WETH (WETH)
WETH, or Wrapped Ethereum, is an ERC-20 token that is fully collateralized by ETH, the native cryptocurrency of the Ethereum blockchain. It serves as a tokenized variant of ETH and is intended for use in decentralized applications that require an ERC-20 token. The Ethereum blockchain and ETH were introduced in July 2015, before the development of the ERC-20 standard. The ERC-20 standard, which defines a uniform token protocol, was introduced in November 2015. Consequently, while tokens used by Ethereum's decentralized applications adhered to this standard, Ether itself did not.
In 2017, the 0x project team introduced WETH to address interoperability challenges between various decentralized exchanges and applications on the Ethereum network. At that time, differing token standards among decentralized exchanges hindered asset movement across platforms. WETH aimed to create a standardized, interoperable system by tokenizing ETH for seamless trading and integration with other applications and exchanges. The initial WETH contract was launched on the Ethereum mainnet in January 2018.
| Ticker | WETH |
| Category | Crypto-Backed Tokens |
| Website | https://weth.io/ |
| Contract Addresses | |
|---|---|
| ethereum | 0xc0...c2 Copied! |
| tron | TH...bFCopied! |
Overview of WETH
Wrapped tokens are digital currencies hosted on the Ethereum blockchain, with values equivalent to their underlying assets, even if they are on different blockchains. This allows wrapped tokens to interact seamlessly with other digital assets, promoting interoperability between different systems. Unlike Ether, WETH cannot be used for covering gas fees on the Ethereum network. However, its ERC-20 compatibility makes it suitable for investment and staking opportunities within decentralized applications. WETH is also used on platforms like OpenSea for auction-based buying and selling.
To wrap Ether, users send ETH to a smart contract to generate WETH. The locked ETH ensures proper backing for WETH. When WETH is converted back to ETH, the corresponding WETH tokens are removed from circulation, maintaining its value alignment with ETH. WETH can also be obtained by exchanging other tokens on platforms like SushiSwap or Uniswap.
Supply mechanism of WETH
WETH's supply is not fixed; it adapts according to demand dynamics. When Ether is converted to WETH, a smart contract generates newly minted WETH tokens. Conversely, when WETH is exchanged for Ether, an equivalent amount of WETH is retired. Despite its 1:1 pegging to Ether, minor fluctuations may occur between WETH and Ether due to factors such as Ethereum's transaction fees and trading activities on both centralized and decentralized exchanges.
In theory, if demand for WETH dwindles completely, its circulation could cease. Conversely, increased market interest in WETH can lead to an expansion in its supply. This is different from non-pegged cryptocurrencies, where supply protocols often include restrictions or scheduled issuance patterns.
Use cases of WETH
WETH acts as a bridge between ETH and ERC-20 tokens, enabling diverse applications within the decentralized finance (DeFi) sector. Another utility of WETH is its role in providing liquidity on decentralized exchanges. As an ERC-20 token, it becomes part of token pools on platforms like Uniswap and SushiSwap, facilitating token swaps and enhancing the trading process.
WETH is also relevant in the field of lending and borrowing. By converting ETH to WETH, users can utilize their assets as collateral across various DeFi protocols. This standardization allows for versatile access to financial services.