Regardless if you’re new to the realm of Ethereum and cryptocurrencies, you might be asking what the earth “wETH” is.
Don’t worry! In this article, I’ll break out what wETH(or WETH) is and its importance.
wETH stands for “Wrapped Ethereum” which is literally what it sounds like. It is a tokenized version of Ethereum that can be used in DeFi applications.
But why would I wrap Ethereum?
You may be wondering what's the point of wrapping Ether. Well, one of the primary reasons is that DeFi applications require users to trade using ERC-20 tokens instead of ETH. ERC-20 is a standard for creating tokens on the Ethereum chain.
wETH is an ERC-20 token that represents ETH on the Ethereum network. This allows for interoperability between Ether and other ERC20 tokens.
But why not use ETH directly in DeFi protocols?
There are several reasons why using ETH directly is not preferred. Some of the most relevant ones are:
Using a tokenized version of ETH can make it easier to track your transactions and balances in DeFi protocols.
wETH can be used in DeFi protocols that offer liquidity pools, which allow users to earn fees by providing liquidity to the protocol. it can also be used to earn trading fees on DEXs that support it.
Since ERC-20 is a standardized token it can be easily integrated into protocols. Hence, using wETH creates a better user experience.
wETH is pegged to the price of Ethereum at a 1:1 ratio. This means you will receive one wETH token for every ETH token that you convert Hence, its price is the same as that of Ether at all times. If the price of Ether falls, so does that of wETH and vice-versa.
How do I get wETH?
Converting ETH to wETH is a simple process that is generally done through a Decentralized Exchange(DEX).
Simple procedure to get wETH:
Launch a DEX that supports ETH. The most widely used ones are Uniswap and Sushiswap.
Connect your wallet(Metamask/Trust) to the DEX.
There should be a ETH-wETH trading pair on the dashboard.
Enter the amount of ETH you would like to convert to wETH.
Sign the transaction and once it goes through you should receive wETH in your wallet.
I hope this article made it a little easier to understand wETH and the complex world of Decentralized Finance.