Wrapped tokens are blockchain assets that represent other assets from different blockchains, facilitating interoperability within specific ecosystems.
Tokens are wrapped to make them usable on a different blockchain or in a particular environment to which they are not native.
For instance, Wrapped Bitcoin is a well-known example on the Ethereum network. But what is Wrapped Bitcoin? WBTC represents Bitcoin is “locked” into a smart contract in order to generate a wrapped token. Aor a trusted entity usually keeps an eye on this locking procedure. To create wrapped tokens, the locked native coin is used as collateral.After the original cryptocurrency is locked, a corresponding number of wrapped tokens are created or released on a different blockchain .
Secondly, wrapped tokens can make it easier to integrate assets with other functionality. For example, wBTC can be used to integrate Bitcoin into the Ethereum DeFi ecosystem. They also standardize and simplify asset interactions, making them simpler to use.
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