DeFi & Yield

What is a wrapped token (like wBTC) and how is it used in DeFi?

A wrapped token is a token on one blockchain that represents an asset native to another, backed one-to-one by the original held in custody. It exists so an asset can be used on a network it does not natively run on. For example, wBTC represents Bitcoin on the Ethereum network, letting it be used in lending, trading, and liquidity pools that Bitcoin cannot access directly. The peg depends on the custodian or system actually holding the backing asset, which adds a layer of trust and risk. Understanding what backs a token before using it reflects the research-led approach we take at Qatobit. Explore our methodology.