What is Wrapped Solana (wSOL)? A Simple Guide to the Token Behind Solana’s DeFi Growth

Most people know Solana (SOL) as the fast, low-cost blockchain that powers everything from NFTs to decentralized apps. But if you’ve tried using SOL in a DeFi protocol like Orca or Raydium, you might’ve been asked to use wSOL instead. What’s the difference? Why can’t you just use SOL? And why does this weird wrapper even exist?

Why Solana Needs a Wrapped Version

Solana’s native token, SOL, isn’t a regular token like USDC or ETH. It’s the base currency of the network - the fuel that pays for transactions, staking rewards, and block production. Because of this, it doesn’t follow the same rules as other tokens on Solana. Most DeFi apps, lending platforms, and exchanges on Solana expect tokens to be built using the SPL (Solana Program Library) standard. Native SOL doesn’t meet that standard. It’s like trying to plug a USB-C device into a Lightning port - they’re both connectors, but they don’t fit the same slot.

That’s where wSOL comes in. Wrapped Solana is a tokenized version of SOL that follows the SPL standard. Every wSOL token is backed 1:1 by one SOL locked in a smart contract. Think of it as a digital receipt. You give your SOL to a smart contract, and in return, you get wSOL. You can use that wSOL anywhere SPL tokens are accepted. When you want your SOL back, you burn the wSOL, and the contract releases your original SOL.

How wSOL Works (No Middlemen, No Trust)

Unlike wrapped tokens on other chains - like wBTC, which needs trusted custodians to hold the real Bitcoin - wSOL is fully on-chain and non-custodial. There’s no company holding your assets. No third party. No risk of a centralized entity going bankrupt or getting hacked. The entire process is handled by Solana’s smart contracts. You interact directly with them through your wallet.

Here’s how it works in practice:

1. You have 10 SOL in your Phantom wallet.
2. You click ‘Wrap SOL’ - the wallet sends your 10 SOL to the official wSOL contract (address: So11111111111111111111111111111111111111112).
3. The contract locks your SOL and mints exactly 10 wSOL to your wallet.
4. You now have 10 wSOL, which you can swap, lend, or stake in any DeFi app on Solana.
5. When you want your SOL back, you burn the 10 wSOL, and the contract sends your 10 SOL back to you.

The whole process takes less than a second on Solana’s fast network. Gas fees are tiny - around 0.000005 SOL per transaction. That’s less than a penny.

wSOL Is the Backbone of Solana’s DeFi Ecosystem

If you look at Solana’s DeFi landscape, wSOL isn’t just useful - it’s essential. As of late 2023, over 87% of the total value locked (TVL) in Solana’s DeFi protocols was in wSOL, not native SOL. Why? Because nearly every major DeFi app on Solana requires it.

- Raydium and Orca use wSOL in their liquidity pools. You can’t provide liquidity with native SOL.

- MarginFi and Lido let you borrow against wSOL as collateral.

- Serum DEX trades wSOL against other SPL tokens like USDC and JUP.

Without wSOL, Solana’s DeFi ecosystem would be broken. SOL would be stuck as just a fee token - useful for paying for transactions, but useless for earning yield, trading, or lending. wSOL turned SOL into a true DeFi asset.

How Much wSOL Is Out There?

The amount of wSOL in circulation changes every day, because it’s directly tied to how much SOL people are wrapping. As of October 2023, between 28.5 million and 32.7 million wSOL tokens were in use. That means between 28.5 and 32.7 million SOL are locked in the wrapping contract.

wSOL is held in over 2.8 million unique wallets - that’s 63.7% of all token-holding wallets on Solana. Daily trading volume for wSOL hit $142 million in late 2023, up from just $2.1 billion in Q1 2022 to $47.8 billion by Q3 2023. That’s a 2,176% increase in just 18 months.

It’s not just retail users. Institutional players like hedge funds and crypto funds now use wSOL for yield strategies. According to Fireblocks, 12.3% of all wSOL volume in Q3 2023 came from institutional wallets.

wSOL vs. Other Wrapped Tokens

Not all wrapped tokens are the same. Here’s how wSOL stacks up:

Comparison of Wrapped Tokens

Feature	wSOL (Solana)	wBTC (Ethereum)	wXRP (Multi-chain)
Wrapped On	Native chain	Ethereum	Multiple chains
Custodian	None (smart contract)	Centralized (BitGo)	Centralized (Hex Trust)
Wrapping Time	0.4-1.2 seconds	10-30 minutes	1-5 minutes
Gas Fee	~$0.00003	~$1-$10	~$0.10-$0.50
Use Case	DeFi on Solana	DeFi on Ethereum	Cross-chain trading

wSOL wins on speed and decentralization. It’s faster and safer than wBTC. But it doesn’t cross chains like wXRP does. That’s intentional. wSOL isn’t meant to leave Solana. It’s meant to unlock SOL’s potential within Solana.

Is wSOL Safe?

Yes - but with a caveat.

The smart contract that handles wSOL has been audited and is live on Solana’s mainnet since 2020. There’s no central point of failure. The contract code is open source and publicly verifiable.

But there’s a catch: user error. Many beginners get confused between SOL and wSOL. They might send SOL to a wSOL-only address, or try to stake wSOL thinking it’s the same as staking SOL. Wallet interfaces like Phantom have improved, but they’re still not perfect. In late 2023, over 23% of user complaints on Trustpilot were about confusion during the wrapping process.

Also, if Solana’s network goes down - which has happened a few times - you can’t unwrap your SOL until it’s back online. That’s a risk, but it’s the same for any blockchain. wSOL doesn’t add new risks - it just exposes the ones already there.

How to Wrap SOL (Step-by-Step)

You don’t need to be a coder to wrap SOL. Here’s how to do it in Phantom Wallet:

1. Open Phantom and make sure you have at least 0.01 SOL for gas fees.
2. Click ‘Swap’ or ‘Wrap’ in the wallet interface.
3. Select SOL as the token you’re sending.
4. Select wSOL as the token you’re receiving.
5. Enter the amount you want to wrap.
6. Confirm the transaction. It’ll take under a second.

Your wSOL will appear in your wallet immediately. You can now use it in any DeFi app. To unwrap, just reverse the steps.

What’s Next for wSOL?

The Solana Foundation isn’t resting. In October 2023, they rolled out SIP-2618, which cut wrapping costs by 37%. In November, the ‘Cortex’ upgrade reduced wSOL transfer time from 0.42 seconds to 0.29 seconds.

The next big step? Solana Program Library 3.0, expected in Q2 2024. This update aims to merge the wrapping process into a single transaction instead of three. That means you’ll be able to swap SOL directly to a DeFi pool without ever seeing wSOL - it’ll happen behind the scenes.

Some experts think this could make wSOL obsolete. Others say it’ll just become invisible - like how you don’t think about HTTP when you visit a website. Either way, wSOL has already done its job: it turned SOL into a DeFi powerhouse.

Final Thoughts

Wrapped Solana isn’t magic. It’s not even that complicated. It’s a simple, elegant solution to a real problem: how do you make a network’s base currency work in a tokenized economy? wSOL solved it without breaking Solana’s speed, without adding centralization, and without sacrificing security.

If you’re using Solana for DeFi, you’re already using wSOL - whether you know it or not. And if you’re not using it yet, you’re missing out on 87% of what the ecosystem has to offer. Wrap your SOL. Use it. Earn yield. Trade it. Then unwrap it when you’re done. It’s that simple.