Wrapped token

A wrapped token is a version of one cryptocurrency issued on a different blockchain, backed one-to-one by the original coin held in reserve. It matters to a reader because it lets assets like Bitcoin work inside ecosystems, such as Ethereum's DeFi apps, that wouldn't otherwise recognize them. For example, Wrapped Bitcoin (WBTC) is an ERC-20 token on Ethereum: a custodian holds real BTC in a vault, and for every BTC deposited, one WBTC gets minted. Trading WBTC lets someone use Bitcoin's value in a Uniswap pool or as loan collateral on Aave. The catch is trust in whoever holds the reserves; if that custodian gets hacked or acts dishonestly, the wrapped token can lose its backing and its peg to the original asset.