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What is Wrapped Token?
A wrapped token represents a cryptocurrency from one blockchain on another. WBTC (Wrapped Bitcoin) lets you use Bitcoin on Ethereum for DeFi.
Full Explanation
Wrapped tokens are 1:1 backed representations of assets on a different blockchain. The original asset is locked in a custodial contract, and an equivalent token is minted on the target chain. WBTC (Wrapped Bitcoin on Ethereum) is the most common: it lets BTC holders access Ethereum DeFi. Risks include custodial risk (the entity holding the real BTC) and smart contract risk.