Ethereum (ETH) and Wrapped Ethereum (WETH) are two different types of Ethereum tokens.
ETH is the original token created on the Ethereum blockchain, while WETH is an ERC-20 token created to make it easier to trade ETH or convert it into other cryptocurrencies.
While they are both Ethereum tokens, there are some key differences between them that you should know before buying or trading any of them. Let's take a closer look at what these differences are.
What is ETH?
Ethereum, also known as ETH, is used as a digital currency, like Bitcoin, and is bought, sold, and traded on exchanges, just like any other cryptocurrency. However, Ethereum has more potential than just being a digital currency. It can be used to pay transaction fees, create Decentralized Applications (DApps), and make Smart Contracts on the Ethereum network.
Terms to Know:
- DApps are apps that run on the Ethereum network. They are decentralized, meaning they are not controlled by any one entity. This makes them more resistant to censorship and hacking.
- Smart Contracts are programs that run on the Ethereum network. They can be used to automate specific tasks or agreements. For example, smart contracts are used to mint and facilitate the sale of NFTs.
What is WETH?
WETH is an abbreviation for Wrapped Ethereum or Wrapped ETH for short. Tokens created on Ethereum all follow the ERC-20 protocol, except for ETH itself, which does not. To make ETH more accessible, a smart contract on the Ethereum network allows users to wrap ETH into WETH. This process is known as wrapping, resulting in the creation of WETH tokens.
The main use of wrapped tokens like WETH is that they can be used on other chains that the main token (Ethereum in this case) is not compatible with. WETH can therefore be used on decentralized exchanges, and to purchase goods and services that accept WETH crypto as payment.
The main advantage of using WETH is that it allows users to hold ETH in a more compatible token format.
How to wrap ETH
To wrap ETH, send ETH to the WETH smart contract. Once the transaction is confirmed, you will receive an equal amount of WETH in return. It is important to note that WETH is not a replacement for ETH. It is designed to complement ETH and help make it more user-friendly. Therefore, you will still need ETH to interact with the Ethereum network.
Many platforms that use Ethereum have a function that allows you to wrap and unwrap WETH. One of the easiest places to do this is the Balancer DEX. Just connect your DeFi wallet to the protocol and find the place where you can “wrap” or “unwrap” your tokens.
How to unwrap WETH and convert it back into ETH
To convert your WETH back into ETH, you will need to use a smart contract. First, you must approve the smart contract to take your WETH. To do this, you will use the Ethereum blockchain's approve function. The approve function allows a third party to access your account and perform actions on your behalf.
Next, you will call the convert function on the smart contract. This function will exchange your WETH for ETH at a 1:1 ratio. Once the conversion is complete, you will have ETH in your account that you can use or withdraw at your leisure.
You can withdraw your ETH from the smart contract by calling the withdraw function. This will send your ETH to an Ethereum address that you specify. Once the transaction is complete, you will have your ETH back and can use it as you please.
The main differences between ETH and WETH
ETH and WETH are sometimes interchangeable, but there are some critical differences between the two.
ETH is the native cryptocurrency of the Ethereum network. ETH is used to pay transaction fees, often referred to as gas, associated with running smart contracts on the Ethereum blockchain.
WETH is ERC20 compliant, meaning it can be stored in any wallet or exchanged on any DEX that supports that standard. ETH is not ERC20 compliant and can only be stored in wallets that support the Ethereum blockchain
WETH vs ETH: Which is better?
Since ETH and WETH always have the same value, neither is better than the other. However, deciding which one to use at a given time has more to do with your needs and less to do with which one may be better. For example, ETH would be better for you if you wanted to buy a product or service online. However, if you wanted to purchase some Bitcoin (which is based on another chain) you may need WETH.
Final Thoughts
While WETH and ETH may seem similar at first glance, they are actually quite different in terms of their format, flexibility, and use. Understanding these differences is vital for anyone looking to use either cryptocurrency.
Before using WETH or ETH, it’s crucial to understand the distinctions explained in this article. Remember, there is no difference in value between WETH and ETH. The only differences are in how they are used.
In short, WETH is a more flexible and user-friendly version of ETH that can be used for a broader range of purposes.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.
