What Are Wrapped Tokens?
By placing cryptocurrency in a special kind of digital vault, one can create what is called a wrapped token. The value of which depends on the stored Bitcoin, but the wrapped asset runs on a separate blockchain.
For example, consider Wrapped Bitcoin (CRYPTO: WBTC) and Bitcoin BEP-2 (CRYPTO: BTCB). One can swap WBTC or BTCB for Bitcoin (CRYPTO: BTC) directly on most wallets. And both are Bitcoins, but they don't operate on the Bitcoin blockchain. Instead, they transact on the Ethereum (ERC-20) and Binance (BEP-2) chains. Binance is the largest cryptocurrency exchange in the world by trading volume.
Readers might be wondering: What's the point of going through all this? Well, creating a wrapped token enables users to use their Bitcoin in self-executing, programmable agreements -- aka, smart contracts -- and earn fixed income.
Source Fool.com
