Some functions of DeFi require you to trade digital assets that aren’t compatible with a platform you wish to use for a service. This requires a process known as “wrapping”. While nothing is technically being wrapped in a physical sense, it is a descriptive term for creating compatibility to a specific network architecture. Users can wrap Bitcoin to be compatible with the Ethereum network for example which allows that Bitcoin to be ERC-20 compatible that is also backed 1:1 in value. Wrapping an asset provides more benefits than just compatibility benefits. Wrapped assets also offer liquidity to a blockchain, allows hard assets to be directly tradable with tokens, and reduces noise by only utilizing one node (if on the Ethereum network for example) instead of multiple.
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