Wrapped Ether: What Is It and How Does It Work?

Ethereum is one of the most popular and influential blockchains in the crypto space. It hosts thousands of decentralized applications (dApps) that offer various services and use cases, such as decentralized finance (DeFi), non-fungible tokens (NFTs), gaming, and more. However, Ethereum also has some limitations that prevent it from reaching its full potential. One of these limitations is the lack of interoperability with other blockchains and ERC-20 tokens.

ERC-20 is a standard that defines a set of rules and functions for tokens on Ethereum. It allows tokens to be easily compatible and exchangeable with each other and with dApps. However, Ethereum's native token, Ether (ETH), does not follow this standard. This means that ETH cannot be directly used in many dApps that require ERC-20 tokens as inputs or outputs. For example, you cannot swap ETH for another ERC-20 token on a decentralized exchange (DEX) like Uniswap or SushiSwap without converting it first.

This is where Wrapped Ether (WETH) comes in. WETH is a tokenized version of ETH that conforms to the ERC-20 standard. It is pegged to the value of ETH at a 1:1 ratio and can be exchanged for ETH at any time. WETH enables ETH holders to use their coins in any ERC-20 compatible platform or application without losing their exposure to ETH's price movements. WETH also solves the problem of low interoperability between blockchains, as it allows ETH to be transferred and used on other chains that support wrapped tokens, such as Binance Smart Chain (BSC), Avalanche, or Fantom.

In this article, we will explain what WETH is, how it works, what are its benefits and drawbacks, and how you can wrap and unwrap ETH using different methods.

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