens. GDA and VRGDA are variants of the Bonding Curve model but do not resolve its issues and lose the secondary market functionality. # Technical Doc This technical document provides an overview of the **WrapX Protocol**, detailing its **core architecture, smart contract interactions, and user flow** for **wrapping and unwrapping assets**. WrapX is a **next-gen NFT-based decentralized exchange (DEX)** that integrates **AI agent services with gated token access**, allowing users to convert fungible tokens into **premium NFTs** with embedded value and functionality. The document outlines the **contract mechanisms, validation processes, fee structures, and transaction flows**, ensuring a clear understanding of how WrapX facilitates **on-chain AI-powered utility, tokenized access, and decentralized trading**. Developers, integrators, and stakeholders can use this documentation as a **reference guide** to interact with WrapX smart contracts and integrate its functionalities into their applications. # Wrap Tokens to WToken The wrapping process allows users to deposit **ERC20/ETH fungible tokens** into the **WrapX contract** in exchange for an WToken representation of the deposited value. The following steps outline the technical flow of this process. #### TLDR: What is Wrap? * Deposited Tokens to Pool * Receives WToken * Transaction is logged on-chain #### **Flow Breakdown** 1. **User Prepares Wrapping Parameters**\ The user initiates the wrapping process by specifying: * **Recipient Address**: The address that will receive the minted **WToken**. * **ETH Wrapping**: * Token name is encoded in the `data` parameter. * ETH amount is sent as `msg.value`. * **ERC20 Wrapping**: * `data` parameter includes **slippage protection** (first 32 bytes as `uint256`). * Remaining bytes in `data` encode the token name. 2. **User Calls the `wrap` Function** * Depending on the asset type, the user calls: * **ETH Wrapping**: ```solidity solidityCopyEditwrap(to, data) {value: ethAmount} ``` * The `data` parameter contains only the **token name**. * **ERC20 Wrapping**: ```solidity solidityCopyEditwrap(to, data) ``` * The `data` parameter contains: * **First 32 bytes**: Slippage amount (as `uint256`). * **Remaining bytes**: Token name. 3. **System Validates Parameters**\ Before proceeding with wrapping, the smart contract performs the following checks: * **Token Name Validity**: Extracts and validates the token name from `data`. * **Maximum Supply Constraint**: Ensures the new mint does not exceed the contract's defined supply cap. * **Payment Verification**: * For **ETH**: Confirms that `msg.value` matches the required amount. * For **ERC20**: Ensures the caller has approved and transferred the required token amount. 4. **System Calculates Fees** * The contract applies a **1% fee** based on the **base wrapped value**. * The remaining amount defines the **wrapped asset value**. 5. **System Mints an WToken** * A new **WToken is minted** to the specified recipient. * The WToken includes: * A **unique `tokenId`**. * An **associated name**, derived from the provided parameters. * **Metadata** referencing the wrapped asset value. 6. **System Emits a `Wrap` Event** * A blockchain event is emitted with details, including: * The **recipient's address**. * The **WToken’s tokenId**. * The **amount wrapped** (ETH or ERC20). * The **fee deducted**. *** #### **Outcome** * The **user receives an WToken** representing their wrapped assets. * The **contract holds the deposited WTokens**, ensuring they can later be unwrapped. * The transaction is **logged on-chain**, allowing for future tracking.

WrapX - Wrap

# Unwrap Converting WToken back to tokens The unwrapping process allows an **WToken** holder to exchange their WToken for its underlying asset through the **WrapX contract**. The following steps outline the technical flow for this operation. #### TLDR: What is Unwrap? * **WToken** is burned * Receives **ERC20/ETH fungible tokens** * Transaction is logged on-chain #### **Flow Breakdown** 1. **User Prepares Unwrapping Parameters**\ The user initiates the process by defining the necessary parameters: * **Recipient Address**: Specifies who will receive the unwrapped assets. * **Token ID**: Identifies the WToken to be unwrapped. * **Minimum Expected Output**: Ensures slippage protection by setting a threshold for the unwrapped value. 2. **User Calls the `unwrap()` Function** * The user submits a transaction invoking the `unwrap()` function on the **WrapX contract**, providing the prepared parameters. 3. **System Validates the Request**\ Upon receiving the transaction, the smart contract performs the following checks: * **Ownership Verification**: Confirms that the caller either owns the WToken or has been granted approval. * **Minimum Output Check**: Ensures that the unwrapped asset's expected value meets or exceeds the specified threshold. 4. **System Calculates the Unwrap Value**\ The system determines the output amount based on predefined rules: * The **FOAMM (Fractional Ownership Automated Market Maker)** model calculates the base amount. * A **1% fee** is deducted from the calculated value and transferred to the designated **fee recipient**. 5. **System Burns the WToken** * The WrapX contract **permanently removes (burns)** the WToken from circulation, making it non-recoverable. 6. **System Transfers the Unwrapped Asset to the Recipient**\ Based on the type of WToken being unwrapped, the system executes one of the following transfers: * **For WrapXNative** **WTokens** → **ETH** is sent to the recipient. * **For WrapXToken** **WTokens** → The corresponding **ERC20 tokens** are transferred. 7. **System Emits an `Unwrap` Event** * A blockchain event is emitted, containing transaction details such as: * The WToken’s token ID * The recipient’s address * The amount of unwrapped assets received * The applied fee *** #### **Outcome** * The **WToken is burned** and removed from circulation. * The **user receives** the underlying asset **minus the transaction fee**. * The transaction is **recorded on-chain**, ensuring transparency and traceability.

WrapX - Unwrap

# Deploying a Wrapper Contract Deploying a Wrapper contract involves initializing a new **WToken wrapper** for **tokens**. The deployment process requires setting key parameters, ensuring proper validation, and minting an ownership NFT to the deployer. #### tldr: What is a Wrapper? * Wraps tokens to WTokens * Unwrap WTokens back to tokens * Defines the WToken supply, initial price, and the content of WTokens created by the wrapper. * Deployer of the Wrapper provide ### **Flow Breakdown** #### **1. Preparing Deployment Parameters** Before initiating deployment, the user must define the following parameters: * **Collection Name**: * Must be **alphanumeric** (a-z, A-Z, 0-9) with optional hyphens (`-`) and underscores (`_`). * Maximum length: **32 characters**. * **Base WToken**: Determines the pricing for **wrap/unwrap operations** within the contract. * **Maximum Supply**: Defines the **total cap** on WTokens that can be minted in this collection. * **Token Address**: * If deploying a **native ETH wrapper**, set as `address(0)`. * If deploying an **ERC20 wrapper**, set to the ERC20 **token contract address**. #### **2. Contract Deployment Invocation** * The user calls: ```solidity solidityCopyEditdeployWrapX(collectionName, baseWToken, maxSupply, tokenAddress) ``` * This function is executed on the **WrapXDeployer contract**. #### **3. System Validation of Deployment Parameters** Upon receiving the deployment request, the system performs the following checks: * **Collection Name Validation**: * Ensures the name is **not empty**. * Confirms it is **≤ 32 characters**. * Verifies that only **valid characters (a-z, A-Z, 0-9, hyphen, underscore)** are used. * **Token Address Validation**: * If `tokenAddress == address(0)`, the system will deploy a **WrapXNative** contract (for ETH). * If `tokenAddress != address(0)`, it must be a **valid ERC20 contract address**, leading to a **WrapXToken** deployment. #### **4. Smart Contract Deployment Process** The system deploys the appropriate WrapX contract: * **For Native ETH Wrapping**: * Deploys a **WrapXNative** contract, allowing ETH to be wrapped into WTokens. * **For ERC20 Token Wrapping**: * Deploys a **WrapXToken** contract, allowing ERC20 tokens to be wrapped into WTokens. * The newly deployed contract is registered within the **WrapX ecosystem**. #### **5. Minting Ownership Token to Deployer** * Once the contract is deployed, the deployer receives an **NFT representing ownership** of the deployed contract. * The WToken’s **tokenId** is derived from the **deployed contract’s address**. * The WToken’s **metadata includes**: * The **contract name**, retrieved directly from the deployed contract. #### **6. Deploying & Assigning the TokenURI Engine** * The system automatically deploys and assigns a **default TokenURI engine** to manage WTokens' metadata. * Different TokenURI engines are assigned based on contract type: * **WrapX Deployer Contract**: Uses a **deployer-specific TokenURI engine**. * **WrapX Contracts**: Uses a **token-specific TokenURI engine**, ensuring **WToken** metadata is dynamically linked to the deployed contract. #### **7. Emitting Deployment Event** * A **WrapXDeployed** event is emitted with the following details: * **Deployed contract address**. * **Collection name**. * **Deployer’s address**. * **Token type (ETH or ERC20)**. * **Maximum supply & base WToken settings**. ### **Outcome** * The deployer **receives an ownership NFT**, representing control over the deployed WrapX contract. * The deployed **WrapX contract is active**, allowing users to **wrap and unwrap assets**. * The deployment details are **permanently recorded on-chain**, ensuring **decentralized transparency**. # ERC7527 # Introduction ERC7527 was initiated by the original WrapX team and was officially merged by Ethereum in 2023 #### 1. Introduction ERC7527 is an Ethereum-based smart contract standard designed to address the liquidity issues of NFTs in decentralized systems through the **Function Oracle Automated Market Maker (FOAMM)** mechanism. This protocol defines interfaces for wrapping ERC-20 tokens or ETH into ERC-721 tokens, as well as unwrapping ERC-721 tokens into ERC-20 tokens or ETH. With the embedded Function Oracle, ERC7527 dynamically calculates the minting and burning prices of NFTs, enabling automated on-chain pricing and enhanced liquidity. #### **2.** Core functions and mechanisms #### **2.1** Wrap and Unwrap mechanism * **Wrap**: Users can convert ERC-20 tokens or ETH into ERC-721 tokens through Wrap. The Wrap price is dynamically calculated by the function oracle according to the embedded FOAMM equation. * **Unwrap**: Users can convert ERC-721 tokens into ERC-20 tokens or ETH through Unwrap. The unwrapping price is based on the Price Stack mechanism to ensure transparency and fairness. **2.2 Function Oracle AMM (FOAMM)** * FOAMM is an automated market maker mechanism that realizes on-chain pricing and liquidity management of tokens through smart contracts. * It combines the characteristics of **Bonding Curve** and **Auction mechanism**, and supports dynamic price discovery and complex game strategies. > In ERC7527, the **Bonding Curve** is part of its core pricing mechanism and is mainly used to dynamically calculate the prices during the Wrap and Unwrap of PTs. The introduction of the Bonding Curve is to solve the problems of insufficient liquidity and opaque pricing in the traditional NFT market. At the same time, combined with the auction mechanism, it further enhances the dynamics and complexity of price discovery. **2.3 Dynamic price discovery** * The current price of Wrap takes into account the transaction time difference, the previous transaction price, and the current transaction price to ensure dynamic adjustment of prices. * The prices of Wrap and Unwrap are based on the price stack mechanism to ensure that users can exit at a fair price. *** #### **3.** Advantages of ERC7527 **3.1 Decentralized liquidity management** The design of ERC7527 can achieve decentralized liquidity management, fundamentally solving the problem of insufficient liquidity in the traditional NFT market and eliminating the dependence on external liquidity providers. * **Full liquidity support:** Assets have full liquidity in the secondary market. Users can conduct transactions, Wrap and Unwrap through Agency (asset pool). This mechanism ensures that assets can be efficiently bought, sold or converted at any time, avoiding the trading difficulties caused by insufficient liquidity. * **Self-provided liquidity:** ERC7527 does not need to rely on external liquidity providers. Users can directly participate in liquidity provision through smart contracts. This decentralized liquidity provision model eliminates the dependence on initial liquidity and enables any user to become a liquidity provider, further enhancing the flexibility and participation of the market. **3.3 Share of Interests** * Users participating in Wrap/Unwrap form a community driven by economic interests and promote the development of related agencies. * This community-driven model enhances the sustainability of the ecosystem. **3.4 Dynamic game theory** * Introduce auction mechanism in Bonding Curve to make the price discovery process more dynamic and complex. * Avoid the game problems caused by excessive transparency of traditional mechanisms. *** #### Application scenarios The following application scenarios are for reference only. The application scenarios of ERC7527 are unlimited. * **Certificate**: The ERC7527 confirms ownership or credentials (e.g., professional certification, membership, license). * **Authentication**: Because it is uniquely tied to a wallet address and cannot be forged, the ERC7527 doubles as a secure identity key. * **Governance**: Holders of the ERC7527 can be granted voting rights or authority in decision-making. * **Check/Verification**: On-chain records make it easy to verify history and legitimacy, ensuring that no one can alter or counterfeit the token’s details. *** #### To conclude ERC7527 provides an automated on-chain pricing and liquidity solution for ERC721 tokens through the Function Oracle AMM (FOAMM) mechanism. It not only addresses the issue of insufficient liquidity of ERC721 but also promotes the innovation and development of decentralized economies through dynamic price discovery and community-driven models. ERC7527 has a wide range of application scenarios, covering areas such as intangible asset tokenization, community projects, art trading, and AI agents and game assets. In WrapX, the application of ERC7527 will provide AI Agents with the ability to autonomously manage their economic identities, enabling them to seamlessly participate in decentralized markets, capture and distribute economic value, and thus promoting AI agents to become the core driving force of a new generation of productivity. # Publications ERC7527 Information Overview ### EIP Information {% embed url="" %} [Ethereum Improvement Proposals](https://eips.ethereum.org/) {% endembed %} {% embed url="" %} Ethereum-magicians {% endembed %} Created: 2023-09-03 Discussion Link: [Ethereum Magicians - EIP-7527](https://ethereum-magicians.org/t/eip-7527-token-bound-function-oracle-amm-contract/15950) Requires: EIP-165, EIP-721 ### Publications About ERC7527 Peep An EIP on Youtube by [Ethereum Cat Herders](https://www.ethcatherders.com/): {% embed url="" %} #### Published on Gate.io {% embed url="" %} Published on AiCoin {% embed url="" %} #### Published on PANews {% embed url="" %} Technical Talk on Youtube interviewed by [EIP FUN](https://eip.fun/) {% embed url="" %}