Wrapped tokens are digital assets that represent another cryptocurrency on a different blockchain. This mechanism allows users to hold assets from one blockchain while interacting with decentralized applications on another, enhancing interoperability between networks.A wrapped token is typically created by locking the original cryptocurrency in a smart contract. In return, an equivalent amount of the wrapped token is issued. For example, wrapping Bitcoin (BTC) on the Ethereum network creates Wrapped Bitcoin (WBTC). This process ensures that the wrapped token’s value is pegged to the original asset.The main benefits of wrapped tokens include increased liquidity, broader access to decentralized finance (DeFi) applications, and improved cross-chain transactions. By enabling assets to be used across different platforms, wrapped tokens facilitate more flexible trading and investment strategies.Overall, wrapped tokens play a crucial role in enhancing the usability and functionality of various digital assets by bridging different blockchains, ultimately promoting greater collaboration and integration within the ecosystem.