Ever found it frustrating that you cannot use BTC on Ethereum? ETH on Binance Smart Chain? Or whether you can perform operations with any cryptocurrency outside of its native blockchain? Unfortunately, you cannot, at least not directly.

Coins that exist on a given blockchain cannot be transferred to another. Wrapped tokens are a way to circumvent this limitation and use non-native assets on a blockchain.

This inability to migrate crypto assets from one blockchain to another can be considered by some among the most frustrating problems facing the crypto community. And while there is currently no direct way that allows Bitcoin on the Ethereum blockchain, a wrapped crypto token is the next best thing to a completely seamless transition between blockchains.

What is a wrapped token?
A wrapped token is an asset hosted on the Ethereum blockchain with a price that is the same as another underlying asset, even if it’s not on the same blockchain or a blockchain at all.

A wrapped token is an ERC-20 token with a value identical to another asset that it represents, either through a smart contract or by being backed one-to-one with the underlying asset.

Wrapped Bitcoin, for instance, is a token worth the same as one BTC at any given moment, as a smart contract algorithm reproduces its price in real-time and regulates the underlying fund with supply and demand information gleaned from user transactions. In exchange for their money, wrapped token users get an equivalent amount of value “wrapped up” in an asset that’s more easily mobilized by decentralized applications (DApps).

How to wrap a token.
To wrap a token, a user “locks” the original token in a smart contract, which then mints an equivalent amount of wrapped tokens. This is similar to a traditionally structured note issued by a DeFi robot. To unlock your original tokens, you simply trade your wrapped tokens back to the smart contract. “Wrapping” seems like a misnomer since you’re trading one token for an ERC-20 token of equal value.

Wrapped tokens are backed by an equal amount of the underlying asset or currency coupled with various organizational rules and algorithmic checks and balances.

DApps can process wrapped token transactions much faster because they are not done across multiple blockchains.
The complex model is enough to provide DApp users native access to other cryptocurrencies without burdening both blockchains. One minimal gas fee on Ethereum is all it takes.

Wrapped tokens on Ethereum
As you’d expect, wrapping and unwrapping tokens on Ethereum costs gas. The implementations of these tokens can be very different.
An example is wrapped ether (WETH).

A quick recap ETH (ether) is required to pay for transactions on the Ethereum network, while ERC-20 is a technical standard for issuing tokens on Ethereum.
However, since ETH was developed before the ERC-20 standard, it isn’t compliant with it. This creates a problem, as many DApps require you to convert between ether and an ERC-20 token. This is why wrapped ether (WETH) was created. It’s a wrapped version of ether that is compliant with the ERC-20 standard.

Wrapped tokens on Binance Smart Chain (BSC)
Just like wrapped tokens on Ethereum, you can wrap Bitcoin and many other cryptos for use on the Binance Smart Chain (BSC).

The Binance Bridge allows you to wrap your crypto assets for use on the Binance Smart Chain in the form of BEP-20 tokens. Once you’ve brought your assets to BSC, you can trade them or use them in various yield farming applications.
The transaction fees are lower on BSC than other blockchains.