Wrapped Ether (WETH) is a tokenized version of Ethereum (ETH) that represents Ether on the Ethereum blockchain. It’s essentially an ERC-20 token that represents Ether at a 1:1 ratio.
Here’s why WETH exists: Ethereum itself is not an ERC-20 token, which is a standard for tokens issued on the Ethereum blockchain. This standard allows smart contracts to interact with any token in a predictable way, which is vital for decentralized applications (dApps), decentralized exchanges (DEXs), and other smart contracts.
However, because Ether doesn’t comply with the ERC-20 standard, it can’t be directly traded for other ERC-20 tokens in these decentralized systems. So, to allow Ether to be traded with these tokens, it’s “wrapped” into WETH, an ERC-20 compliant version of Ether.
When you wrap your Ether into WETH, you’re essentially locking up your Ether into a smart contract and minting an equivalent amount of WETH. When you want to convert your WETH back to Ether, you simply interact with the same smart contract to burn the WETH and unlock your Ether.
By using WETH, decentralized platforms can treat Ether like any other ERC-20 token, simplifying their systems and making them more predictable. This has played a significant role in the growth and success of decentralized finance (DeFi) applications on Ethereum.