Topic
What is wrapped bitcoin?
Last reviewed:
- Quick fact 1
A wrapped token stands for another asset in a different token format or on a different blockchain.
- Quick fact 2
Moving value between blockchains usually relies on a bridge or a custodian.
- Quick fact 3
Bridges add risk: they have been targets of large hacks.
The short lesson
Bitcoin lives on the Bitcoin blockchain. Many apps run on other blockchains, such as Ethereum. Bitcoin cannot move there directly.
Wrapped bitcoin is a workaround. Someone holds real bitcoin, and a matching token is created on the other blockchain. The token is meant to be worth one bitcoin because it can, in theory, be swapped back for one.
That “in theory” is the lesson. A wrapped token is a claim, not the bitcoin itself. It depends on:
- The custodian or bridge that holds the real bitcoin. If it is hacked, mismanaged or frozen, the token can lose its link.
- The smart contracts that create and destroy the tokens. Code can have bugs.
- The rules for redeeming. Not everyone can swap the token back directly.
So wrapped bitcoin carries bitcoin’s risks plus the risks of whoever does the wrapping. That is the same idea as Lesson 8: if you do not hold the keys, someone else does.
Related terms
Go deeper in Lesson 8: What not your keys means
Common questions
Is wrapped bitcoin the same as bitcoin?
No. It is a token on another blockchain that is meant to track bitcoin. It depends on whoever holds the real bitcoin.
Why do people wrap bitcoin?
To use something linked to bitcoin in apps on other blockchains.
Can wrapped bitcoin lose its link to bitcoin?
Yes, if the custodian or bridge fails, is hacked or stops redemptions.
Is wrapping the same as a bridge?
They are related. Bridges move value between chains, often by locking an asset on one side and issuing a token on the other.