A wrapped asset, in the context of a digital asset, refers to a digital representation of a traditional or another blockchain-native asset that is issued on a blockchain. It is created by "wrapping" the original asset and representing its value in the form of a token on a blockchain network.

The process of wrapping involves depositing the original asset with a custodian or a trusted third party. Once the asset is held securely, a matching quantity of wrapped tokens is generated and introduced onto the blockchain network. These wrapped tokens are backed by the underlying asset, typically held in reserve, and can be freely transferred and traded on the blockchain network.

Wrapped assets provide the ability to represent and transfer real-world assets, such as fiat currencies, commodities, or even other digital assets, in a digital form on a blockchain. They enable greater interoperability and liquidity between different blockchain networks, as they can be seamlessly exchanged and utilized within decentralized applications (dApps) and smart contracts.

Wrapped assets are usually designed to maintain a fixed value that mirrors the underlying asset they represent. This mechanism ensures that the wrapped tokens can be exchanged or redeemed for the original asset at any time, typically through a custodian or an authorized entity.