Wrapped Token
A wrapped token is a tokenized version of a cryptocurrency from another blockchain. Wrapped Bitcoin (WBTC) is Bitcoin on Ethereum; wrapped ETH (WETH) is ETH in an ERC-20 format.
Understanding the Concept
Wrapped tokens enable cross-chain DeFi. You can use your BTC as collateral on Ethereum DeFi protocols (which can't use native BTC). The wrapper holds the original asset and issues a 1:1 token on the target chain. Risks include: custodial wrapping (someone holds your original BTC), smart contract exploits, and bridge hacks. Always verify the wrapping mechanism. WBTC is held by BitGo with audits. Decentralized wrappers like renBTC are trustless but have had issues. The convenience of cross-chain is worth the additional trust assumptions for many users.
Real-World Example
You have 1 BTC but want to earn yield on Aave (Ethereum). You use the WBTC wrapper: deposit 1 BTC, receive 1 WBTC on Ethereum. Now you can use your "Bitcoin" in Ethereum DeFi while BitGo custodies the original BTC.
How Strykr Helps
Strykr tracks Wrapped Token developments across the crypto ecosystem. Our AI provides real-time insights and alerts to help you navigate the market with confidence.
Try Strykr Free