ETH vs WETH: What’s the Difference?
It is important to remember that the ERC-20 standard for crypto tokens was created after the ETH token was created for the Ethereum blockchain. The Ethereum token is not in compliance with the ERC-20 standards, so it cannot be used with ERC-20 compliant tokens. Wrapped tokens, like WETH or Wrapped Bitcoin, are tokenized versions of cryptocurrencies that are pegged to the value of the original coin and can be unwrapped at any point.
Learn how to apply machine learning techniques to develop, test and implement crypto algorithmic trading strategies. Learn about how Solana compares to Ethereum in decentralized finance, and why, in spite of Ethereum’s dominance, Solana remains a chain to watch. However, you should tread carefully as the risk of impermanent loss might result in a significant drop in the value of your locked assets. Pre-authorized bids are essential as they facilitate auctions on marketplaces, eradicating the need for parties to interact with the OpenSea protocol frequently. In addition, OpenSea WETH bids allow you to use a single WETH to make multiple bids on various auctions as you wish, although the total bids might be more than the WETH tokens you own.
Ethereum has many DeFi DApps to explore that accept ERC-20 tokens. One option is to add WETH to a liquidity pool available on a Decentralized Exchange (DEX) like Uniswap. After providing liquidity, you’ll begin to earn fees from users who swap their tokens using the pool.
- In return, you’ll receive interest until you decide to remove your deposit.
- But, the major difference between the two processes is that you have alternative reserve assets to use as underlying assets in the latter.
- Wrapping helps create a copy of an original cryptocurrency with another blockchain’s coding standards.
- However, with the creation of the “wrapped Ethereum” (wETH) token, crypto traders have an easier time interacting with Ethereum’s cutting-edge dApps.
- Think of the “wrapper” around wrapped cryptocurrencies as an ID tag that helps other blockchain networks recognize them.
For instance, if you want to lock ETH in a Uniswap liquidity pool or use it as collateral on the Maker protocol, you need to convert it to WETH. To understand the wrapping and unwrapping mechanism, consider our example of a smart contract bet on the temperature in London next year. Until the day in question, the parties to the contract lock up ETH in the smart contract—and the coins are automatically released to whoever wins the bet. Both parties lock a set amount of ETH in a smart contract that governs their wager on the blockchain.
Step 4: Complete the Swap
EIP-4844 (proto-danksharding), an upgrade to the Ethereum protocol, lays the groundwork for danksharding and is the first step towards lower gas fees. However, the developers hope there will be no future for WETH, as they are hopeful that steps are being taken to update ETH to make it compliant with its own ERC-20 standards. A pop-up window how to sell your bitcoin from wallet exodus buy bitcoin to transfer will appear – select “WETH” in the top field and “ETH” in the lower field. If you click “Select a token” and you type the token you are looking for, the Uniswap search engine will provide the appropriate suggestions to select. It’s worth noting that this doesn’t necessarily mean you must hold WETH to interact with all DeFi Apps.
Step 2: Enter the Currencies to be Swapped
It is used to trade ETH on decentralized exchanges and to provide collateral on lending platforms. You can wrap ETH on other blockchains with the help of a cryptocurrency bridge. To wrap a cryptocurrency, users deposit a compatible digital asset on a wrapping service or buy a wrapped token on a crypto exchange such as Uniswap. If a crypto trader creates a wrapped token, they first lock their original cryptocurrency on a protocol to receive the wrapped version of their deposit in their account. Whenever a trader returns a wrapped token to their chosen service, the site automatically destroys (also called burning) it and returns the deposited cryptocurrency. The burning and locking mechanisms ensure that wrapped tokens’ circulating supply mirrors the amount of the underlying cryptocurrency asset.
The difference in these prices (after the trading fees) will be your net profit. Wrapping ETH simply refers to exchanging ETH tokens for wETH tokens. You can do this by locking up your ETH in smart contracts that produce an equivalent amount of wETH. If you want to unwrap WETH, you can easily do it using OpenSea and a Metamask wallet. Before you begin unwrapping your WETH, go to each company’s website and sign up for an account.
The reason being ETH holders have to swap their ETH for tokens that can be accepted by other blockchains and their related dApps. For DeFi to thrive, developers and users must utilize various products and services flawlessly on different blockchains – like how you transfer money from your local bank to another local bank. Since ERC-20 is just a technical standard for minting digital assets on Ethereum, it significantly influences the token properties. ERC-20 coins are also fungible – letting you can exchange them with other assets of equal value. Importantly, ERC-20 coins are fungible – you can exchange them with other assets of equal value. Another way to think of wrapped tokens is by looking at stablecoins.
Wrapping ETH on Uniswap
Similarly, if the price of ETH ever gets too low, people will start buying ETH in order to sell wETH at a higher price. Traverse to the upper-right side of your screen and select the wallet icon. Sign in to your MetaMask wallet and choose Ethereum Mainnet as your preferred network. Well, this section offers practical step-by-step guides on how to convert WETH to ETH on MetaMask, Uniswap, and OpenSea.
The ERC-20 standard has emerged as a popular choice for Decentralized Applications (dApps) and projects since it’s more practical for most use cases. Nonetheless, this preference has caused friction on Ethereum’s native currency, ETH, which doesn’t abide by the ERC-20 rules. You’ll now need to confirm the transaction in your crypto wallet. Don’t forget that you’ll also need to pay gas fees, so make sure to have extra ETH at hand. At first, it might seem confusing why we have a token like WETH. The first thing to understand is that not every token on Ethereum is technically alike.
It’s worth noting that the user will need to hold some ETH in their wallet to pay gas transaction fees. This locked ETH can only be accessed when the same amount of WETH is returned in an “unwrapping transaction,” where WETH is converted back to ETH. We’re always adding more cryptocurrencies like wrapped Ether (wETH) to sell, so check back soon. To get a wETH token on another chain, you first have to lock up your funds on one end of the bridge.
Look at Aave for example, you can deposit ETH and in the background, the Aave protocol will automatically wrap it for you to use their products and services. how to sell a bitcoin But generally speaking, most Ethereum dApps like Uniswap require you to hold WETH. ETH was developed before the ERC-20 token standard was implemented.
Transactions on the Ethereum main chain can also take hours to get validated. If you have ETH, you can wrap it and get ETH by simply trading ETH to WETH. With that said, steps are being taken to upgrade the Ethereum codebase to make it conform to ERC-20 standards — essentially making WETH a thing of the past.
If the temperature in London exceeds 80 degrees on the agreed-upon date, the smart contract automatically executes, sending ETH to the winning party’s crypto wallet. Remember that ERC-20 is a technical standard for issuing tokens on the Ethereum blockchain. One of the most crucial aspects of an ERC-20 token is that it is fungible, which means that one token will always be exchangeable for another one of the same value. Simply, they’re the pathway that allows users to send cryptocurrencies across different blockchains. Arbitrage is the act of buying and selling assets in order to take advantage of discrepancies in prices. It is simply buying an asset from one place and selling it on another platform where the price is higher.
But the objective of WETH is to create a much seamless experience for native ETH users. DeFi dApps like dYdX offer eligible traders new ways to trade digital assets and derivatives like crypto perpetuals. After linking a compatible crypto wallet, eligible traders can enjoy a low-fee crypto perpetuals trading experience with up to 20x leverage. For those new to using DeFi services like DEXs, check out our Academy for a wealth of guides on all things crypto. And if you’re interested in learning more about our platform and product, head to our blog.
One way to think about this is to compare fiat currency (legal tender) with a gift card. Both have value and both can be used as a form of payment, but they exist on different platforms. Fiat currencies exist independently while gift cards rely on someone else’s coinbase withdraw guide payments infrastructure / ecosystem. Understanding the difference between a coin and a token is critical to clearly understand the role of wrapped Ether. This Article does not offer the purchase or sale of any financial instruments or related services.