[Feature] The 4W1H of wETH

What is wETH?

wETH stands for Wrapped Ether, a "wrapped" form of Ether (ETH). Before getting into wETH, we first need to understand the concept of “wrap”.

For cryptocurrencies, a wrapped token is an empty vessel that contains the original asset, for instance, Wrapped bitcoin (wBTC), Wrapped MATIC (wMATIC), etc. As bitcoin can only circulate in the native bitcoin blockchain, thus wBTC is created for porting over to other blockchains, giving every network its own version of bitcoin. This process requires a middleman, also serving as a custodian, to help porting your bitcoin to other blockchains.

However, as the custodian is involved, there is a concern that the deposited asset (bitcoin) might be misused. A great example would be soBTC, the wrapped bitcoin issued by FTX/Alameda on the Solana network, which has now depeg more than 90% from the native asset, trading at less than a thousand dollars per bitcoin. This caused a FUD emotion in the crypto space on all wrapped tokens, including wETH.

Unlike wBTC, wETH is created out of a smart contract without the involvement of any intermediary. To wrap for 1 wETH, you need to have precisely 1 ETH in your Ethereum wallet and some small gas fees to do so. That means 1 ETH always equals 1 wETH, and no one is able to create wETH out of the air.

Where is wETH?

Contract address: https://etherscan.io/token/0xc02aaa39b223fe8d0a0e5c4f27ead9083c756cc2

When to use wETH?

Decentralised finance (DeFi) protocols include swapping, staking, pooling and NFT trading. ETH, as the native token itself, has many limitations when it comes to trading. Hence, the ERC-20 token standard is created, allowing developers to create fungible tokens on the Ethereum blockchain. And yes, wETH is an ERC-20 token.

The DeFi ecosystem in Ethereum has grown rapidly; you might have used wETH but are unaware of it. Swapping tokens using a decentralised exchange (DEX), say Uniswap and SushiSwap, will first automatically wrap your ETH into wETH, then lastly, the token you swapped.

Why is wETH needed?

ERC-20 token standards enable DeFi; it opens up a whole new world. Besides, with the NFT boom in 2021, wETH becomes essential to Ethereum-NFT enthusiasts, especially those high-price NFT collections. Let’s say we are filthy rich and want to grab a JPEG of an ape. We are eyeing a golden ape which is not listed for sale right now, meaning we can’t buy it traditionally from the market using ETH. This is where wETH comes to play. A 70 wETH bid is placed, hoping the owner will accept the offer.

https://opensea.io/assets/ethereum/0xbc4ca0eda7647a8ab7c2061c2e118a18a936f13d/9572

If the bid is accepted, the BAYC owner gets 70 wETH in exchange for his digital ape image. Without getting too much into technical details, wETH grants sellers (or owners) access to accept bids at their will, making auctions work in Ethereum.

How to wrap wETH?

Metamask:

Uniswap:

OpenSea (Uniswap protocol):