Wrapped tokens are each backed by an equal amount of the underlying asset or currency — as well as a variety of organizational roles, and algorithmic checks and balances.
DApps can process wrapped token transactions much faster because they aren’t done across multiple blockchains. Users can transact confidently because wrapped tokens’ trustless nature is preserved by a framework that backs each one-to-one with the underlying assets.
The complex model is enough to provide DApp users native access to other cryptocurrencies without burdening both blockchains in the processing of any DApp transaction. One minimal gas fee on Ethereum is all it takes.
Governance over wrapped tokens is typically done by assigning necessary roles to organizations, predominantly custodians who hold underlying assets and mint (or burn) new wrapped tokens as necessary. Merchants provide a medium to wrapped token buyers, while users own the tokens.