WETH

WETH, or Wrapped ETH, is a tokenized form of ETH used for transactions within Ethereum dApps. It adheres to the ERC-20 token standards, enhancing its interoperability with other ERC-20 tokens. This feature increases its utility as it can be employed across different networks and dApps for staking, yield farming, lending, and providing liquidity.

Unlike ETH which is restricted to the Ethereum chain due to non-compliance with the ERC-20 standard, WETH can operate on alternative chains such as Binance, Polygon, Solana, and Cardano. The value of WETH mirrors that of ETH due to a 1:1 wrapping ratio.

Wrapping ETH

To wrap ETH into WETH, users send their ETH to a custodian which could be a multi-sig wallet, a Decentralized Autonomous Organization (DAO), or a smart contract. After linking your web3 wallet to a DeFi exchange and entering the amount of ETH you want to wrap via the swap function, you'll receive an equivalent amount of WETH once the transaction is confirmed.

In centralized exchanges, deposited ETH is burned and replaced with its wrapped version. Unwrapping involves burning the wrapped version and minting an equivalent amount of ETH.

The Future of WETH

The developers aim for WETH's obsolescence in future as efforts are underway to make ETH compliant with its own ERC-20 standards.