Wrapped tokens are assets on any blockchain that hold the exact same value and tokenomics of another asset. They can provide interoperability with other blockchains and are a critical component of DeFi's infrastructure.

For example, 1 WETH is pegged to the exact same price as 1 ETH.

So if we already have ETH, why make another 'copied' version of it? Since ETH itself is the native asset on Ethereum, it follows a different set of rules compared to the ERC20 tokens that are built upon the network. Wrapping ETH into an ERC20 version turns into WETH, allowing users to swap the value (and associated characteristics) of ETH with other ERC20 standard tokens.

Additionally, wrapping a token or a native asset can allow it to be interoperable with other external blockchains. For example, the BNB Chain equivalent of ETH, still holds the same value as regular ETH, but follows the BEP20 standard.

The wrapping process also allows assets to assume the characteristics of the network it is being wrapped on. For example, wrapped Bitcoin (WBTC) is essentially Bitcoin, but built on Ethereum. It still holds the same monetary value as real BTC, however it can be sent at much faster speeds on Ethereum. Not only does wrapping provide higher efficiency, it also can significantly reduce the fees for moving similar forms of value.

As a decentralized exchange aggregator, 1inch utilizes wrapped tokens to quickly transfer assets through a route, achieving the best rates and efficiency for users.

In this example, an Ethereum transaction interacted with the 1inch Aggregation Router V6. The internal transactions show WETH being transferred to the router and the same amount of native ETH being sent to the recipient, illustrating how WETH can be unwrapped during the route.

From the user's perspective, they receive native ETH; the WETH-to-ETH unwrapping happens as part of the transaction.

1inch also specifically uses wrapped tokens in its Limit Order protocol to serve as a more compatible and efficient means of executing orders.