Wrapped Token

A Wrapped Token is a cryptocurrency whose value has been pegged to the value of another token 1:1.

The values of the two tokens are exactly the same, the value of one backing the value of the other one for one.

The tokens are identical, with the only distinction being that they exist on different blockchains.

Take BTC for instance, which operates on the Bitcoin blockchain.

In its present form, it can’t operate on, or talk to, the Ethereum blockchain.

But by wrapping it, you’re taking “regular” Bitcoin (BTC) and exchanging it for a version that has the same price as bitcoin but can operate on the Ethereum blockchain.

This solves the problem of blockchain interoperability.

The wrapping process takes the BTC and mints a corresponding amount of wBTC.

The wrapped token becomes a sort of bridge between the two chains.

Related Terms

Token

A Token is a digital asset that operates on a parent blockchain or on another digital asset’s blockchain because it doesn’t have a blockchain of its own. The term “token” also tends to describe almost all other cryptocurrencies other than Bitcoin and Ethereum, the two largest cryptocurrencies in existence today. Tokens have multiple purposes and use cases.

Polkadot (DOT)

Polkadot (DOT) is an open-source blockchain protocol for cryptocurrencies, dubbed the “blockchain of blockchains”, that allows different, incompatible networks to communicate with each other and share data, using a multichain design.

Bitcoin (BTC)

Bitcoin (BTC) is most well known as a digital decentralized cryptocurrency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer Bitcoin network without the need for intermediaries, such as payment gateways or banks or routing services. Think of bitcoin as Internet money, that you can send and receive directly, to and from anyone, and you can use it to pay for stuff.

Ethereum (ETH)

Ethereum is a decentralized blockchain platform that makes digital money, global payments, and applications possible using open-source software and smart contract functionality. The big difference between the two is that Ethereum is programmable, meaning you can build and use decentralized apps on the network. That means the Ethereum blockchain can be programmed to do virtually anything.

Cardano (ADA)

Cardano is a decentralized open-source blockchain platform built with proof-of-stake (PoS) consensus, offering smart contract capabilities, and using the native cryptocurrency ADA.