Investors have a choice between 2 promising cryptocurrencies: Wrapped Ether (WETH) and Ethereum (ETH). However, to make an informed decision, it’s essential to understand the differences between the 2 assets. This in-depth guide provides a detailed comparison of WETH vs ETH, outlining the advantages and disadvantages of each crypto project.
ETH and WETH share many similarities, as WETH is essentially just a wrapped version of Ethereum. In the crypto space, a wrapped token serves as a container for the original asset, enabling non-native assets to function on any blockchain. By wrapping tokens, users can overcome the interoperability challenges between blockchains, interoperability challenges that can significantly frustrate holders of specific crypto assets.
Comparing WETH and ETH reveals that most blockchains function as silos, lacking seamless interoperability. As a result, holders of particular crypto assets may experience difficulty transferring them from one blockchain to another.
This guide aims to help investors compare WETH and ETH to make an informed decision.
WETH vs ETH: What is WETH?
WETH represents Wrapped Ether, an ERC-20 version of ETH, and always maintains a 1:1 parity with its unwrapped counterpart. ETH, by itself, is not suitable for bidding on items, as it lacks pre-approval. Therefore, wrapping ETH into WETH facilitates advanced interactions on decentralized applications while standardizing the exchange code base, benefiting other ERC-20 tokens. WETH is minted when a user sends Ethereum to the WETH smart contract.
Moreover, wrapping ETH into Wrapped ETH mitigates potential risks like double entries and other costly errors that can occur when transferring ETH to unknown recipients. Since the value of WETH and ETH is identical, they operate like stablecoins but with no attachment to any typical fiat currency.
WETH boasts several use cases, including the following:
- Trading on decentralized exchanges;
- Exchanging it for other ERC-20 tokens;
- Paying for transaction fees and services on dApps;
- It can also be used as an investment vehicle, just like other crypto assets;
- It can be used in place of ETH as collateral.
Advantages of Using WETH
We know that the original tokens are not always compatible with the ERC-20 standards. By wrapping such tokens, they comply with the ERC-20 standards, making them more interoperable.
The prime idea behind cryptocurrencies is to create a decentralized financial system where people can complete transactions more quickly and with more accuracy. Here are some of the advantages of using WETH:
Promotion of Decentralized Financial Activities
The Ethereum blockchain is considered the most comprehensive and vibrant DeFi platform. At the same time, it’s highly compatible, and its functionality is not limited to just validating and registering transactions. WETH is also more consistent, thereby promoting the advancement of a decentralized financial system.
Provides Interoperability
By allowing interoperability with other standardized tokens, WETH improves the economy by creating no room for errors.
It’s Highly Compatible
Many platforms have adopted using the Ethereum blockchain and the ERC-20 standards to create the tokens they need to run various projects. Since WETH has high compatibility, it makes transactions more efficient.
The main advantage of using WETH is its ability to support decentralized financial transactions without involving third parties.
What is Ethereum (ETH)?
Ether is one of the pioneer cryptocurrencies, often denoted as ETH. With the 2nd largest market cap on the market, Ethereum is among the most popular cryptocurrencies worldwide. It’s the base currency of the Ethereum blockchain, facilitating many things, such as paying for transaction fees and incentivizing miners. As stated on its official website, Ethereum’s primary purpose is to build dApps and organizations.
Another key benefit of ETH is its ability to facilitate asset storage, transactions, and communication without a central authority. This decentralized approach means that users do not have to divulge their personal details to use cryptocurrency. They fully control their personal data.
ETH Evolution in the Market
Since its launch in 2015, Ethereum has grown in leaps and bounds while building on Bitcoin’s innovation. However, it has significant differences. By 2021, the following are what ETH accomplished in numbers:
- 2970: Projects built on Ethereum;
- 71M+: Ethereum wallets with ETH balance;
- 50.5M: Smart contracts on the Ethereum platform;
- $11.6T: Value of money moved through the Ethereum network in 2021;
- 3.5B: Miner earnings in 2021.
How Are WETH and ETH Different?
Here are the differences between WETH and ETH:
Technical – WETH operates on the ERC-20 standard, while ETH doesn’t. WETH was created because the original ETH was not feasible for DeFi applications.
Purpose and use case – WETH users can create their own versions of tokens, but ETH users can’t.
Market performance comparison – Regarding their values, the WETH price equals ETH. At the moment of writing, for instance, ETH has a price of $1,745.72, with a 24-hour trading volume of over $5 billion, while Wrapped ETH has a price of $1,744.63, with a trading volume of almost $645 million.
Wrapping and Unwrapping ETH
Wrapping is the process of transferring Ethereum to another smart contract that gives WETH in return. The wrapped tokens are locked up in the smart contract and will be visible on the blockchain of that contract. Afterward, WETH is credited back to the crypto wallet.
The wrapping process is quite technical, and the most common method to do it is through a DEX (Decentralized Exchange). For example, you can do it through Uniswap (UNI). In this case, you must connect a crypto wallet like MetaMask to an exchange such as Uniswap.
How to wrap ETH to WETH
The easiest way to buy WETH is through swapping. If you do not want to use this method, we will cover 2 more options afterward.
Method 1: Using MetaMask
1. Download the MetaMask
When accessing the official MetaMask website, on the first page, you will find a “Download” button. Once pressed, you will be redirected to the “Download” section on the Chrome Web Store.
Once in the Chrome Web Store, click on the add extension button in the browser and confirm the addition by clicking “Add Extension.”
2. Set Up Your Account Using Onscreen Instructions
After clicking the add extension button, you will be redirected to your MetaMask account setup page. If you already have an account, click “Import an existing wallet. If you do not have an account, click the “Create a new wallet” button.
Of course, to go ahead, you must accept the terms and conditions.
To set up, you will need to choose a password for your account, secure your wallet by saving your Secret Recovery Phrase in a safe place (beware, losing this code may result in losing assets in your MetaMask wallet), and confirm your Secret Recovery Phrase.
Now, your MetaMask account is configured and ready to use. You can pin the MetaMask extension near the browser search bar for easier usage. To access your MetaMask wallet, click the fox face icon on the top right.
3. Buy Ethereum (ETH)
In order to convert ETH to WETH, you obviously need to have ETH in your wallet. On MetaMask, you have two options: Either buy ETH directly from the platform or buy from a Crypto Exchange and then transfer it to your wallet.
Buy Ethereum (ETH) Directly on MetaMask
If you choose the method to buy ETH directly from MetaMask, click on the “+” button and then select the payment processor through which you want to buy ETH. You will have three options: Coinbase Pay, Transak, and MoonPay. MoonPay is the easiest way to buy ETH on MetaMask using a bank card, Apple Pay, or Google Pay.
Once you’ve decided, select the processor and move on. The process is simple and fast.
Buy Ethereum (ETH) on a Crypto Exchange
If you do not have an account, you must create one and complete the account validation process. Also, if you do not have any funds in your Binance account, you must deposit some before buying Ethereum.
To purchase Ethereum on Binance, navigate to the “Buy Crypto” menu and select “Cash Balance.” Ensure you are on the “Buy” menu, enter the desired quantity of ETH, and verify that you have selected ETH and not another currency. Click on the button next to the Receive row to select ETH and complete the transaction. Remember that this is just one of many ways to purchase ETH on Binance.
After purchasing Ethereum on Binance, you can transfer it to your MetaMask wallet. To do this, go to the Binance wallet section, select Ethereum, and fill out the required information to withdraw the funds. Select the Ethereum network and provide the MetaMask wallet address where you want the Ethereum to be transferred. Once you have entered the necessary details, click “withdraw” to complete the transfer.
It is crucial to be cautious when transferring funds to an external wallet, as sending the funds to the wrong address could result in permanently losing your funds.
- Swap ETH for WETH
In MetaMask, click on the “Swap” button, select the currencies, and complete the transaction. After the last step, you should be able to see the WETH on the MetaMask wallet.
Method 2: Using a DEX
Besides swapping directly within MetaMask, you can exchange ETH for WETH on a DEX. You just need a supported wallet. However, MetaMask is supported by most platforms.
- Connect Your Wallet to a Decentralized Exchange (DEX)
Connect your MetaMask wallet to your preferred DEX using your wallet address. Some platforms allow an easier connection. In the example above, the connection takes place instantly after you confirm by pressing “Connect” on Uniswap and then pressing MetaMask.
2. Swap ETH for WETH
If you use Uniswap to convert ETH to WETH, simply go to the “Swap” section, select ETH to WETH, enter the desired amount, and confirm the transaction. The process is similar to other DEXs.
Method 3: Using OpenSea
It’s also possible to swap ETH for WETH on OpenSea. This platform uses WETH in the bidding process because WETH supports bidding on different NFTs.
Here is how you can do it:
1. Visit OpenSea website and Connect with Your MetaMask or Coinbase Wallet
2. Check Your ETH Balance and Click on the Three Dots
3. Choose the ETH Amount You Want to Wrap and Convert Tokens
After the last step, you should be able to see the WETH on the wallet page on the OpenSea platform.
How to Unwrap WETH to ETH
Each Ethereum wrapping transaction must have a custodian, which includes smart contracts, merchants, or multi-sig wallets. The custodians are collaterals holding Ether tokens and giving back WETH.
Unwrapping ETH works nearly the same as wrapping it. For example, if you use MetaMask, all you need to do is go to the swap section of the wallet. Choose WETH and ETH in their appropriate fields while indicating the amount you want to unwrap before executing the transaction.
Even so, you must own some Ethereum in your wallet to settle the transaction fees. In summary, here’s how you do it:
- Download/log in to your MetaMask wallet;
- Proceed to ‘Swap’;
- Enter WETH in the field indicated ‘From’;
- Enter ETH in the field indicated ‘To’;
- Click ‘Swap’;
- Confirm.
Conclusion
Typically, ETH bears the same value as WETH. They nearly bear the same price against the US dollar in terms of market performance. However, WETH attracts slightly lower transaction fees. WETH is considered to be a stablecoin pegged to the value of Ether instead of USD.
Since WETH adheres to the ERC-20 standard, it delivers capabilities that ETH doesn’t. For example, WETH can be used in smart contracts, dApps, and blockchains.
Those who buy and trade NFTs frequently and even those who execute crypto borrowing and lending must convert ETH into WETH to make their operations easy. However, ETH would be the better option if you’re considering a crypto investment that allows you to buy and hold.
Still, keep in mind that it is essential to conduct your own research before deciding how to invest in crypto. If you want to trade WETH, the wrapped form of Ethereum, you may need to use other strategies than when trading ETH. Nevertheless, adding WETH to your crypto investment plan may come with some significant advantages.
