Plain English
A wrapped token is a blockchain token that represents an asset from another chain. The classic example: wrapped Bitcoin (WBTC), an Ethereum token backed 1:1 by Bitcoin held by a custodian, that lets Bitcoin participate in Ethereum-based DeFi.
How it actually works
To create a wrapped token, you deposit the underlying asset with a custodian (or smart contract). The custodian mints an equivalent amount of the wrapped version on the destination chain. To redeem, you burn the wrapped token and the custodian releases the underlying. Bridges and cross-chain protocols often issue wrapped versions of native assets to make them usable on the receiving chain.
What it means for you
Wrapped tokens are how members bring Bitcoin (or other native assets) into DeFi without selling them. The trade-off is custodial risk: you trust the entity holding the underlying. Decentralized wrapping is improving but still less common than centralized.
We cover wrapped-Bitcoin custody, the major issuers, the redemption mechanics, and the practical strategies (lending wBTC for stablecoin yield) members deploy.
Educational content only. Not investment, tax, or legal advice.