We explained some advanced features of the XRPL like secondary assets, trust lines, trading, KYC and custodial wallets vs. gateways in our previous blog.
Here we go in depth about the relationship between GateHub, XUMM and all the assets supported in each wallet as well as their advantages and limitations. The upcoming Flare airdrop will follow most if not all of the rules that are applicable to Songbird SGB. Check it out!
Why can't you withdraw BTC, SGB, ETH and others from XUMM?
XUMM is a wallet client only, which means that with XUMM you are operating an XRPL wallet on the XRP Ledger. XUMM does not offer bridging functionality and therefore you can only transfer these assets over the XRPL. With the help of the GateHub Trade xApp, you can trade your assets into XRP which you can send to an exchange to trade into a different asset.
GateHub on the other hand gives you an XRPL wallet much like XUMM but offers additional services like crypto and fiat deposits and withdrawals. At GateHub you can withdraw assets like BTC and ETH to their native chains.
Why can't you send SGB directly from XUMM to GateHub if you are sending it through XRPL?
Your XRPL wallets on XUMM and GateHub utilize the same network, the XRPL. Sending any asset over the XRPL requires a common trust line between the two wallets. You can freely send any asset including GateHub SGB from your XUMM wallet to GateHub and vice versa and you can actually use the same wallet on both XUMM and GateHub.
There are some limitations though. XUMM is a non-custodial wallet app for the XRPL. This means that with XUMM you are able to operate an XRPL wallet directly on the XRP Ledger (native blockchain of the XRP token). XUMM is not an XRPL gateway which means that XUMM does not offer bridging to other blockchains like BTC, ETH, SGB and to fiat systems like SEPA (EUR).
GateHub on the other hand is an XRPL gateway and XRPL wallet client. As a GateHub user, you can deposit assets like EUR, USD, BTC, ETH and SGB to your XRPL wallet on GateHub. Once your deposit arrives, the assets you have just deposited are tokenized on the XRP Ledger. This means that you can transfer these assets over the XRPL in seconds at a fraction of the cost of their respective networks.
What’s special about the Songbird airdrop and claiming SGB?
On GateHub you were able to participate in the Flare snapshots and the recent SGB airdrop by setting your wallet’s message key in a semi automatic way. This means that GateHub generated the Flare address used in your message key for you. Once the SGB airdrop happened, GateHub was custodying your SGB which had to be claimed. SGB was tokenized and issued to your wallet on the XRPL, while GateHub kept custody of the actual SGB tokens on the Songbird network. You can transfer and trade these tokenized SGB over the XRPL but you can’t utilize any Songbird features at GateHub. In order to do so, you must withdraw (Send Payment) your SGB to a Songbird address that you own and use a different app.
If you were using XUMM (or other non-custodial solutions) to participate in the Flare snapshots and airdrops the setup was probably quite different. In most cases, you were able to set your XRPL wallets message key using a Flare address owned by you. If this was the case, you own your Flare address, meaning you own any SGB distributed to you and you will own any FLR (Spark) distributed at a later time. Since XUMM and other XRPL wallets are not gateways they can’t provide access to your SGB tokens. Moving these funds requires you to use a different app than GateHub or XUMM as these tokens need to be managed on the Songbird network. An Ethereum style wallet like Metamask can be used to move the tokens. Using additional Songbird features requires you to use an app like Bifrost wallet. Songbird and the upcoming Flare network are separate networks from the XRPL and they can only transfer value between themselves via a gateway like GateHub.
Is “GateHub SGB” different from just an “SGB”?
The difference is subtle but very important. GateHub SGB is a token on the XRPL and represents one SGB coin on the Songbird network. The actual coin is held by GateHub in a cold/hot wallet on the Songbird network. As a user, you can freely send the GateHub SGB token around the XRPL and trade it for other assets. If you want to use SGB on Songbird, you need to make a withdrawal of GateHub SGB to your own wallet. GateHub will send the actual SGB to the address you specified. This also holds true for all other currencies on GateHub like BTC, ETH, EUR and USD.
Similarly, custodial exchanges will receive your cryptocurrency or fiat deposit and assign a virtual balance to your account. From there, you are able to trade this virtual value in one asset to virtual value in another asset. When you decide to withdraw these virtual balances, the exchange will adjust your balance and send you the actual coins, tokens or money to your specified address.
On GateHub you actually receive tokens to your XRPL wallet (also called IOUs) that can be sent over the XRPL instead of the virtual balance. Our Hosted wallets work in the same manner as described above.
A non-custodial wallet like the XRPL can only operate within the limits of the XRP Ledger. This means that you must follow certain rules like reserves. The main benefit here is that you actually own the currencies or tokens in question and you are free to trade them on the native XRPL decentralized exchange.
On the other end, custodial wallets and exchanges can provide greater flexibility and unique features on top of the virtualized value in your account.
Why is there a SGB and a GateHub SGB anyway?
As explained above, Songbird is a separate network from the XRPL. In this regard, Songbird network and SGB coins should be thought of like Bitcoin network and BTC. The setup is virtually identical. A deposit to GateHub in BTC will result in you holding GateHub BTC on your XRPL wallet. When you decide to withdraw, GateHub will send the actual BTC to your specified address.
A concept that has gained popularity recently on the Ethereum blockchain is “wrapped”. You can think of GateHub BTC as a wrapped BTC on the XRP Ledger. Wrapped currencies are tokens whose value is pegged to the value of the underlying asset. Wrapping usually occurs via smart contracts and in principle should be decentralized. The XRPL currently doesn’t have such a setup yet as a decentralized gateway doesn’t exist yet.