A token on one blockchain that represents an asset from another blockchain. Example: WBTC is Bitcoin wrapped on Ethereum.
A wrapped token is a cryptocurrency token pegged to the value of another asset, minted on a different blockchain than the original. The most common example is Wrapped Bitcoin (WBTC) — an ERC-20 token on Ethereum that represents BTC 1:1. The original BTC is held by a custodian, and equivalent WBTC is minted on Ethereum, allowing Bitcoin to participate in Ethereum's DeFi ecosystem (lending on Aave, trading on Uniswap, etc.). Wrapping solves cross-chain compatibility — since Bitcoin can't natively interact with Ethereum smart contracts, wrapping creates a bridge. Other examples include wETH (wrapped ETH, needed for some smart contract interactions), wstETH (wrapped staked ETH), and various wrapped assets across chains. The trust model varies: centralized wrapping (WBTC uses BitGo as custodian) requires trust in the custodian, while decentralized wrapping protocols aim to eliminate this trust assumption through cryptographic proofs or multi-party computation.
Wrapped tokens are blockchain assets that represent the value of a cryptocurrency from one blockchain on a different blockchain — like Wrapped Bitcoin (WBTC) representing BTC on Ethereum, or Wrapped ETH (WETH) making ETH compatible with ERC-20 standard interfaces. The wrapping process typically involves depositing the original asset with a custodian or smart contract, which then mints an equivalent wrapped token on the target chain. Wrapped tokens enable cross-chain interoperability: you can use Bitcoin's value in Ethereum DeFi through WBTC, collateralizing it on Aave or providing liquidity on Curve. The trust model matters: custodial wrapping (WBTC, managed by BitGo) requires trusting the custodian to maintain reserves; trustless wrapping uses smart contracts and cryptographic proofs (like tBTC). The total value of wrapped assets across all chains exceeds $10 billion, with WBTC alone representing over $5 billion in Bitcoin value deployed in Ethereum DeFi.
There are over 150,000 BTC wrapped as WBTC on Ethereum (~$10B) — representing Bitcoin holders who want to use their BTC as DeFi collateral on Aave or provide liquidity on Uniswap without actually selling their Bitcoin.
WBTC represents BTC's value on Ethereum, backed 1:1 by actual Bitcoin held in custody by BitGo. You can redeem WBTC for real BTC through authorized merchants. The key risk is custodial: you trust BitGo to maintain reserves. WBTC lets you use Bitcoin's value in Ethereum DeFi but carries counterparty risk that native BTC does not.