What is the Difference Between Ethereum (ETH) and Wrapped Ethereum (WETH)?

Overview

Ethereum (ETH) and Wrapped Ethereum (WETH) are closely related but serve slightly different purposes within the Ethereum ecosystem. This article explains the key differences between ETH and WETH.

ETH is the native cryptocurrency of the Ethereum blockchain, while WETH is an ERC-20 token that represents ETH. WETH is designed to make ETH compatible with decentralized applications (dApps) and smart contracts that require ERC-20 tokens. Essentially, WETH "wraps" ETH into a standard format that can be used across the Ethereum ecosystem.

Ethereum (ETH)

  • Nature: ETH is the native cryptocurrency and the underlying blockchain network of Ethereum.
  • Function: Powers the Ethereum network and is used for transaction fees (gas).
  • Usage: Can be used for transactions and as a store of value but may not be directly compatible with all dApps requiring ERC-20 tokens.

Wrapped Ethereum (WETH)

  • Nature: WETH is an ERC-20 token that represents ETH on a 1:1 basis.
  • Function: Created to make ETH compatible with dApps and smart contracts that require ERC-20 tokens.
  • Usage: Used within DeFi protocols and other dApps that require ERC-20 tokens, improving interoperability.

Purpose of WETH

WETH enables ETH to be used in dApps and smart contracts that are specifically designed for ERC-20 tokens. This bridges the gap between ETH and the wider ecosystem of ERC-20 applications, allowing ETH holders to participate in more activities within the Ethereum network.

Interoperability

WETH improves interoperability by allowing ETH to be easily used within the dApp ecosystem, simplifying interactions with smart contracts.

Example

Imagine you want to use ETH in a Decentralized Finance (DeFi) protocol that only accepts ERC-20 tokens. You can "wrap" your ETH into WETH, which then allows you to use it within that specific DeFi protocol.

Key Takeaway

ETH is the native cryptocurrency of the Ethereum blockchain, while WETH is an ERC-20 token that represents ETH, allowing it to be used in dApps and smart contracts that require ERC-20 compatibility. WETH enhances the interoperability of ETH within the Ethereum ecosystem.