Wrapped tokens can be confusing—even for seasoned DeFi users. What exactly is the difference between WETH and ETH? And why does it matter? If you’ve ever interacted with decentralized finance (DeFi) protocols, you’ve likely used WETH without fully understanding it. The reality is, while ETH is Ethereum’s native currency, it doesn’t play well with most smart contracts. That’s where wrapped Ether (WETH) comes in.
👉 Discover how wrapping ETH unlocks powerful DeFi opportunities
Why Can’t I Just Use ETH?
At first glance, it seems counterintuitive: why wrap ETH when it’s already on Ethereum? The answer lies in technical design. ETH predates the ERC-20 token standard, which has become the blueprint for most tokens on Ethereum-compatible blockchains. Because ETH isn’t an ERC-20 token, smart contracts must include special logic to handle it—adding complexity and potential vulnerabilities.
By wrapping ETH into WETH, a fully compliant ERC-20 token, developers can treat Ether like any other token. This simplifies interactions across decentralized exchanges (DEXs), lending platforms, yield farms, and cross-chain bridges. In short, WETH makes ETH programmable within the broader DeFi ecosystem.
What Is WETH and Why Do I Need It?
WETH (Wrapped Ether) is a 1:1 representation of ETH, backed by actual Ether locked in a smart contract. When you wrap ETH, you send your native Ether to a verified contract, which issues you an equivalent amount of WETH. This process is reversible—unwrapping returns your original ETH.
You need WETH whenever you:
- Trade on decentralized exchanges (e.g., Uniswap, SushiSwap)
- Provide liquidity to DeFi pools
- Use DEX aggregators like Matcha for optimized trades
- Bridge assets to other networks like Polygon or Base
- Engage in yield farming or margin trading
Without WETH, many DeFi applications would require complex, gas-heavy workarounds to accept ETH directly.
👉 Learn how to seamlessly convert between ETH and WETH
How to Wrap ETH into WETH
Wrapping ETH is a simple process that can be done in just a few clicks using platforms that support token wrapping.
Step-by-Step: Wrapping ETH
- Open the Trade module on a supported platform.
- Select ETH as the token to sell.
- Choose WETH as the token to buy.
- Enter the amount of ETH to wrap.
- Review the transaction and confirm—this will show the gas cost.
- Click Place Order to complete the wrap.
The process costs only gas fees—no additional service charges. Once completed, you’ll have WETH ready for use in any ERC-20-compatible application.
How to Unwrap WETH Back to ETH
When you need native ETH again—such as for paying gas fees or long-term storage—you can unwrap your WETH at any time.
Step-by-Step: Unwrapping WETH
- Go to the Trade module.
- Select WETH as the token to sell.
- Choose ETH as the token to buy.
- Enter the amount of WETH to unwrap.
- Review gas costs and confirm the transaction.
- Click Place Order to receive ETH back.
Since WETH is pegged 1:1 to ETH, every 1 WETH unwrapped returns exactly 1 ETH. Always ensure you keep enough ETH in your wallet to cover future gas fees—even when unwrapping.
WETH vs. ETH: Key Differences
| Feature | ETH | WETH |
|---|---|---|
| Token Standard | Native currency | ERC-20 compliant |
| Smart Contract Functions | Limited (non-standard) | Full ERC-20 support (transfer, approve, etc.) |
| Use in DeFi | Limited without wrapping | Fully compatible |
| Gas Payments | Used directly | Can be used indirectly via features like gas abstraction |
While they hold equal value, ETH and WETH are not interchangeable at the protocol level. Under the hood, when you wrap ETH, your original Ether is locked in a contract, and new WETH tokens are minted. Unwrapping burns the WETH and releases the original ETH.
As noted in the original Canonical WETH proposal:
“By abstracting ether as an ERC20-compliant token, smart contract code can be simplified by eliminating special business logic for handling ETH.”
This abstraction is what enables cleaner, safer, and more scalable DeFi development.
The Origins of WETH
WETH was co-developed by key players in early DeFi, including MakerDAO, 0x, and Gnosis. The goal was to create a standardized way to represent Ether as an ERC-20 token. Before WETH, different platforms used their own versions of wrapped Ether, leading to fragmentation and user confusion.
The concept of a canonical (official) WETH contract emerged to unify these efforts. Deployed on Ethereum mainnet in January 2018, the current WETH contract (0xc02...cc2) has since become one of the most widely used pieces of infrastructure in DeFi.
Early versions required users to migrate between contracts—a cumbersome process that highlighted the need for standardization. Today’s unified contract eliminated this friction, accelerating adoption across dApps and DEXs.
Common Uses of WETH
WETH powers much of the DeFi ecosystem. Here’s where you’ll find it in action:
1. Trading on DEXs
Most decentralized exchanges use WETH as a base pair (e.g., USDC/WETH, DAI/WETH). This allows seamless swaps without requiring special ETH-handling logic.
2. Liquidity Provision
When supplying liquidity to pools like Uniswap V2 or V3, you typically pair WETH with another ERC-20 token. This ensures both sides of the pool are ERC-20 compliant.
3. Yield Farming & Staking
Many yield strategies require depositing WETH into vaults or lending protocols like Aave or Compound.
4. Cross-Chain Bridges
To move value from Ethereum to Layer 2s like Arbitrum or Optimism—or sidechains like Polygon—you often wrap ETH first, then bridge WETH.
5. Gas Abstraction & MEV Protection
Advanced trading tools like Matcha Auto allow you to pay gas fees from the output token, reducing reliance on holding ETH solely for gas. This only works with wrapped assets like WETH.
Gas Fees and Transaction Costs
Wrapping and unwrapping both require gas since they involve smart contract interactions. However:
- The fees are typically low during non-congested periods.
- Once wrapped, transferring or trading WETH has similar gas costs to other ERC-20 tokens.
- You can bridge WETH to networks with lower fees (e.g., Polygon, Base).
Pro tip: Use features like gas abstraction to minimize how much ETH you need on hand for transactions.
Other Wrapped Tokens
WETH is part of a broader trend of asset tokenization:
- WBTC: Wrapped Bitcoin (BTC → ERC-20)
- WBNB: Wrapped Binance Coin (on BNB Smart Chain)
- WMATIC: Wrapped MATIC (used on some Polygon implementations)
These tokens enable non-native assets to function within EVM-based ecosystems, expanding interoperability across chains.
Risks of Using Wrapped Tokens
While WETH is considered safe—being audited, open-source, and foundational to DeFi—not all wrapped tokens are trustworthy. Risks include:
- Smart contract vulnerabilities
- Centralized custody (e.g., custodians holding underlying assets)
- Fake or spoofed tokens
Always verify:
- The contract address matches official sources
- The token has sufficient liquidity and community trust
- You’re using reputable platforms for wrapping/unwrapping
Frequently Asked Questions (FAQ)
Q: Is WETH safer than ETH?
A: Not inherently. ETH is native and doesn’t rely on smart contracts for value backing. However, WETH operates on a well-audited, battle-tested contract and is widely trusted in DeFi.
Q: Can I lose money by wrapping ETH?
A: No—if you use legitimate platforms and verified contracts. The risk comes from using malicious sites or fake tokens, not the wrapping mechanism itself.
Q: Does wrapping cost money?
A: Yes—gas fees apply for both wrapping and unwrapping. However, there are no service fees on most reputable platforms.
Q: Can I earn yield on WETH?
A: Absolutely. You can lend it on Aave, supply it to liquidity pools, or stake it in yield farms—all common strategies in DeFi.
Q: Will ETH eventually become ERC-20 compliant?
A: There have been proposals (like EIP-2771), but no changes yet. For now, WETH remains essential.
Q: Do I need WETH to pay gas fees?
A: No—only native ETH can pay gas on Ethereum. Keep some ETH aside even if most of your funds are wrapped.
Final Thoughts: Wrapping Up WETH
Wrapping is a powerful mechanism that bridges native assets with modern DeFi functionality. WETH transforms ETH into a programmable, composable asset, enabling innovation across trading, lending, and cross-chain applications.
Though temporary by design, WETH has become a cornerstone of decentralized finance—so much so that it may remain relevant even if future upgrades make ETH natively ERC-20 compatible.
Whether you're swapping tokens, providing liquidity, or exploring new chains, understanding WETH vs. ETH is crucial for navigating Web3 confidently.