What is an ether file?
As mentioned, WETH is a wrapped version of Ethereum, so named because WETH is essentially “wrapped” Ethereum with the ERC-20 token standards. Coins and tokens have almost the same value as their base assets.
So, is it safe to trade and invest in encapsulated Ethereum? The answer is yes when it comes to Ethereum. wETH is pegged to the ETH price in a 1:1 ratio, so it is basically the same. The only difference between encapsulated tokens and their underlying assets lies in their use cases, especially for older currencies like Bitcoin (BTC) and Ether.
The encapsulated tokens are somewhat similar to stablecoins. When you think about it, stablecoins can also be considered “US dollar-wrapped” since they have the same value as their underlying asset, the US dollar. It can also be exchanged for fiat currency at any time.
Bitcoin also has a wrapped version called Wrapped Bitcoin which has the same value as Bitcoin. The same applies to other blockchains such as Fantom and Avalanche.
Encapsulated Ethereum tokens can be decoded after encapsulation, and the process is simple: users simply need to send their wETH tokens to a smart contract on the Ethereum network, which will then return an equal amount of ETH.
Encapsulated tokens solve the interoperability problems most block chains face and make it easy to replace one token with another. For example, users generally cannot spend Ether on the Bitcoin blockchain or Avalanche on the Ethereum blockchain. Through encapsulation, the base currencies are encoded and encapsulated according to the token standards of a particular blockchain so that they can be used on that network.
How does wETH work?
Unlike ether, wETH cannot be used to pay for gas online. However, since it is ERC-20 compliant, it can be used to provide additional investment and installation opportunities in DApps. wETH can also be used on platforms such as OpenSea to buy and sell through auctions.
Topping up Ether involves sending ETH to a smart contract. In return, the smart contract will generate WETH. Meanwhile, ETH is locked to ensure WETH is backed by a reserve.
Each time it is exchanged back for ETH, the exchange with ETH is either burned or removed from circulation. This is to ensure that wETH always remains tied to the value of ETH. They can also be purchased by exchanging them for other tokens on a crypto exchange, such as SushiSwap or Uniswap.
So, what is the point of encapsulating Ethereum? According to WETH.io, the ultimate goal is to update the Ethereum database and make it stand-alone and ERC-20 compliant, which will eventually eliminate the need for Ethereum wrapping for compatibility. But until then, WETH remains useful for providing liquidity to liquidity pools, as well as for cryptocurrency lending and NFT trading, among other things.
In short, this is not really an ETH versus WETH question, as encapsulating Ethereum is more of an alternative than a permanent solution. Given the amount of upgrades that have occurred on the Ethereum network over the years, it seems like Ethereum is getting closer to interoperability every day.
How to roll ether (ETH)?
There are several ways to mobilize ether. As mentioned earlier, one of the most popular ways to do this is by sending ETH to a smart contract. Another way is to exchange WETH with another token through a crypto exchange.
Let’s look at three ways to create WETH in the sections below:
Using a WETH smart contract in OpenSea
In this example, we will use the OpenSea platform to convert ETH to wETH using a smart contract.
First, click on “Portfolio” located in the upper right corner of OpenSea. Then click on the three dots next to Ethereum and select “Wrap.”
Step 1. Select Wrap to convert ETH to WETH in OpenSea.
Then enter the amount of ETH to transfer to. Then click “ETH Wrap”. This will call the WETH smart contract to convert ETH to WETH.
Step 2: Enter the amount of ETH you want to convert to WETH.
A MetaMask popup will appear asking you to sign the transaction.
Step 3: Confirm the transaction
When the filling is completed, a confirmation message will appear.
Step 4: Confirm the token transfer
The WETH transferred will appear in the wallet section of the user’s OpenSea account. WETH will have the pink Ethereum diamond as its logo, what sets it apart from Ethereum.
WETH generation via Uniswap
When using Uniswap, the user must first connect to their wallet and make sure that the Ethereum network is selected.
Step 1: Connect to your wallet and select the Ethereum network on Uniswap.
Then click “Select Icon” in the bottom field and select WETH from the list of options.
Step 2: Select “WETH” from the list of available codes.