Wrapped tokens: Wrapped crypto-assets (e.g. cbETH, WBTC) (often referred to as 'wrapped tokens') are tokenised representations of other crypto-assets. They are typically created to facilitate compatibility and interaction across different blockchain protocols.

Smart contract risk: Wrapped tokens rely on smart contracts to ensure their value remains pegged to the underlying asset. These contracts could have vulnerabilities or flaws that can be exploited, potentially leading to a loss of funds.

Collateral risk: The value of a wrapped token is typically backed by an equivalent amount of the underlying asset. If the mechanisms ensuring this collateralization fail, the wrapped token's value might not be preserved.

Custodial risk: The underlying assets for wrapped tokens may be held in custody by a third party. If this party becomes insolvent, mismanages the assets, or is subjected to fraud or hacking, the value of the wrapped token might be jeopardized.

Bridging risk: Wrapped tokens are often used to bridge assets between different blockchain ecosystems. The integration layers that facilitate these bridges might suffer from technical issues, hampering the ability to transfer or utilize the tokens as intended.

Pricing disparity: In certain situations, the price of the wrapped asset and its underlying asset might diverge due to market inefficiencies or liquidity issues.