Glossary
Wrapped Token
A token issued on chain B that represents 1:1 ownership of an asset locked on chain A or in a contract — WBTC, WETH, and stETH are common examples.
Wrapping turns one asset into another with the same value but different mechanics. WETH wraps native ETH into an ERC-20 so it works with token-only contracts. WBTC wraps BTC on Ethereum so DeFi can use Bitcoin as collateral. stETH wraps staked ETH into a liquid receipt.
The wrapper is only as trustworthy as the bridge or custodian that holds the underlying. WBTC, for instance, is centrally custodied; a loss of confidence in the custodian directly threatens the peg.