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Crypto Terms:  Letter W

What is Wrapped Ether (WETH)?

Meaning:
Wrapped Ether (WETH) - the ERC-20 compatible version of Ether.
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2 minutes

Let's find out Wrapped Ether (WETH) meaning, definition in crypto, what is Wrapped Ether (WETH), and all other detailed facts.

Wrapped Ether (WETH) is created by transferring Ether to a smart contract. This puts it on hold in exchange for a 1:1 ratio of WETH ERC-20 tokens. This WETH can then be transfered back into the same smart contract to be unwrapped. However, it can also be redeemed at a 1:1 ratio for the original Ether.

Ether (the native currency of Ethereum) was created before the ERC-20 standard or any other standards were established. As a result, Ether is not ERC-20 compatible. Thus, it cannot be exchanged for other ERC-20 tokens in a decentralized manner.

Though rather than implementing two interfaces within the same smart contract, which would add unnecessary complexity, developers came up with the solution of wrapping Ether to upgrade it to the ERC-20 standard. This allows WETH and other ERC-20 tokens to be handled within the same contract.

Wrapping Ether creates a possibility of a direct and frictionless exchange between Ether and ERC-20 tokens. This means that there would be no need to rely on third parties. Besides, it helps to avoid exposing users to extra risks. For example, it would help to avoid unexpected transaction errors that could appear due to complicated implementations.

Many Ethereum-based decentralized apps (dApps) use WETH instead of Ether. They do that to enable direct and decentralized peer-to-peer trading between Ether in a wrapped form and ERC-20 tokens that follow the same technical standard.