# Original Assets Vs Wrapped assets

By [Elys Network Academy](https://paragraph.com/@elys-academy) · 2024-04-15

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Have you ever wondered:

▪️ 𝐖𝐡𝐚𝐭 𝐢𝐬 𝐚 𝐖𝐫𝐚𝐩𝐩𝐞𝐝 𝐚𝐬𝐬𝐞𝐭 ?

Interoperability is crucial for crypto industry scalability.

The professor will delve deeper into this topic.

Let's find out in the book of truth !

**Let's first revisit the classics:**
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**Do you know the difference between a coin and a token?**

For example:

*   Bitcoin is a coin.
    
*   Ethereum is a coin.
    
*   Wrapped ETH is a token.
    
*   Elys is a coin.
    
*   Uniswap is a token.
    

![](https://storage.googleapis.com/papyrus_images/2a9bc13ba76e6932294b22cc15eb79711b08f02bd8a35fc0d2c6e11dacac0fec.jpg)

Coins are digital assets that are native to their own blockchain. They are independent and operate on their own network.

Some examples :

*   BTC
    
*   ATOM
    
*   ETH
    
*   ELYS
    

![](https://storage.googleapis.com/papyrus_images/17ec9a94e98f0472bc0ce5d7b660b6f043abd47732c0aa3ce59054542c68f607.jpg)

Tokens, on the other hand, are digital assets that operate on an existing blockchain network.

**They do not have their own blockchain to operate on** but require another blockchain platform to operate.

They often rely on smart contracts and take the form of an ERC-20, CW-20, TR-20, etc.

**For the reasons explained above, Bitcoin stays within the Bitcoin ecosystem, and ETH remains in the ETH ecosystem.**

To enable interoperability, bridges and wrapped assets were introduced.

So, how does it work?
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**A wrapped asset is a tokenized version of an existing crypto Coin.**

(Notice the distinction between Token and Coin is crucial.)

Typically, the original coin backs the asset, allowing the holder to redeem it for the coin at any time.

**WBTC represents a tokenized version of BTC.**

![](https://storage.googleapis.com/papyrus_images/0b123c4ee3933935d6a10fea50c78fd16b19fba8155726c10f3ad8bb6ac9403c.jpg)

Wrapped tokens are commonly used in the following way:

*   Deposit your BTC into a smart contract or another messaging service.
    
*   Mint a WBTC.
    
*   Obtain WBTC.
    

However, what risks are involved?

**If the smart contract is compromised, redemption may not be possible at a 1:1 ratio.**

![](https://storage.googleapis.com/papyrus_images/cc949d6ea03ac7679ff72864114cc4cb48f7d6e78b28e16f337cf487a1db63ac.jpg)

For IBC protocol, the process differs slightly. **It is more akin to a TCP/IP protocol.**

*   Lock ATOM on the source chain.
    
*   Mint an ATOM on the destination chain.
    

**As long as the relayers are operational (all validators oversee the relayers), you can redeem in a 1:1 ratio.**

![](https://storage.googleapis.com/papyrus_images/83137078da16ce2b32c950383dc638a22a857008b6bc22057c1c304a8bd2aab3.jpg)

Another alternative utilized by Noble is native asset issuance.

*   Deposit your USD
    
*   Circle mints USDC
    
*   Receive them on Noble
    

**You can always redeem them 1:1, unlike with a bridge.**

Your only risk is Circle in this example.

In simpler terms:
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*   **When assets are wrapped, there is a risk of smart contract hacking.**
    
*   **Using IBC eliminates bridge risk but introduces the risk of chain halting.**
    
*   **Issuing native assets carries the risk of company default.**

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*Originally published on [Elys Network Academy](https://paragraph.com/@elys-academy/original-assets-vs-wrapped-assets)*