What is a Wrapped Crypto?

A wrapped crypto is a token that represents another cryptocurrency on a different blockchain. It is a way to enable cross-chain compatibility and interoperability between different blockchain networks.

How does it work?

When a crypto asset is wrapped, it is locked on its native blockchain and an equivalent amount of tokens is issued on the destination blockchain. These wrapped tokens can then be traded, transferred, or used in decentralized applications (DApps) on the new blockchain.

Benefits of wrapped cryptos

1. Cross-chain compatibility: Wrapped cryptos allow users to access and utilize assets from different blockchains without having to switch between networks.

2. Liquidity: By representing assets from different blockchains, wrapped tokens increase liquidity across various decentralized exchanges (DEXs) and other platforms.

3. Interoperability: Wrapped cryptos enable seamless integration and communication between different blockchain networks, fostering collaboration and innovation.

4. Expanding functionality: With wrapped cryptos, the features and capabilities of a particular blockchain can be extended to other networks, unlocking new possibilities.

Example of a wrapped crypto: Wrapped Bitcoin (WBTC)

Wrapped Bitcoin (WBTC) is an example of a wrapped crypto. It represents Bitcoin (BTC) on the Ethereum blockchain, allowing users to access BTC's value and liquidity in the Ethereum ecosystem.

Wrapping process

1. User locks their BTC in a custodial wallet.

2. The custodian mints an equivalent amount of WBTC on the Ethereum blockchain.

3. The user receives WBTC, which can be used or traded within the Ethereum ecosystem.

Conclusion

Wrapped cryptos play a crucial role in bridging different blockchain networks and expanding the functionalities of cryptocurrencies. They provide a means for users to access assets from other blockchains, increasing liquidity and fostering interoperability.

For more information on wrapped cryptos, you can read the full article "Crypto.com Crashed: A Deep Dive into the Recent Crash".

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