TOKENS & ASSETS
Wrapped Token
Definition
A wrapped token represents another cryptocurrency on a different blockchain. It's backed 1:1 by the original asset held in custody, enabling cross-chain functionality.
Example
Example
Ethereum, the network, existed before the ERC-20 token standard was establishd, thus ETH the token is not ERC-20 compliant. wETH is an ERC-20 compliant representation of ETH, enabling smart contracts to handle it like a regular ERC-20 token.
Risks to Consider
Risks
- Custodial risk
- Depeg risk
- Bridge vulnerabilities
Common Questions
Is a wrapped token the same as the original?
Functionally similar but technically different. They should maintain 1:1 value but carry additional risks from the wrapping mechanism. Wrapping mechanism can vary, the ideal is immutable contracts like for wETH.
