Understanding the Importance of Wrapped Cryptocurrency Assets: Where Do They Fit In?

Decentralized finance (DeFi) is no longer new among the crypto community. It has been gaining notoriety in the last few years, and DeFi is now an industry on its own. When we talk about the asset classes running the DeFi space, we cannot ignore wrapped assets, which are now a critical player in exploiting the multitude of use cases and functionalities in decentralized finance. This write-up will explain wrapped cryptocurrency assets in detail to help cryptocurrency and DeFi enthusiasts understand their importance and where they fit in the larger cryptocurrency industry. What are Wrapped Cryptocurrency Assets? A wrapped asset can be simply defined as a cryptocurrency token pegged to another asset. However, this definition makes wrapped assets much similar to stablecoins. For a more elaborate representation, a wrapped is a token that represents the original coin in a foreign blockchain. It is called a wrapped asset because the original crypto coin is put in a digital vault called the wrapper that allows it to exist on a non-native blockchain. The wrapped asset holds the same value as the original cryptocurrency, and apart from being used on other blockchains, some wrapped assets are redeemable for the original coin. Essentially, wrapped assets exist in two types. However, it is widely conceded that stablecoins were the first class of wrapped assets regardless of the massive differences. The more established wrapped cryptocurrenc...