Ether (ETH) is the primary currency of the Ethereum blockchain, serving multiple purposes such as staking, transactions, and paying gas fees for computations. Wrapped Ether (WETH) is an enhanced version of ETH designed to meet the technical requirements of decentralized applications (dApps) and other digital assets on Ethereum. Since ETH predates the ERC-20 token standard, it lacks compatibility with many applications. WETH bridges this gap by converting ETH into an ERC-20-compliant token.
How WETH Works
Wrapped ETH is a smart contract that allows users to deposit ETH and receive an equivalent amount of WETH, which adheres to the ERC-20 standard. This process, known as "wrapping," enables ETH to interact seamlessly with ERC-20 tokens. Conversely, users can "unwrap" WETH to retrieve their original ETH by redeeming it through the WETH smart contract, which burns the WETH and releases the ETH.
👉 Learn how to wrap and unwrap ETH
Why Wrap ETH?
- Interoperability: ETH cannot be directly traded for ERC-20 tokens or used in ERC-20-based dApps. WETH solves this problem.
- DeFi Integration: Most decentralized finance (DeFi) platforms require ERC-20 tokens. WETH allows ETH holders to participate in DeFi protocols like decentralized exchanges (DEXs) and lending platforms.
Key Differences: ETH vs. WETH
| Feature | Ether (ETH) | Wrapped Ether (WETH) |
|------------------|--------------------------------------|-------------------------------------|
| Standard | Native Ethereum asset | ERC-20 token |
| Supply | Managed by Ethereum validators | Issued/burned via smart contract |
| Gas Payments | Used for transaction fees | Cannot pay gas fees directly |
Importance of WETH
Approximately 3% of circulating ETH is locked in WETH contracts, highlighting its critical role in Ethereum’s ecosystem, particularly in DeFi.
FAQs
Why can’t I use ETH directly in DeFi apps?
ETH doesn’t comply with the ERC-20 standard, which most DeFi platforms require. WETH converts ETH into a compatible format.
Is WETH safer than ETH?
WETH is as secure as ETH since it’s backed 1:1 by ETH held in audited smart contracts.
How do I unwrap WETH?
Interact with the WETH smart contract to redeem WETH for ETH.
👉 Explore WETH uses in DeFi