Token Wrapping

Token wrapping is a way to make one crypto asset usable on a blockchain it wasn't originally built for. Bitcoin (BTC), for example, can't natively interact with smart contracts built on the Ethereum blockchain. Wrapping allows for BTC to move on Ethereum by creating a stand in token to represent Bitcoin, one to one, on a different network.

How token wrapping works

Think of it like a receipt: someone deposits their Bitcoin with a custodian, who locks it away and holds it safely. In exchange, they receive an equivalent amount of a new token. Using BTC on Ethereum, for example, would mean trading WBTC (wrapped bitcoin). That new token can be traded, lent out, or used in DeFi apps just like any other digital asset. 

The process looks something like this:

The original Bitcoin stays locked in reserve the whole time. When someone wants their token back, they trade in the wrapped version, which gets destroyed, and the original crypto is released to them.

The bigger picture

Crypto today spans many active blockchains, each with its own strengths and its own community of apps. Wrapping is one of the core mechanisms that keeps value moving freely between them, so an asset isn't stuck on the one chain it happened to launch on. That mobility is part of what allows the broader crypto landscape to function as a connected ecosystem.