Bitcoin exists on the Bitcoin network, ETH on Ethereum, and BNB on BNB Chain. Each blockchain has its own rules, standards, and technical architecture. This means you cannot simply take a coin from one network and move it to another.
However, the crypto market found a workaround long ago — wrapped tokens. They make it possible to use the value of one digital asset in an environment where the asset itself cannot technically operate.
Why wrapped tokens are needed
Modern blockchains technically remain separate systems. Ethereum, Solana, TRON, BNB Chain, and other networks use their own token standards and mechanisms for interacting with smart contracts.
Even if the same asset is available across dozens of networks, this does not mean it can be moved freely between them.
A good example is Tether (USDT). The stablecoin operates on Ethereum, TRON, Solana, BNB Chain, Avalanche, Polygon, Arbitrum, and many other networks. However, USDT on Ethereum and USDT on TRON are technically different tokens issued for their respective blockchains.
With cryptocurrencies such as Bitcoin, the challenge is even greater. BTC was not originally designed to interact with Ethereum applications. This means that ordinary Bitcoin cannot, for example, be used directly in an Ethereum-based lending protocol.
This is where wrapped tokens come in.
What is a wrapped token?
A wrapped token is a digital representation of another crypto asset. As a rule, its value is pegged to the original asset at a 1:1 ratio.
In simplified terms, one BTC is locked in reserve, and in return the user receives one token representing that Bitcoin in another ecosystem.
The original asset itself does not travel between blockchains. It remains locked, while its tokenized version circulates on another network.
This is why the word “wrapped” describes the technology quite accurately: the cryptocurrency is essentially placed inside a new technical wrapper that is compatible with the required blockchain.
Such assets became particularly popular with the development of DeFi — decentralized finance. The first wrapped tokens appeared during the cryptocurrency boom of 2017, but they became widely adopted starting in 2020, when the DeFi and NFT markets began growing rapidly.
How wrapped tokens are created
The classic model is based on reserves.
The original cryptocurrency is locked with a custodian — an organization, protocol, or another party responsible for holding it. An equivalent amount of wrapped tokens is then issued.
For example, if 10 BTC are deposited into reserve, the system can issue 10 tokenized BTC on a supported network.
When a user wants to recover the original asset, the process works in reverse: the wrapped tokens are destroyed — burned — and the corresponding amount of cryptocurrency is released from reserve.
The process looks simple:
original asset → locked in reserve → wrapped token issuance → use → token burning → return of the original asset.
The exact mechanics, however, depend on the project. In some cases, reserves are controlled by a centralized company, while others use smart contracts, multisignature schemes, or more sophisticated decentralized infrastructure.
What wrapped tokens offer users
The main advantage is the ability to use a cryptocurrency in environments where it was previously of little practical use.
The clearest example is Wrapped Bitcoin (WBTC).
Bitcoin performs its primary function extremely well, but the Bitcoin ecosystem was not designed as a universal platform for DeFi applications. Ethereum, by contrast, has become the foundation for thousands of financial protocols.
WBTC made it possible to connect these two worlds. Users receive a token whose value tracks BTC while being able to use it as an asset within the Ethereum ecosystem.
As a result, Bitcoin can be used for:
- lending;
- providing liquidity;
- yield farming;
- transactions on decentralized exchanges;
- participating in various DeFi protocols.
Wrapped tokens also help distribute liquidity across different blockchains. The more networks and applications support an asset, the broader the range of ways in which it can be used.
In some cases, lower fees are another advantage. If a tokenized version of an asset can be used on a cheaper and more efficient network, certain transactions may cost significantly less than they would on the original blockchain.
But there is an important caveat: a wrapped token is not the original asset
Tokenized Bitcoin may be worth roughly the same as BTC, but technically it is a different asset.
This is where the main risks arise.
The first is related to backing. If assets managed by a custodian back the issued tokens, the user effectively depends on the reliability of that party. K
The second risk involves smart contracts and blockchain bridges. The more complex the infrastructure, the greater the number of potential attack vectors.
One of the best-known examples occurred in 2022 with the Wormhole bridge. An attacker exploited a vulnerability and obtained around 120,000 tokenized ETH. At the time of the attack, the losses were estimated at approximately $320 million.
The best-known wrapped tokens
Wrapped Bitcoin (WBTC)
WBTC is the largest representative of the wrapped-token category. It was launched in January 2019 and became one of the first ways to enable widespread use of Bitcoin within the Ethereum ecosystem.
As of July 2026, WBTC has a market capitalization of around $7.4 billion, with approximately 116,500 tokens in circulation — around 0.5% of all Bitcoin issued.
Wrapped Ether (WETH)
At first glance, the idea of “wrapping” ETH within its own ecosystem may seem strange. However, there is a technical reason for it.
Native ETH predates the ERC-20 standard and does not itself comply with it. WETH converts Ether into a standard ERC-20 token, making it easier for smart contracts, exchanges, and DeFi protocols to work with.
As of July 2026, WETH has a market capitalization of more than $6.2 billion, with around 3.37 million tokens in circulation.
Coinbase Wrapped BTC (cbBTC)
In 2024, the U.S. cryptocurrency exchange Coinbase also launched its own tokenized version of Bitcoin.
cbBTC initially launched on Ethereum and Base before becoming available on other networks as well.
By July 2026, its market capitalization had reached approximately $5.9 billion, while the number of tokens in circulation approached 93,000.
Wrapped eETH (weETH)
weETH is associated with the Ether.Fi protocol and represents a different approach to tokenization.
A user stakes ETH but, instead of holding a completely locked asset, receives a liquid token that can be used in other DeFi services.
This allows the same capital to continue generating staking rewards while simultaneously being used in other operations.
As of July 2026, weETH has a market capitalization of around $3.5 billion, with a supply of approximately 1.7 million tokens.
Wrapped BNB (WBNB)
WBNB is a tokenized version of BNB. It is primarily needed to ensure compatibility between the native coin of BNB Chain and smart contracts and applications that operate with tokens of the corresponding standard.
WBNB was launched in 2020. By July 2026, the asset’s market capitalization had approached $1 billion, with around 1.58 million tokens in circulation.
Is it worth using wrapped tokens?
Wrapped tokens have solved one of the fundamental problems of the cryptocurrency market — the incompatibility of different blockchains.
They allow Bitcoin to be used in DeFi, staked Ether to remain liquid, and capital to move more freely between different ecosystems.
However, this flexibility comes at the cost of an additional layer of risk.
An owner of ordinary BTC primarily depends on the Bitcoin network and the security of their own private keys. An owner of tokenized BTC additionally depends on the issuer, reserves, smart contracts, and the infrastructure responsible for maintaining the token’s peg to the original asset.
Therefore, when choosing a wrapped token, it is important to look beyond its price. It is equally important to understand who holds the backing assets, whether the reserves can be verified, and how the token can be redeemed for the original asset.
These details ultimately determine how reliable the “wrapper” around the underlying value really is.