Wrapped Ether (WETH) is the wrapped version (tokenized version) of Ether, whose value is associated with the original coin’s value. It was created to improve its interoperability with the ERC-20 standard.
Understanding the term
There are many wrapped tokens available in the crypto space, such as wrapped Bitcoin, wrapped Binance Coin, and even wrapped Fantom. Crypto users need to have WETH in order to exchange it with other ERC-20 tokens in the market.
Wrapped tokens are nothing but cryptocurrencies, which are hosted on the original blockchain and have the same value as the underlying assets. For this reason, it is possible for wrapped tokens like wrapped Ethereum to be exchanged with other digital currencies if and when needed.
Wrapped Bitcoin is another popular wrapped token other than wrapped Ether, which bears the same value as BTC. A smart contract is entrusted to reproduce the price of the original BTC in real-time for the purpose of wrapping bitcoin. Wrapped tokens can always be traded with their original tokens at a fixed ratio of 1:1.
The wrapped version of Ethereum is called Wrapped Ethereum, and it represents ETH, but unlike the original ETH, WETH is compatible with ERC-20 standards, and therefore it can be traded directly with such tokens.