How to Wrap and Unwrap Ethereum (WETH)?8 min read

Wrapped ETH, or WETH, is a token that represents 1:1 ETH and meets the ERC20 token standard. Because it is ERC20 compatible, it enables greater functionality in any application that handles ERC20 tokens. You can always convert WETH to 1:1 ETH and vice versa.

To use ETH in the Avalanche network, you will first need to wrap it in WETH before sending it to the Avalanche-Ethereum bridge.

Why wETH tokens?

As mentioned at the beginning of this article, wETH tokens were created for specific purposes. However, in order to fully understand the reason for its existence, it is better to imagine the following case.

Imagine you have some fiat money and you visit an amusement park. As a rule, the park has everything inside accessible only through special tokens sold at the entrance. So, even if you have a lot of money, you will not be able to use it inside the park, and you will not be able to enjoy anything in the park unless you change your money to that which is used inside the park. A situation that requires you to exchange your money for tokens just to be able to enjoy the park’s attractions and services.

To some, it is certainly a rather irritating and undesirable situation. But the truth is that is exactly what is happening on Ethereum. You may have a lot of Ether in your wallet. But, if you want to access a paid service in an ERC-20 token, you will need to convert that Ether first. Only after transforming your balance into the token you need will you be able to access this service.

The situation is further complicated when thousands of tokens are exchanged and traded. A situation that makes it difficult to market and presents obstacles for users and their experience.

To avoid this, wETH was created. This token actually functions as a “converter” between ethers and tokens. All thanks to a smart contract that simplifies this task. After this process, wETH converts any ether you send to a 1:1 ratio. Simply put, wETH is a stable Ether coin that can be converted into any other ERC-20 token you want in a DEX.

A smart contract, DApp, and wETH, the triad of the Ethereum ecosystem

Given the scale and complexity of the Ethereum ecosystem, developers had to create tools that make it easy to use. First of all, smart contracts are small programs that allow to development of any type of application that works on Ethereum. Additionally, smart contracts are responsible for the huge ecosystem of ERC-20 tokens that exist on Ethereum. All because an ERC-20 token is nothing more than a smart contract that has the necessary properties to be classified as such a standard.

DApps, on the other hand, is simply the result of a web or local application that interacts with smart contracts. This ability to interact with smart contracts can be seen, for example, in Dappradar. This is possible because if a smart contract needs to receive ETH or ERC-20 tokens, it will do so and provide access to the service or function it manages. At this point, MetaMask, which is a DApp, will allow you to act as a bridge to directly interact with this smart contract.

However, there are cases where a much more direct interaction tool is needed. If, for example, we use an ERC-20 token exchange, everything we manage is linked to a smart contract. Here, wETH and its 1:1 parity with Ether come in handy. Since wETH is an ERC-20 token and has a smart contract associated with it, it is easier, cheaper, and safer to trade wETH with other tokens than directly from Ether. This is the main reason why wETH was created.

• A WETH or “Wrapped ETH” is the one used to exchange with other cryptographic tokens that comply with the ERC-20 standard, thus avoiding the incompatibility generated by its occurrence after ETH.

• Smart contracts and custodians ensure that ETH converted to WETH meets all necessary requirements and is well protected while its owner operates under the ERC-20 standard.

If you are one of the many who want to make the most of their Ethereum cryptocurrency holdings, you better read on. It’s just that if you know how to wrap and unwrap Ethereum (WETH), you have a powerful tool in your hands to take your investment to the next level and multiply your profits effortlessly.

For those who don’t know yet, the difference between ETH and WETH is that the former is the native token of the Ethereum blockchain, the one used to pay transaction fees and perform various basic operations. The downside is that ETH was created before the ERC-20 standard and did not comply with it.

A WETH or “wrapped ETH” is used for trading directly with other ERC-20 compliant cryptocurrencies, as they are interoperable and can be used in ERC compliant blockchain transactions. Thus, offering an excellent solution.

In other words, a WETH offers more utility to ETH holders without the ETH losing value because it is “wrapped” in a smart contract and concluded in that currency, which we will call “WETH” in the future.

What are the benefits of WETH?

The benefits of working with WETH are many, but today we’ll list some of the most important:

  • Interoperability with other ERC-20 crypto tokens
  • Security by only participating in approved operations
  • Faster transaction speeds and lower transaction fees than ETH

Are there any disadvantages?

WETH

On the other hand, some investors reject this solution for various reasons. For example:

  • You have to pay gas fees, which affects the price
  • Great care must be taken when wrapping and unwrapping ETH
  • It is up to custodians to mint and burn the tokens, and this creates centralization

How does WETH work?

How does weth work

Before knowing how to wrap and unwrap Ethereum, it is important to consider how this system works.

As stated earlier, the ERC-20 standard for crypto tokens was created after the release of the ETH token for the Ethereum blockchain. Therefore, the Ethereum token is not ERC-20 compliant.

The process of modifying ETH to make it compatible with the ERC-20 token would be too costly and disruptive for the Ethereum blockchain. Thus, this release was born for decentralized applications or DApps, for smart contracts and blockchain, as long as they are compatible with ERC-20.

When you convert ETH to WETH, a smart contract generates a WETH token supported by the ETH token sent for the transaction. The WETH coin custodian keeps the private key of the ETH token safe and guarantees that the WETH has the same value as the underlying ETH token. Here is the crux of the problem.

Likewise, this smart contract that WETH structure works to be ERC-20 compatible and can be used with other ERC-20 compatible programs and software, hence its relevance in operation.

WETH can be used as a native token on any ERC-20 compliant blockchain and DApp.

Step by Step on How to Wrap and Unwrap ETH

If you have ETH, whenever you want, you can wrap it and get WETH just by doing this transaction. Finally, yes, you will need a specific wallet to do this, such as MetaMask, which you need to sync with an Ethereum-integrated DEX, such as Uniswap, to proceed.

We will see the procedure to obtain WETH from ETH following these elements.

  • In Chrome, go to the official website of MetaMask and download its extension for this browser
  • Go to https://app.uniswap.org/#/swap and connect your wallet, selecting ETH and WETH as assets
Weth Uniswap
  • Select ETH and WETH
Weth Swap
  • Select the amount of ETH you want to include and click on Wrap to see a simulation of fees
  • If you are satisfied, confirm the procedure and wait for WETH to be stored in your wallet

If you want to reverse the procedure, you just need to invest the assets and perform the reverse operation. In the meantime, you can use WETH to trade with the ERC-20 standard without limits.