What is a Wrapped Token?
Quick Definition
A wrapped token is a token that represents another asset on a different blockchain or in a different form, typically backed 1:1 by the original token or asset.
Full Definition
Wrapping is a common pattern in crypto. The original asset is locked in a smart contract or held in custody, and a new "wrapped" version is issued elsewhere, usually on a different blockchain, in a different token standard, or with different mechanics. Wrapped Bitcoin (WBTC) on Ethereum is one of the most widely known examples. It's a token on Ethereum backed 1:1 by Bitcoin held in custody, allowing Bitcoin holders to use their value in Ethereum's DeFi ecosystem.
Wrapped tokens can also serve technical purposes. Some tokens use mechanisms (like rebase) that aren't compatible with certain DeFi protocols. A wrapped version of the same token can be used in those protocols without compatibility issues. This is what Steady does. Wrapped Steady (wSTDY) offers the same product, but instead of rebasing (i.e. growing the amount of Steady in your wallet), the wSTDY token price increases to reflect the growth of our underlying. The product is the same, it's just how growth is perceived that's different.
Why wrapped tokens matter
Wrapped tokens make assets more flexible. They allow value to flow between blockchains, between protocols, and into use cases that the original asset couldn't easily reach. They also introduce trust considerations, the wrapping process typically involves a custodian or smart contract that holds the underlying, so the integrity of the wrap depends on the integrity of that infrastructure.
Wrapped Steady
Because STDY uses a rebase mechanism, it can be technically complex to integrate with some DeFi protocols that don't handle rebasing tokens well. Wrapped Steady solves this by providing an ERC-20-compatible version of STDY that does not rebase. Instead, its value increases over time to reflect the same underlying performance. Holders can freely wrap and unwrap between STDY and wSTDY at any time using Steady's smart contract, paying only the network gas fees required for the transaction. This makes Wrapped Steady more compatible with DeFi protocols, lending markets, and other integrations while preserving exposure to the performance of the underlying assets.
Related Terms
Bridge
ReadA bridge is a mechanism that enables the transfer of assets or data between different blockchain networks.
Composability
ReadComposability refers to the ability of different protocols, contracts, and tokens on a blockchain to interact and combine with each other seamlessly.
DeFi (Decentralized Finance)
ReadDeFi refers to financial services and applications built on blockchain technology, operating through smart contracts without traditional intermediaries.
Rebase
ReadA rebase is an automatic adjustment to the total supply of a token, where every holder's balance changes proportionally to reflect a new total supply.
Tokenization
ReadTokenization is the process of representing a real-world asset such as a currency, bond, or piece of property as a digital token on a blockchain.
Other Glossary Items
Learn about common and essential terms related to Steady and other stablecoin protocols.
Algorithmic Stablecoin
ReadAn algorithmic stablecoin attempts to maintain its value through automated rules that adjust token supply based on market demand, rather than holding equivalent reserve assets.
AML
ReadAML (Anti-Money Laundering) refers to the laws, regulations, and procedures designed to prevent the use of financial systems for laundering the proceeds of crime.
APY
ReadAPY, or Annual Percentage Yield, is the standardized rate of return an asset generates over a year, including the effect of compounding.
Arbitrum
ReadArbitrum is a Layer 2 blockchain network built on top of Ethereum, designed to offer faster and cheaper transactions while inheriting Ethereum's security and infrastructure.
Asset Backing
ReadAsset backing refers to the real-world or on-chain assets held by the issuer to support the value of every token in circulation.
Asset Locking
ReadAsset locking refers to restricting access to funds for a defined period or condition, during which they cannot be transferred or used.
Asset Segregation
ReadAsset segregation is the practice of keeping client or backing assets separate from the issuer's operational funds, protecting them from the issuer's other obligations.
Audit
ReadAn audit is an independent examination of a protocol's code, reserves, or operations by qualified third parties to verify accuracy and compliance with stated claims.
Backing
ReadBacking refers to the assets or mechanisms that support a stablecoin's value and help it maintain its intended reference value.
Blockchain Network
ReadA blockchain network is the system of connected participants and infrastructure that validates, records, and maintains data on a specific blockchain.
Blockchain
ReadA blockchain is a distributed digital ledger that records transactions across a network of computers in a secure, transparent, and tamper-resistant way.
Clarity Act
ReadThe Clarity Act is a proposed US legislative framework intended to clarify the regulatory treatment of digital assets, defining when they should be treated as securities versus commodities.
Collateralization / Over-collateralization
ReadCollateralization refers to the ratio between the value of assets held in reserve and the value of tokens issued. Over-collateralization means holding more in reserves than the value of tokens issued.
Counterparty Exposure
ReadCounterparty exposure refers to the risk that another party, such as a bank, custodian, broker, or service provider fails to fulfill its obligations, potentially affecting the assets or funds it holds.
Custodial vs. Non-Custodial
ReadCustodial means a third party holds the private keys to your assets on your behalf. Non-custodial means you hold your own keys and control your own assets directly.
LearnMoreAboutSteady
Transparency Portal
reserves, statements, audits, smart contract, and more.
FAQs
Discover the basics about Steady in our frequently asked questions.
Contact Us
questions, feel free to get in touch. We'll be happy to help.
