The world of cryptocurrencies has become a lot more understandable than it once was. It initially began as a unicorn of sorts, this new, majestic investment type that had risen to untold levels seemingly overnight. Since then, other variations have popped up, like Ethereum, to challenge for the top spot.
Wrapped Ether (WETH) is tied to Ethereum (ETH) with a unique twist. Knowing WETH price is nice, but it helps to know what it is in the first place. Read on to know more about WETH and how it relates to the Ethereum platform.
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What is WETH?
WETH is short for Wrapped Ether. It is a form of cryptocurrency that gives users the ability to make pre-authorized bids that can ultimately be fulfilled at a later date without the need for any further action from the person doing the bidding. It is minted when the user sends ETH to the WETH smart contract.
That smart contract will hold the ETH sent by the users, minting the equivalent amount of WETH. Not all exchanges will not mint WETH, nor will it exchange ETH for WETH. If that doesn’t provide much clarity, read on to find out more about it.
Making the Conversion from ETH to WETH
Converting ETH to WETH is a pretty simple process depending on what you use. On most platforms that offer it, users can click on the wallet balance and choose the “wrap” tab. From there, enter how much ETH that you wish to wrap and click to add to offer balance.
A window will appear to confirm the transaction. Keep in mind that there is a gas fee involved since the transaction is tied to the blockchain. The fee will depend on how much ETH is involved and the platform used to make the conversion. When the wrap is complete, a verification message will appear and the WETH will appear somewhere within the account balance page.
Why Use WETH?
In the world of decentralized finance, smart contracts make everything go. Think of them as separate decentralized programs. Those contracts have been designed to handle ERC-20 tokens, which is a blueprint universally recognized on the Ethereum blockchain as well as several compatible blockchains like Polygon and Avalanche.
ETH, the native currency of Ethereum, precedes ERC-20 and isn’t compatible. By converting to WETH, ETH can be transferred and used on exchanges that follow the ERC-20 standard. It is a way to work around the smart contract limitations when jumping from Ethereum to other platforms.
How is WETH created?
Though it may sound like a complicated endeavor, the technical details are actually pretty simple. Just about anyone can deposit ETH right into a WETH smart contract. This is the smart contract that not only creates but returns the same amount of ETH back as WETH. Even better, the process works in reverse as well. Make a deposit of WETH into that contract and it will be destroyed before ultimately being returned as ETH.
No singular entity is in control of the smart contract. Using a smart contract ensures that any WETH that has been created within that contract will be backed by an equal amount of ETH. What does that mean? Well, WETH becomes basically indistinguishable from ETH when it comes to overall market price.
The nonfungible token (NFT) market has been growing rapidly in recent years. Using WETH, users can place pre-authorized bids on those NFTs. The bids will be fulfilled at a later date. Better than that, it won’t require any further action from the bidder to carry out that bid.