What Is Wrapped Ether (WETH) and How Do You Use It

Wrapped Ether (WETH) lets you use Ethereum (ETH) as if it were an ERC-20 token. Wrapped Ether is mainly used in the DeFi ecosystem for providing liquidity, collateralized lending, token swaps, and more.

You can easily wrap and unwrap Ethereum through Uniswap, MetaMask, OKX Wallet, or exchanges such as Binance. In this post, we'll take a closer look at what Wrapped Ether is and how to use it.

What Is Wrapped Ether (WETH)?

Ether (ETH) is the "base currency" used on the Ethereum network. However, ETH is a unique native coin that doesn't follow the ERC-20 token standard.

The problem is that most DeFi services are built on the ERC-20 standard, so ETH itself is hard to use directly with smart contracts or certain dApps.

Because most DeFi apps only support ERC-20 tokens, if you want to put ETH into a liquidity pool, use it as collateral, or connect it to a smart contract, you need to convert it to fit the ERC-20 standard.

That's where Wrapped Ether, or WETH, comes in. As the name suggests, WETH is a token that wraps ETH in the ERC-20 format. Once you wrap your Ethereum this way, it follows the ERC-20 token standard, so you can use it freely across a wide range of DeFi services.

• ETH: the base asset of the Ethereum network
• ERC-20 token: a standard asset created for use by smart contracts and dApps

To sum up, Wrapped Ether is the ERC-20 version of Ether, and its advantage is that it can be used easily across many dApps. Also, the exchange rate between 1 ETH and 1 WETH is designed to stay at 1:1.

How Does WETH Work?

WETH is created through a smart contract. Here's how it works in detail:

1. You send ETH to a specific smart contract
2. The contract mints the same amount of WETH and sends it to your wallet
3. When you convert WETH back to ETH (unwrapping), the WETH is burned and the ETH is returned

Throughout this entire process, the ETH:WETH exchange rate is fixed at 1:1. In other words, you can wrap and unwrap without any exchange rate difference or spread. (A small network gas fee is required.)

How Do You Convert Between WETH and ETH?

Converting ETH into WETH is called wrapping, and converting WETH back into ETH is called unwrapping.

So how do you actually wrap and unwrap Ethereum? The most common and widely used method is to use Uniswap.

(1) Go to Uniswap

Go to the official Uniswap website, connect your wallet, and select the Ethereum mainnet.

(2) Wrap

As shown below, select ETH at the top and WETH at the bottom to wrap your ETH. Enter the amount of ETH you want to convert and click 'Wrap'.

(3) Approve and Complete the Transaction

Check the transaction in your wallet. If all the details are correct, go ahead and approve it. Once it's processed on the blockchain, the wrapped WETH will be deposited into your wallet.

To unwrap, simply follow the steps above in reverse. In other words, just 'Unwrap' your WETH into ETH. After you approve the transaction and the blockchain confirms it, the ETH will arrive in your wallet.

Can You Use WETH on Other Blockchains?

Yes. You can also use wrapped Ethereum similar to WETH on many other chains, such as BNB Chain, Avalanche, and Base. These assets are usually created through bridge services.

A bridge is a service that holds an asset on one blockchain and issues a corresponding wrapped token on another blockchain. For example, you send ETH on Ethereum and receive WETH on BNB Chain.

However, bridges can have security issues, so it's a good idea to make sure the platform is trustworthy. Well-known bridges include Wormhole, Stargate, and LayerZero.

If you're worried about using a bridge, another option is to deposit your Ethereum to an exchange such as Binance, Bybit, or OKX, and then withdraw it to a specific network. This way, you can use wrapped ETH without having to wrap it yourself.

What Is WETH Used For?

Wrapped Ether can be used on many DeFi platforms, such as Uniswap, Berachain, and KernelDAO. You can earn additional returns by supplying WETH to a platform's liquidity pools, depositing it in vaults, or lending it out.

You can also deposit WETH on platforms like Aave or Compound and borrow assets using it as collateral. Finally, you can use WETH to swap tokens or buy NFTs on various marketplaces such as 1inch, PancakeSwap, and OpenSea.

Final Thoughts

The Ethereum-based ecosystem is growing rapidly, centered on smart contracts and dApps. However, because ETH, Ethereum's native token, doesn't follow the ERC-20 standard, there were limits to using it directly across various DeFi protocols.

WETH is a leading asset that emerged to solve this limitation, acting as a kind of 'bridge'. When you wrap ETH, you can convert it into WETH of equal value under the ERC-20 token standard, which lets you access core DeFi functions such as providing liquidity, collateralized lending, and NFT trading.