Wrapped Bitcoin tokens: what they are
A wrapped Bitcoin token is a blockchain token on another network that tracks BTC's price. You get it by sending BTC to a custodian or bridge.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
On this page
- Send BTC to a custodian or bridge to get one.
- Check the token's network before sending.
- It is not native Bitcoin and can depeg.
Bitcoin runs on its own blockchain. Many apps on other networks do not accept it directly, so a wrapped Bitcoin token acts as a stand-in.
How does wrapped Bitcoin work?
You send native Bitcoin to a custodian or bridge. That service holds the Bitcoin and issues a token on another network. Before you send it, check which network the token uses. Sending on the wrong network can lose your funds.
What can you do with it?
Apps on networks such as Ethereum may accept a wrapped token. They let Bitcoin holders reach services that native Bitcoin cannot.
- Trade it on apps that do not list native Bitcoin.
- Use it as collateral in lending apps.
- Hold it in a wallet that supports that network.
What are the risks and limits?
A wrapped token depends on the custodian or bridge that issued it and on its smart contracts. If the custodian fails, you may not be able to redeem it for Bitcoin. The token can trade away from Bitcoin's price, called depegging.
How is it different from Bitcoin?
Wrapped Bitcoin is not native Bitcoin. It is a separate token meant to follow Bitcoin's price. To get Bitcoin back, you usually redeem it through the issuer.
Bitcoin price todayLive price, charts and market data live in our Coins section.Frequently asked questions
No. It is a separate token on another blockchain, not native Bitcoin.
Usually yes, if the issuer or bridge is working. You send the token back through the same service.
The IRS treats cryptocurrency as property. Wrapping can have different tax rules than holding Bitcoin.
You may lose the ability to redeem it for Bitcoin. The token can also stop tracking Bitcoin's price.
