Wrapped Assets
Web3 / cross chain
Wrapped assets are tokenized representations of cryptocurrencies from one blockchain that can be used on another blockchain while maintaining a fixed one-to-one value correspondence with the original asset. When a user wraps an asset, they send it to a custodian or smart contract on the source blockchain, which then mints an equivalent amount of wrapped tokens on the destination blockchain. These wrapped tokens represent claims on the underlying asset held in reserve, allowing users to leverage liquidity and functionality across multiple chains. Wrapped assets are essential infrastructure for cross-chain DeFi, enabling assets like Bitcoin to be used on Ethereum and other networks despite existing on fundamentally different blockchains. Example: Wrapped Bitcoin (wBTC) is an ERC-20 token on Ethereum that represents Bitcoin held in custody by Bitgo, allowing Bitcoin holders to access Ethereum's DeFi ecosystem while maintaining exposure to Bitcoin's price, with each wBTC backed one-to-one by actual Bitcoin reserves. Why it matters for cross-chain interoperability: Wrapped assets unlock liquidity across chains, enable composability between disparate blockchain ecosystems, and allow users to access DeFi opportunities unavailable on their native chains while maintaining value parity.
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