Ether (ETH) is the native currency of the Ethereum blockchain, serving multiple purposes such as staking, transactions, and paying gas fees for computational tasks. Wrapped Ether (WETH) is an upgraded version of ETH designed to integrate seamlessly with Ethereum-based applications and other digital assets. Unlike ETH, which predates the ERC-20 token standard, WETH adheres to the ERC-20 rules, enabling compatibility with decentralized applications (dApps) and token exchanges.
How WETH Works:
WETH is created through a smart contract that locks ETH and mints an equivalent amount of WETH. This process, known as "wrapping," allows ETH to function as an ERC-20 token. Conversely, users can "unwrap" WETH—redeeming it for ETH—by depositing WETH back into the contract, which burns the WETH and releases the original ETH.
👉 Learn more about Ethereum’s token standards
Key Stats:
- Approximately 3% of all circulating ETH is locked in WETH contracts.
- WETH is widely used in decentralized finance (DeFi) for trading, lending, and liquidity provision.
Why Wrap ETH as an ERC-20 Token?
The ERC-20 standard ensures tokens interoperate smoothly across Ethereum’s ecosystem. Since ETH isn’t ERC-20-compliant, wrapping it unlocks functionalities like:
- Token Swaps: Exchange ETH for other ERC-20 tokens (e.g., DAI or USDC).
- dApp Integration: Use ETH in applications that only support ERC-20 tokens, such as DeFi platforms.
Without WETH, developers would need separate systems to handle ETH and ERC-20 tokens, complicating user experiences.
WETH vs ETH: Key Differences
| Feature | Ether (ETH) | Wrapped Ether (WETH) |
|-----------------|--------------------------------------|-------------------------------------|
| Standard | Native asset | ERC-20 token |
| Supply | Managed by Ethereum validators | Minted/burned via smart contract |
| Gas Fees | Paid directly in ETH | Cannot pay gas fees with WETH |
FAQs
1. Can I unwrap WETH anytime?
Yes! Use the WETH smart contract to redeem WETH for ETH at a 1:1 ratio.
2. Is WETH safer than ETH?
Both are equally secure since WETH is backed 1:1 by ETH held in audited smart contracts.
3. Why is WETH popular in DeFi?
DeFi protocols often require ERC-20 tokens—WETH lets ETH participate in these ecosystems.
👉 Explore DeFi applications using WETH
Further Reading: