A tokenised representation of a cryptocurrency from one blockchain on a different blockchain, maintaining a 1:1 value peg with the original asset through a custodial or smart-contract-based mechanism. Wrapped tokens enable cross-chain interoperability by allowing assets to be used on blockchains where they don't natively exist, significantly expanding their utility in DeFi protocols. The wrapping process involves depositing the original asset with a custodian or locking it in a smart contract, which then mints an equivalent number of wrapped tokens on the target chain.
Example
“The DeFi user wrapped 5 BTC into WBTC (Wrapped Bitcoin) to use as collateral on an Ethereum-based lending protocol, maintaining exposure to Bitcoin's price while accessing Ethereum DeFi.”