A wrapped token or wrapped cryptocurrency is a token existing on a blockchain whose value is pegged to another crypto asset that functions on a different blockchain. Wrapped tokens allow access to crypto assets on blockchain ecosystems other than their native blockchains.
The process of wrapping allows unsupported tokens to function across blockchain networks. To simplify, a wrapper acts like a digital vault - taking in the native asset of one blockchain and issuing a corresponding number of wrapped assets with the same value but which can work on a different network.
The wrapping process involves tokenizing a crypto asset and using it on a non-native blockchain. The method of redeeming the wrapped token for the original cryptocurrency is unwrapping.
Wrapped Bitcoin (WBTC) is one of the crypto market’s most popularly used wrapped tokens. It exists as an ERC-20 token on the Ethereum blockchain. The WBTC token allows DeFi protocols on the smart contract platform to access liquidity for the world’s largest and most traded cryptocurrency on the non-native Ethereum network.