You may have heard of ETH a.ka. Ether a.k.a the native currency of Ethereum, a decentralized, open-source blockchain platform. But what in the world is WETH? And how does it affect Etherium holders?
What Is Wrapped Ethereum (WETH)?
To better understand WETH, you need to know a bit about ETH first.
As we’ve mentioned, ETH is the native cryptocurrency of Ethereum, a blockchain-based software platform that enables the development of smart contracts and decentralized applications (dApps) without the hassle of downtime, control, or third-party interference. ETH is the second-largest cryptocurrency by market value today, only behind Bitcoin.
WETH, on the other hand, stands for Wrapped Ethereum. Wrapped coins are currencies that are hosted in the ETH blockchain, priced the same way as their underlying assets. An Ether token and a WETH token will be worth the exact same amount and can be traded at a 1:1 ratio.
How Does Wrapped Ethereum Work?
Wrapped Ethereum works in the same way that all wrapped tokens or coins work.
Crypto coins or tokens cannot be moved from one blockchain to another, so users cannot usually enjoy the benefits of the additional functionalities of another blockchain. Wrapped tokens solve this problem by allowing interoperability, bridging two different blockchains together to allow users to use their crypto coins from one network to another.
How? WETH is an ERC-20 compatible version of ether. The ERC-20 token standard is the technical standard for all Ethereum tokens and is used for all smart contracts on Ethereum’s blockchain. All Ethereum-based tokens must conform to the rules set by ERC-20. To trade ETH for other ERC-20 tokens, you need wrapped Ethereum first.
To break it down, wrapped tokens, including WETH, usually:
- Have the exact same value of their underlying currency
- Allow for interoperability among different blockchains
- Come in all kinds of currencies
Pros And Cons Of WETH
WETH and other wrapped assets are beneficial to crypto traders as they open up a range of trading and investment opportunities that would otherwise be unreachable with “unwrapped” tokens alone. These assets become more profitable than traditional tokens because of their use in dApps.
One major downside of WETH and other wrapped assets is their vulnerability to centralization, as these assets depend heavily on the platforms that issue them. These types of assets have the potential to diminish the decentralization principle upon which the blockchain industry operates.
How To Buy WETH
Decentralized exchanges (DEX) are peer-to-peer marketplaces where crypto traders can swap ETH for WETH. Uniswap and Sushiswap are some of the best cryptocurrency exchanges for this purpose. You can also exchange ETH for WETH on the NFT marketplace OpenSea.
To exchange ETH for WETH on OS, you simply have to:
- Click your wallet in the upper righthand corner of your OS page.
- Click “Wrap”.
- Fill in how much ETH you want to convert to WETH.
- Click the “Convert tokens” button.
- Sign the transaction on the MetaMask window that pops up.
- That’s it. WETH will appear in your OS wallet with a pink diamond Ethereum logo, as opposed to the traditional black.
Wrapped tokens allow users to access other blockchains and, thus, make faster transactions across a variety of blockchains.
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