The difference between wETH and ETH is not immediately clear. If you want to mint or bid on an NFT, you may see this currency marker: wETH. It sort of looks like ETH, but it’s clearly different. What is wETH?
What is wETH?
To start at the beginning, the native currency on the Ethereum blockchain is called Ether (also referred to as ether tokens, or ETH). After the ETH token was released, the ERC-20 standard was developed. This standard defines the ways that tokens can be transferred, and how these transfers are recorded on the blockchain. However, since ETH was released before the development of the standard, ETH does not conform to the ERC-20 standard.
ETH & dAPPS
Decentralized applications are called dApps. Examples of dApps include Augur, Cryptokitties, and Steemit. Many of these decentralized applications use their own tokens – sort of like in-game currency, or Chuck E. Cheese tokens. You can buy these tokens with ETH, right? Well…
Since ETH doesn’t conform to the ERC-20 standards, it cannot be exchanged for dApp tokens. First, you must “wrap” your ETH in a protective ETC-20 hug. Then, the ETH can be exchanged using the ERC-20 standard.
Functionally, wrapped Eth is a wrapper around Ethereum cryptocurrency. This means that you convert your ether into wrapped ether, and then. you are able to deposit your Ethereum with a layer 2 side chain such as Polygon or Optimism. This enables you to enjoy the benefits of a side chain including low gas fees, as well as purchase the tokens native to that layer 2 chain.
Why would you wrap your ETH?
What is the benefit of wrapping your precious ether and entrusting it to a third party (the L2s)? The answer is money in the form of gas fees.
The expense of doing business on the Ethereum Mainnet has risen dramatically, often requiring hundreds of dollars in gas (depending on traffic) to mint a 0.08Ξ NFT. L2s such as Polygon offer a cost-effective means of engaging with popular Ethereum protocols.
How do you wrap your Eth?
The mechanism for wrapping ETH and converting it to wETH uses a bridge, or a smart contract that you can deposit your ETH with. This smart contract associates your wallet address on the L2 side chain.
Wrapping your ETH into wETH can be an intimidating and confusing process. Before you begin, be sure to give yourself plenty of time, and start with a small amount of ETH.
How-to Bridge to Polygon (with Metamask installed):
- Go to Polygon
- Click on “Polygon Bridge”.
- Select the amount of Eth you want to wrap.
- Follow the User Instructions/read the FAQ
- Once the trade is complete, click on “Assets on Polygon”
- It may take some time for your transaction to settle, but you should see “ETH” and the amount that you have deposited minus transaction fees.
- IMPORTANT: If you use Metamask, you will need to point Metmask at the Polygon RPC (instructions here).
- Wrapped Eth will not show up in your Metmask until you have added as a token. Don’t worry, you still have your ETH! When you mouse over ETH in the “Assets on Polygon”, you will notice a little foxhead metamask icon on the right. Click on this to add the token.
- Now, with your Metamask wallet pointed at Polygon, you will see your wrapped Eth balance and can trade and buy your NFTs with those sweet low, low transaction fees.
- To see your ETH on the L1 Ethereum chain, you will have to switch back to the Mainnet in Metamask
This Seems Like a Pain
When you’re “wrapping” ETH into wETH, you’re not actually wrapping ETH or anything else. You’re using a smart contract to trade ETH for wETH. Is this clunky? Yeah, kinda. So what’s the plan?
There are currently steps being taken to revise Ethereum so that it’s compliant with ERC-20. Once that’s done, there won’t be a need to “wrap” your ETH into wETH or “unwrap” wETH back into ETH.
ETH vs wETH
Now we have answered the question “what is wrapped ETH”. As you can see, ether and wrapped ether are very similar. They are basically two versions of the same token/currency with slightly different functionality – ETH being the currency native to the Ethereum Layer 1 blockchain, and wETH being compliant with ERC-20 standard sand exchangeable for dAPP tokens.
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