Wrapped cryptocurrencies or tokens are pegged to the value of another original crypto or assets like gold, stocks, shares, and real estate and put to work on the DeFi platforms.
The original asset is ‘wrapped’ into a digital vault, and a newly minted token is created to transact on other platforms. Wrapped tokens allow non-native assets to be used on any blockchain, build bridges between networks and implement interoperability in the cryptocurrency space.The creator of the token, upon deployment usually creates the initial supply of the tokens . This is known as a "mint" operation. In many ERC20 tokens that's all.
In wrapped tokens, the wrap operation performs a mint. The holder transfers cryptocurrency to the smart contract, the smart contract mints the equivalent amount of tokens, and finally the smart contract transfers the tokens to the holder. All four of these assets have equivalent value, they simply exist in different formats and on different blockchain networks.The reason you need WRBTC is to be able to trade RBTC for other ERC-20 tokens on decentralized platforms. Because decentralized platforms running on RSK use smart contracts to facilitate trades directly between users, every user needs to have the same standardized format for every token they trade. This ensures tokens don’t get lost in translation.
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