TL;DR
A wrapped token is a representation of a token from another blockchain, backed 1:1 by the original asset locked in a bridge contract. For example, wrapped ETH on Solana represents ETH locked on Ethereum.
When you bridge ETH to Solana, the bridge locks your ETH and mints a Solana SPL token representing it (e.g., Wormhole-wrapped ETH). This wrapped token trades on Solana DEXs and can be used in Solana DeFi. Its value should track the original asset 1:1 because it’s always redeemable for the locked original via the bridge. Unwrapping reverses the process: burn the wrapped token, unlock the original.
Some tokens have native versions on multiple chains. USDC on Solana is native (issued directly by Circle) — it’s not wrapped and has no bridge dependency. But Wormhole-wrapped USDC (USDCet) is a bridged version of Ethereum USDC. Native tokens are safer because they don’t depend on a bridge. When swapping, prefer native token versions when available. Jupiter shows which version you’re trading.
Wrapped tokens are only as secure as their bridge. If the bridge is hacked, wrapped tokens become unbacked and worthless. Wrapped tokens can depeg from the original during bridge congestion, exploits, or liquidity crunches. Always check the bridge backing by verifying the locked collateral matches the minted supply. For stablecoins, strongly prefer native versions (USDC) over wrapped versions (USDCet).