Wrapped Crypto

Currently, cryptocurrencies are using various blockchains. Many applications, platforms, and smart contracts on the market could use tokens from different blockchains. One of the bridges that allows you to transfer crypto assets from one network to another is wrapped tokens (WT)

Wrapped Crypto: Basics

You've probably heard about the concept of a wrapped token or seen token symbols WETH instead of ETH, etc.

What are WTs in the factual description? Here are some crucial data:

• This token was created for transferring the original coin into another blockchain or protocol, ensuring its availability and use in other ecosystems. This allows traders to move between various blocks using the same cryptocurrency and expands liquidity capabilities.

• WT is a "copy" of a crypto asset issued on another blockchain, protected by the original coin.

• This type of token is equipped with an underlying asset in a 1:1 ratio, has the same price, and allows you to expand the possibilities of application, for example, trading on decentralized exchanges that do not support the "original".

• The most famous example of a wrapped cryptocurrency is the wrapped Bitcoin (WBTC) issued on the Ethereum network. It is widely used in the field of decentralized finance (DeFi).

WT Specs

The wrapped tokens are based on smart contracts, which are self-executing protocols with the terms of the agreement written directly in the code.

When WT, the process involves sending the original asset to the custodian, who then records it in a smart contract. The smart contract issues an equivalent number of wrapped tokens that can be freely traded and transferred to the target blockchain. The custodian usually stores the original asset in a secure mode. Thus, it provides the opportunity to exchange wrapped tokens for the underlying asset at any time.

Where are Wrapped Tokens used?

Wrapped tokens are used both on centralized and decentralized crypto exchanges.  In general, any service working with crypto assets needs an intermediary between blockchains, and wrapped tokens are a time-tested approach.

Also, WTs can allow you to bypass the problems of the native token blockchain, such as low transaction speeds or high fees. 

Wrapped tokens are a convenient solution used by many digital money services.