GlossaryIntermediate
Wrapped Token
A token that represents another asset on a different blockchain, one-to-one.
A wrapped token is a token on one blockchain that represents another asset, usually from a different blockchain, held one-to-one in reserve, letting that asset be used on a network it wasn't originally built for.
Wrapped tokens rely on the custody or mechanism backing them: understanding who or what holds the underlying reserve asset is an important part of evaluating a wrapped token's risk.
Examples
- A wrapped version of Bitcoin lets it be used within Ethereum-based DeFi applications.
- Redeeming a wrapped token for its underlying asset depends on the reserve mechanism working as intended.