Basically there is no difference between ETH and WETH, because WETH is simply a “packaged” version of ETH. In the case of cryptocurrencies, packaged tokens do not differ from “old wine in a new bottle”. Tokens are packaged for use on any blockchain that it is not native to. For example, use BTC on the Ethereum blockchain.

Since most blockchains have a silo structure, they do not offer the possibility to transfer native tokens from one blockchain to another or to interact. Hence, holders of a particular cryptocurrency may not like this.

But why do we need the WETH version to use on the Ethereum blockchain?

ETH and WETH are exactly the same?

The biggest difference is that WETH is designed according to ERC-20 standards, while ETH is not. WETH was created because ETH could not be used for different types of DeFi applications. This is how you “package” the ETH token in an ERC-20-compatible standard for easy use across multiple dApps (decentralized applications). In addition, users can create their own versions of tokens for custom DeFi applications.

In the case of WETH, it corresponds to ETH. So there is no price difference between ETH and WETH. So if you want to use ETH to join a custom dApp, you can simply convert it to WETH on a dApp (e.g. 1inch) and then keep using it.

Remember that ERC-20 is the technical standard for issuing tokens on the Ethereum blockchain and therefore determines the properties of the token. One of the most important aspects of ERC-20 tokens is that they are fungible, meaning that a token is always interchangeable with another token of the same value.

Why can’t ETH be used for D.Apps on Ethereum?

ETH was born before token standards were created. This means that it does not comply with ERC-20 rules, making it difficult to use frequently. To eliminate the need for a third-party provider, simply deposit ETH in a smart contract and receive WETH in return.

ETH is fungible because it is a coin.

How do packaged tokens work?

Typically, when you want to create a packaged version of a token, you send the original asset to a central custodian (ideally a smart contract). This centralized entity can be a multi-signature wallet, a DAO, and even a smart contract (in the case of Ethereum). The process works like this:

– Assuming you need to use WETH on Ethereum, just connect the wallet to ETH with a decentralized exchange like 1inch.

– Once the wallet is connected, decide how much ETH you want to convert to WETH and exchange the tokens.

– Then you get WETH in exchange for sold ETH. You can use this tutorial for any distributed application.

For centralized entities, once they receive the original asset, they will burn it and mint a wrapped version on the blockchain that is not where the token was originally created. When users want their original assets back, they simply burn wrapped tokens and mint the original assets on the native network.

Packaged tokens are stablecoins?

The mechanism is quite similar to how stablecoins work, in that the centralized unit mints and burns the original or exotic assets. One important difference, however, is that with stablecoins it is easy for the issuer to obtain a variety of currency reserves (besides fiat) in order to issue stablecoins. In contrast, this is not possible with packaged tokens. However, the ideas are pretty similar so it is easy to get confused.

Do we need packaged tokens?

The answer is yes. For a decentralized space that the crypto world is actively building, we need to be able to use different products seamlessly on different networks – such as money transfers from a local bank to a local bank or international goods if accepted by the two entities will. While this interoperability with the centralized units involved is certainly easy, it becomes too difficult for units operating on the blockchain as there is a much larger network and it is not trustworthy.

The ability to move original assets from one network to another is certainly useful when users don’t want to sell their assets in order to buy others. For example, a large Bitcoin holder who wants to use it on Ethereum must first sell BTC in exchange for USDT. Once you have USDT, you can use it to easily participate in any dApp of your choice.

Wrapped tokens can be viewed as derivatives in traditional finance, largely because they follow the price of the underlying asset. Therefore, they are tied 1: 1 to the asset. While the packaged token isn’t exactly the same as a traditional derivative, it does provide interoperability for users in the ecosystem.

Ethereum isn’t the only network capable of creating and deploying packaged tokens. You can also generate packaged tokens of exotic assets on Binance Smart Chain (BSC).

How do I send WETH to Coinbase / MetaMask?

Sending WETH is like sending another cryptocurrency between different wallets.

– Exchange WETH at DEXs like 1inch, Uniswap, SushiSwap, etc …: Access the DEX and exchange ETH to receive the corresponding amount in WETH (minus fees).

– If you see WETH in your wallet (like Metamask), you can transfer it to another wallet that the seller wants. If you don’t see WETH, simply select “Import Tokens” and you will be prompted to claim additional WETH as an asset.

– When you’re done, just copy your personal wallet address and paste it into your Metamask wallet to initiate the transfer. If the wallet did not receive the assets, simply add the token details on the wallet.

Conclude

In short, the purpose of packaged tokens is to add an extra layer of interoperability between different networks. For most users, there is no point in converting a foreign asset like BTC to an ERC-20 compatible token (like USDT) and then converting it further to WBTC. For the most part, they use USDT for most transactions. But WETH’s mission is to create a seamless experience for local ETH users.

At home at home

According to CoinMarketCap

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