When I started to research about wrapped XRP, I first tried to understand why people even need to wrap a coin that already exists. XRP normally lives on its own blockchain called the XRP Ledger. It works well there, but I have seen that many decentralized apps and DeFi platforms are built on other blockchains like Ethereum. In my search, I start to know about a solution called wrapped tokens. That is where Wrapped XRP, also called wXRP, comes in.
Wrapped XRP is simply XRP that has been locked somewhere safe and represented on another blockchain in a new form. They become usable outside the XRP Ledger. For example, wXRP on Ethereum is an ERC20 token. Each wXRP is backed by one real XRP held in reserve. This means the value stays equal at a one to one ratio. If I hold 1 wXRP, there will be 1 real XRP stored by a custodian that supports the system.
I researched on it and found that the price stays stable because of arbitrage. If wXRP becomes more expensive than XRP, traders will buy XRP, wrap it, and sell wXRP. If wXRP becomes cheaper, they buy wXRP, unwrap it, and sell XRP. These actions push the price back to balance. This is how the peg is maintained in a natural market way.
The wrapping process usually works like this. I send my XRP to a trusted service. They lock it in reserve and issue wXRP to me on another chain. When I want my original XRP back, I return the wXRP and they release the XRP. So the supply always matches the reserve.
In my research, I also learned about Wrapped, the project that provides this service. They work with custodians like Hex Trust to safely hold the XRP reserves. This gives users more confidence that the tokens are properly backed.
The main reason people use wXRP is access. If I only use Ethereum, I can now hold and use XRP without leaving that network. I can provide liquidity on decentralized exchanges like Uniswap or SushiSwap. I can pair wXRP with tokens like ETH or USDC and earn fees. This creates more opportunities for XRP holders and also brings XRP to a wider audience.
However, I have also seen that using wrapped tokens comes with risks. You depend on the custodian holding the real XRP. You also face smart contract risks on the new blockchain. So while wrapping increases flexibility, it also adds another layer of trust and technical complexity.
After I researched on it deeply, I understand that Wrapped XRP is not a new coin. It is simply XRP made compatible with other blockchains. They become a bridge between ecosystems. It will have more importance as cross chain activity grows and as users look for more ways to use their assets across different networks.