Key Takeaways
- Wrapped Ether (WETH) bridges Ethereum’s native ETH with the ERC20 token standard, enabling seamless DeFi integration.
- Enhances interoperability by allowing ETH to interact with ERC20 tokens and dApps.
- Convertible 1:1 with ETH via decentralized tools like Uniswap or MetaMask.
- Ensures transparency and collateralization through smart contracts.
What is WETH (Wrapped Ether)?
WETH is a tokenized version of ETH that adheres to the ERC20 standard. Unlike ETH, which is Ethereum’s native currency, WETH is compatible with DeFi protocols, enabling functionalities like trading, lending, and liquidity provision.
👉 Discover how WETH powers DeFi platforms
How Does Wrapped Ether Work?
- Smart Contract Wrapping: ETH is locked in a smart contract, which mints an equivalent amount of WETH.
- 1:1 Value: WETH always mirrors ETH’s value.
- DeFi Utility: Enables ETH to be used in ERC20-based applications (e.g., Uniswap, Aave).
ETH vs. WETH: Key Differences
| Aspect | ETH | WETH |
|---|---|---|
| Standard | Native currency | ERC20 token |
| Use Case | Gas fees, staking | DeFi operations |
| Redeemability | Non-redeemable | 1:1 redeemable with ETH |
Why Do We Need WETH?
- ERC20 Compatibility: ETH’s native form isn’t compatible with most dApps.
- Simplified Transactions: Standardizes ETH for DeFi workflows.
- Cross-Chain Interoperability: WETH can be used on other ERC20-supporting blockchains.
👉 Explore WETH’s role in liquidity pools
How Is WETH Created?
- Deposit ETH: Send ETH to a wrapping smart contract.
- Mint WETH: The contract issues an equivalent amount of WETH.
- Collateralization: ETH is held as collateral in the contract.
How to Convert ETH to WETH
- Connect Wallet: Use MetaMask or another Web3 wallet.
- Visit a Platform: Navigate to Uniswap or a similar DEX.
- Wrap ETH: Select "Wrap ETH" and confirm the transaction.
How to Unwrap WETH
- Select "Unwrap WETH" on a supported platform.
- Confirm Transaction: Pay gas fees to convert WETH back to ETH.
FAQs
1. Is WETH safer than ETH?
- Answer: WETH is equally secure, as it’s 1:1 collateralized by ETH held in smart contracts.
2. Can WETH be staked?
- Answer: Yes, on platforms like Aave or Compound that accept ERC20 tokens.
3. Why pay gas fees for wrapping?
- Answer: Gas fees cover the computational cost of executing the smart contract.
4. Is WETH used outside Ethereum?
- Answer: Yes, on blockchains that support ERC20 tokens (e.g., Polygon, Avalanche).
Conclusion
WETH is a cornerstone of DeFi, solving ETH’s incompatibility with ERC20 standards. Whether you’re trading, lending, or providing liquidity, understanding WETH unlocks Ethereum’s full potential.