> ## Documentation Index
> Fetch the complete documentation index at: https://docs.theblockchainlibrary.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Wrapped Asset

> A token representation of an asset originating on another chain or system.

# Wrapped Asset

A token representation of an asset originating on another chain or system.

## Definition

A token representation of an asset originating on another chain or system.

## Why it matters

Interoperability allows assets, messages, and applications to operate across otherwise separate networks.

## How it works

Users deposit their native asset into a secure bridge contract. Once locked, the protocol triggers the minting of a synthetic token on the new chain. When the user wants to redeem the original, they burn the synthetic token, which signals the contract to release the original asset back to the user.

## Real-world example

Wrapped Bitcoin (WBTC) is the most prominent example, allowing Bitcoin to be used as collateral in Ethereum-based DeFi protocols like Aave.

## Advantages

* Enables cross-chain asset usage
* Increases DeFi liquidity
* Expands utility for legacy tokens

## Limitations

* Custodial risk with centralized bridges
* Complexity of cross-chain trust
* Risk of de-pegging from native value

## Common misconceptions

* Wrapped assets are just another crypto copy. Wrapped assets are backed by the original asset, unlike memecoins or speculative tokens.
* The wrapped asset is the same as the original. They are two different tokens existing on two different ledgers, even though they represent the same value.

## Related knowledge

* [Bridge](/generated/v2/glossary/bridge) — term
* [Cross-Chain](/categories/cross-chain) — term
* [Relayer](/generated/v2/glossary/relayer) — term

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**Canonical knowledge ID:** `glossary:wrapped-asset`