WETH (Wrapped Ethereum) is an ERC-20 token fully collateralized by ETH, Ethereum's native cryptocurrency. It serves as a tokenized version of ETH, designed specifically for decentralized applications (dApps) requiring ERC-20 compatibility.
What Is WETH?
Wrapped Ethereum (WETH) is an ERC-20 compliant representation of Ether (ETH) on the Ethereum blockchain. Key characteristics include:
- 1:1 Value Peg: Each WETH token equals 1 ETH in value and can be unwrapped at any time.
- Interoperability: Enables ETH to function seamlessly in dApps built for ERC-20 tokens.
- Minting/Burning Mechanism: ETH is locked in a smart contract to mint WETH; unwrapping burns WETH to release ETH.
Why Was WETH Created?
Ethereum’s native ETH doesn’t follow the ERC-20 standard, limiting its use in many dApps. WETH bridges this gap by:
- Standardizing ETH for DeFi protocols, decentralized exchanges (DEXs), and other ERC-20-centric platforms.
- Enhancing cross-chain compatibility by allowing ETH to interact with other blockchain ecosystems.
How WETH Works
- Wrapping ETH: Users deposit ETH into a WETH smart contract, which mints an equivalent amount of WETH.
- Using WETH: The token can be traded, lent, or used in dApps like any ERC-20 token.
- Unwrapping: WETH is burned to redeem the original ETH.
👉 Discover how to wrap ETH into WETH
History of WETH
- 2015: Ethereum launched without ERC-20 compliance for ETH.
- 2017: The 0x project team introduced WETH to resolve interoperability issues across DEXs.
- 2018: First WETH smart contract deployed on Ethereum mainnet.
Supply Dynamics
- WETH supply fluctuates based on demand.
- No hard cap exists; tokens are minted/burned as users wrap/unwrap ETH.
FAQs About WETH
1. Is WETH the same as ETH?
No. WETH is an ERC-20 token backed 1:1 by ETH but follows a different technical standard. ETH is native to Ethereum, while WETH is a wrapped version for ERC-20 compatibility.
2. Where is WETH used?
Primarily in:
- DeFi platforms (e.g., Uniswap, Aave).
- NFT marketplaces.
- Cross-chain bridges.
3. Are there fees to wrap/unwrap ETH?
Yes. Ethereum gas fees apply for minting/burning WETH.
4. Can WETH lose its peg to ETH?
Minor deviations (<1%) may occur due to market activity, but arbitrage keeps it closely pegged.
5. Is WETH secure?
Yes, if the underlying smart contract is audited. Always verify the contract address.
👉 Learn about WETH security best practices
Key Takeaways
- WETH enables ETH to function in ERC-20 environments.
- It’s essential for DeFi, DEXs, and cross-chain applications.
- Wrapping/unwrapping requires gas fees but maintains a 1:1 value with ETH.
By leveraging WETH, users unlock Ethereum’s full potential in the decentralized ecosystem. Its role in interoperability and liquidity makes it a cornerstone of modern blockchain applications.
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