Wrapped Token
A token on one blockchain that represents a cryptocurrency from another blockchain.
Explained Simply
Wrapped tokens enable cross-chain interoperability. Wrapped Bitcoin (WBTC) is an ERC-20 token on Ethereum backed 1:1 by actual Bitcoin held in custody. This allows Bitcoin holders to use their BTC in Ethereum DeFi protocols. The wrapping process involves depositing the original asset with a custodian who mints an equivalent wrapped token. Unwrapping reverses the process. Wrapped tokens add counterparty risk (trust in the custodian) but unlock cross-chain utility.
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