Wrapped Ether

What Is Wrapped Ether (WETH)?

Wrapped Ether (WETH) is an ERC-20 compliant form of ether, wrapping ether with other ERC standards is possible as well. WETH can be generated by transferring ether to a smart contract, which holds the ether and returns the WETH ERC-20 token in a 1:1 ratio. This WETH can then be placed back into the very same smart contract to be "unwrapped" or redeemed for the original ether at a 1:1 ratio.

Diving Deep Into the Concept of Wrapped Ether (WETH)

Because ether was developed before the ERC-20 standard and other standards were implemented, it is not ERC-20 compatible and therefore cannot be exchanged directly for other ERC-20 tokens in a decentralized sort of way without the mediation of a trustworthy third-party or the addition of complex technical implementations. 

Rather than incorporating two interfaces inside the same smart contract, which would add unnecessary complexities, developers made the decision to "wrap" ether to upgrade it to the ERC-20 standard, allowing them to handle WETH and other ERC-20 tokens within the same contract. 

Wrapping ether enables the direct, frictionless exchange among ether and ERC-20 tokens without needing a trusted third party and without incurring extra risks such as unexpected problems during transactions caused by sophisticated implementations. 

Many Ethereum-based decentralized apps (dApps), such as decentralized exchange platforms, use WETH in place of ether to permit direct and decentralized peer-to-peer trading between ether in "wrapped form" and ERC-20 tokens within the same technical standard. Recent works aim to create a normative WETH standard that can be utilized by all Ethereum-based dApps.