A wrapped token is a cryptocurrency that stands in for another asset on a different chain, pegged 1:1. Wrapped Bitcoin, WBTC, is the usual example. You deposit BTC with a custodian. They mint the same amount of WBTC on Ethereum. You can lend it, provide liquidity, or post it as collateral in Ethereum DeFi. To get BTC back, you burn WBTC and receive native Bitcoin.
Wrapping exists because Bitcoin and Ethereum do not talk natively. The wrapped token is a synthetic bridge. Someone has to hold the real asset and issue the copy. Custodial wrapping, like WBTC, means you trust the custodian not to steal the deposited Bitcoin. Bridge wrapping locks the native asset in a contract on one chain and mints the wrapped version on the other.
Bridge security is the weak point. Bridge hacks are among the largest losses in crypto. Attackers drain the locked assets. The wrapped tokens on the other side become unredeemable. A wrapped token is only as good as the vault behind the peg. Read who holds the reserve before you treat WBTC like BTC. WETH is ETH locked in a contract so it can follow ERC-20 rules. Unwrap burns WETH and returns ETH.
Wrapped Token
Representing an asset from one chain on another chain.