Since the early years of cryptocurrency, users have faced a significant issue with interoperability, that is, the ability to move assets from one blockchain to another. It has also been difficult to perform functions on more than one chain simultaneously. Over time, many developments have led blockchain technology towards an interoperable future.

One such example is the use of bridges, which were developed to facilitate the transfer of crypto between smart contract-capable blockchains, as well as from Ethereum to its layer 2 solutions and back. Another common example, and one of the earliest solutions to the lack of blockchain interoperability, is token wrapping.

A wrapped token represents a cryptocurrency that would not otherwise be supported natively on a blockchain. One of the most popular of these is Wrapped Bitcoin (WBTC). WBTC tokens are minted on Ethereum (and other chains) and are backed by an equal amount of bitcoin held as collateral with a custodian.

WBTC is important because it provides bitcoin price exposure for users of decentralized finance (DeFi) and makes a BTC-linked asset available outside of its native blockchain for trading against ether and other ERC-20 tokens (when wrapped on the Ethereum blockchain), for decentralized lending/borrowing, and for use on derivatives platforms.

Please login to read full article