What is WETH?
WETH refers to "wrapped ETH". Let's dive in and introduce the important terms:
- Ether Token
Ether (ETH) is the native currency built on the Ethereum blockchain.
- The ERC20 Standard
ERC20 is a standard developed after the release of ETH that defines how tokens are transferred in the Ethereum Network. These "ERC20 Tokens" are currently most common token type.
Why do you need WETH?
- ETH does not conform to its own ERC20 standard.
Eth was built before the ERC20 standard existed, and thus cannot be traded directly with ERC20 tokens.
- Wrapping ETH allows you to trade directly with ERC20 Tokens
You need WETH as an intermediate to trade ETH for ERC20 tokens on DDEX (and many other platforms). Because decentralized platforms running on Ethereum use smart contracts to facilitate trades directly between users, every user needs to have the same standardized format for every token they trade. This ensures tokens do not get lost in translation.
- When you "wrap" ETH, you are trading via a smart contract for an equal token called WETH.
If you want to get plain ETH back you need to "unwrap" it. AKA trade WETH for plain ETH.
- Once you have the WETH you can freely trade with anyone holding an ERC-20 token.