What is Ethereum (wETH) Wrapped and how does it work?
Wrapped Ethereum
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What is Ethereum (wETH) Wrapped and howdoes it work?
Technical standardand most likely have traded and invested in tokens that use it. After all, itspracticality, transparency, and flexibility have made it the industry model forEthereum-based projects. As such, many decentralized applications(dApps), crypto wallets and exchanges natively support ERC-20 tokens.
However, there'sone problem: Ether (ETH) and ERC-20 do not exactly follow the samerules, as Ether was created way before ERC-20 was implemented as a technicalstandard.
What is wrappedEther (wETH)?
As mentioned, wETHis a wrapped version of Ether, and is named as such because wETH isessentially Ether “wrapped” with the ERC-20 token standard. Wrapped coins andtokens have the same value as their underlying asset. So, is Wrapped Ethereumsafe to trade and invest?
As far as Ethereumis concerned, their answer is yes. wETH is pegged to the price of ETH in a1:1 ratio, so they are basically the same. The only difference between wrappedtokens and their underlying assets is their use cases, especially for oldercoins such as bitcoin (BTC) and ether.
Wrapped tokens aresomewhat like stable coins
Come to think ofit, stablecoins can also be considered "wrapped USD,"since they have the same value as their underlying asset, the United Statesdollar. They can also be redeemed for fiat currencies at any time. Bitcoin alsohas a wrapped version called Wrapped Bitcoin, which has the same value asBitcoin.The same goes for other blockchains like Fantom and Avalanche.
How does wrappedEthereum (wETH) work?
Unlike Ether, wETHcannot be used to pay gas charges on the network. Because it is ERC-20compatible, however, it can be used to provide opportunities for moreinvestments and bets on dApps. wETH can also be used to buy and sell viaauctions on platforms such as OpenSea. Wrapping an Ether token involves sendingETH into a smart contract. The smart contract will in turn generate wETH.
Meanwhile, ETH islocked to ensure that the wETH is backed by a reserve. Whenever wETH isexchanged back into ETH, the exchanged wETH is burned or removed fromcirculation. This is done to ensure that wETH remains pegged to the value ofETH at all times. wETH can also be acquired by swapping other tokens for it ona crypto exchange, such as SushiSwap or Uniswap.
How to wrap Ether(ETH)? There are several ways to wrap Ether
As mentioned, oneof the most common ways to do so is by sending ETH to a smart contract. Anothermethod is swapping wETH for another token via a crypto exchange. Using the wETHsmart contract on OpenSea In this example, we'll be using the OpenSea platformto convert ETH to wETH using the wETH smart contract. First, click on "Wallet,"located at the top-right corner of OpenSea. Then, click on the three dots nextto Ethereum and select "Wrap."
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