Wrapped Ether (WETH)

Wrapped Ether (WETH) is a product of the process in which Ether is placed into a smart contract, effectively reserving it in exchange for a corresponding amount of WETH ERC-20 tokens at a 1:1 ratio. Subsequently, this wrapped Ether can be returned to the same smart contract to be unwrapped, and it can also be redeemed at a 1:1 ratio for the original Ether.

Ether, as the native currency of the Ethereum platform, was established before the introduction of the ERC-20 standard and other related standards. Consequently, Ether is not compatible with ERC-20, rendering decentralized exchange with other ERC-20 tokens unfeasible.

In place of implementing dual interfaces within the same smart contract, a solution was devised whereby Ether is wrapped to conform to the ERC-20 standard, thereby allowing for the seamless handling of WETH and other ERC-20 tokens within a shared contract.

The process of wrapping Ether introduces the potential for direct and frictionless exchanges between Ether and ERC-20 tokens, eliminating the need to depend on third-party intermediaries. Additionally, this approach helps mitigate the exposure of users to additional risks, such as avoiding unexpected transaction errors stemming from intricate implementations.

Numerous Ethereum-based decentralized applications (dApps) opt to utilize WETH in place of Ether, aiming to facilitate direct and decentralized peer-to-peer trading between wrapped Ether and ERC-20 tokens adhering to the same technical standard.