What is Wrapped Token?

Wrapping is a method of standardising a token or cryptocurrency issued by one blockchain to to meet the token standards of another blockchain. A wrapped token natively lives on a blockchain it wasn’t initially issued on. It operates as a bridge between different blockchains.

How does it work?

Let’s consider an example of KKUB, a KAP-20 version of KUB that allows users to use their KUB in DApps on Bitkub Chain possible. KKUB is 1:1 pegged to the value of KUB. For every KKUB that exists, there is KUB that a custodian is holding. In other words, by holding KKUB, you effectively hold KUB by proxy. It is a 2-step process, as follows:
Step 1 - A user initiates the minting process by sending KUB to the custodian, an entity holding an equivalent amount of wrapped assets in the reserves.
Step 2 - The custodian then mints KKUB on Bitkub Chain and sends the equivalent amount of KKUB (1:1 pegged to the value of KUB) back to the user. On VONDER Exchange, This step is automatically executed by our Exchange smart contract.
On the other hand, the user can also send KKUB to the custodian and receive the equivalent amount of KUB in return, this process is so-called "Unwrapping".
Wrapped tokens on Bitkub Chain are complied with KAP-20, a technical standard for issuing tokens on Bitkub Chain.
To sum it all up, KKUB is a tokenized version of KUB on Bitkub Chain.