What are wrapped tokens?

Wrapped tokens are digital assets that represent another cryptocurrency on a different blockchain. They make it possible to use tokens across networks — improving interoperability, liquidity, and access to DeFi platforms.

For example, Wrapped Bitcoin (WBTC) is a tokenized version of Bitcoin (BTC) that runs on the Ethereum blockchain. Each WBTC is backed 1:1 by actual Bitcoin held in reserve by a custodian or smart contract, so its value always matches the original asset.

This means you can use Bitcoin in Ethereum-based apps without leaving the Bitcoin network entirely — you just use its wrapped version instead.

How does the wrapping process work?

The wrapping process creates a tokenized version of an existing cryptocurrency on another blockchain:

1. The original asset gets locked. For example, your BTC is deposited into a smart contract or held by a custodian.

2. Wrapped tokens are minted. The same amount is created on the target blockchain — so if you lock 1 BTC, you get 1 WBTC.

3. Unwrapping releases it back. When you're ready to unwrap, the wrapped tokens are burned, and your original asset is returned to you.

This process lets you use Bitcoin in Ethereum-based DeFi protocols, decentralized exchanges, and liquidity pools — all without actually moving your Bitcoin between networks.

Why wrapped tokens matter

Wrapped tokens bridge the gap between isolated blockchains, enabling cross-chain transactions, smart contract interactions, and multi-chain DeFi opportunities — all while maintaining the security and value of the original asset.

They also help increase the efficiency of the crypto ecosystem by making liquidity flow freely between different blockchains.

Main benefits of wrapped tokens

• Cross-chain compatibility — transferring value seamlessly between networks without converting back and forth.
• Improved liquidity— accessing multiple DeFi ecosystems with the same asset.
• Yield opportunities — use wrapped tokens for staking, lending, and yield farming.
• Utility expansion — bringing major assets like Bitcoin into smart contract platforms that wouldn't normally support them.

Conclusion

Wrapped tokens make the multi-chain DeFi world possible. They allow users to move assets between blockchains, access more dApps, and increase liquidity, all without selling or converting their original cryptocurrency. Whether it’s WBTC, wETH, or renBTC, wrapped tokens are the bridge connecting the crypto universe.