Introduction to Wrapped Cryptocurrency
Wrapped means which is covered, and wrapped crypto means the digital currency which is covered. Wrapped Crypto are used in the form of Wrapped tokens as a Cryptocurrency such as Bitcoin or Dogecoin on the blockchain.
About Wrapped Tokens
The wrapped token is a cryptocurrency token that is Pegged in the value of another crypto, here original asset is kept in the wrapper, a digital vault, or on a secure online platform that keeps your assets secure and protected, here assets are Gold, Stocks, Share, and real estate.
One of the best-wrapped tokens is wrapped bitcoin known as WBTC. Wrapped tokens kept their value Backed and maintained.
How was the idea of wrapped cryptocurrency idea born?
The First Wrapped Bitcoin was launched in January 2019, before Wrapped Cryptocurrency, the transfer of assets is not possible because it generates higher risk and hack like double-spending attack, issues with the native tokens for Bitcoin and Ethereum for the exchange of information between the cryptocurrencies.
As we all know, Bitcoin and Ethereum have different protocols and algorithms. And due to this, they are unable to talk to each other.
Therefore, the Wrapped cryptocurrency idea was born to solve the communication problem of the oldest and largest Cryptocurrency networks such as bitcoin and Ethereum, and to solve interoperability issues across various blockchains.
However, for some recent blockchains such as Polkadot designed to solve some interoperability issues but it became vital to find a solution and allow communication between the prior networks like Bitcoin and Ethereum, that’s the reason wrapped tokens were created.
Final Thoughts
Wrapped Cryptocurrency is one of the important tools of Digital currency where decentralized finance will undoubtedly play a significant role. It helps the assets to transfer from one blockchain to the another blockchain and provides privacy/security for the assets to keep them wrapped.
Another advantage of Wrapped tokens is they increase the liquidity of both centralized and decentralized exchanges due to their movable capacity of assets across various blockchains.
