A wrapped token is a representation of an underlying asset from one blockchain network that has been "wrapped" or encapsulated into another format compatible with a different blockchain. This wrapping process involves locking the original asset on its native chain while issuing equivalent tokens on another chain. Wrapped tokens enable cross-chain compatibility by allowing users to utilize assets from one blockchain within applications running on another chain. For example, Wrapped Bitcoin (WBTC) represents Bitcoin's value but operates as an ERC-20 token on Ethereum's network. Holders of WBTC can access decentralized finance (DeFi) applications built specifically for Ethereum without needing to convert their BTC holdings into ETH directly. Wrapped tokens facilitate [[Interoperability|interoperability]] by representing assets from one chain in a compatible format on another chain, allowing users to leverage those assets within specific applications or ecosystems.