To purchase WETH, you’ll have to purchase Ethereum (ETH) first and then use Ethereum to purchase WETH.
It is important to know that to successfully purchase WETH, you need a self-custody wallet. Also, note that ETH and WETH are worth the same amount and can be exchanged directly on decentralized exchanges.
What Is WETH?
WETH stands for Wrapped Ether — Ether is the native currency of the Ethereum blockchain. WETH refers to the version of Ether that conforms to the ERC20 standard. It can be created by sending Ether to a smart contract where the Ether is held and in turn, receive a WETH ERC20 token at a ratio of 1:1. Afterward, this WETH can be sent back to the same smart contract to be unwrapped or redeemed for the original Ether at the same ratio of 1:1.
Almost every native cryptocurrency of major blockchains has wrapped version examples include wrapped BNB, wrapped AVAX or wrapped Fantom, etc. These wrapped cryptocurrencies have mechanisms similar to that of stablecoins. Stablecoins are wrapped versions of USD (United States Dollar ), this means that they are pegged to the value of the USD and can be redeemed for FIAT dollars at any point.
In this same fashion, WBTC, WETH, and other wrapped cryptocurrencies are pegged to their native cryptocurrencies and can be redeemed for the original coin at any time.
The relevance of wrapped coins is a result of the low interoperability of blockchains. This problem makes it impossible for native coins of one blockchain to be used on other blockchains for example you can’t use Ether on the Bitcoin or Avalanche blockchain. The concept of wrapping native coins has proven to be a good solution to this problem.
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What Is The ERC20 Standard?
ERC stands for Ethereum Request for Comment and the ERC20 standard was implemented in 2015. It is a standard that is employed in the creation and issuance of smart contracts on the Ethereum blockchain. These smart contracts can be used to create smart or tokenized assets that people can invest in.
This standard introduced a set of rules for tokens on the Ethereum blockchain which makes it easy to launch new tokens and also made all tokens on the Ethereum blockchain to be comparable to each other.
ERC20 tokens are tokens created on the Ethereum blockchain using different protocols. This makes it possible for the same Ethereum address to hold Ether and many other tokens created using different protocols.
All fungible tokens on the Ethereum blockchain follow the ERC20 standard but Ether doesn’t comply with this standard and this is because Ether was created before the standard was introduced. With Ether being the only one, the wrapped Ether (WETH) was developed to increase interoperability between blockchains and also the usability of Ether in decentralized applications.
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How Does Wrapped Ethereum (WETH) work?
Wrapped tokens require custodians who will hold the collateral to be involved. This means that, for you to wrap Ethereum, there should be a custodian who will hold your Ether and give you wrapped Ethereum in return. These custodians can be merchants, multi-signature wallets, or even smart contracts on the Ethereum blockchain.
All you have to do is send your collateral (Ether) to the custodian and you will get a wrapped version of Ether. With this wrapped Ether, you can swap your Ether for wrapped Ether on decentralized exchanges like Uniswap then, your original Ether is converted to wrapped Ethereum, and then the value stays the same. This process is just similar to how stable coins that are pegged to USD work.
The wrapped Ether (WETH) is needed to swap between tokens on decentralized applications. Some decentralized applications don’t accept Ether as collateral but accept WETH. This is because the WETH is an ERC20 token that makes it possible to exchange it for other tokens of decentralized applications. You must know that Ether is still needed to pay for gas and other blockchains may have their version of WETH which is a mirror version of Ether on their blockchain.
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What Makes Wrapped Ethereum Unique?
Wrapping native cryptocurrencies make it possible for tokens to live on multiple blockchains and makes the use of cryptocurrencies very flexible. This implies that if an investor who holds Ether wants to use it on the Avalanche chain, all he has to do is to wrap the Ether.
Another benefit of wrapping assets is that it increases the liquidity and capital efficiency of blockchains. A good example, in this case, is Bitcoin. Bitcoin is considered a haven by many investors and wrapping Bitcoin will help these investors retain their Bitcoin while they still use it for yield farming and other activities in the decentralized finance space. For a cryptocurrency like Ether, the WETH helps to reduce high gas fees hence, allowing investors to trade Ether at a lower cost.
While wrapping is a fine choice with significant benefits, it also comes with some risks as decentralized exchanges may have a flaw in their smart contracts, custodians can get hacked, there are no fully decentralized solutions for wrapping native coins, chains are unable to wrap every token.
Also, while there are different versions of WETH on most major blockchains, the Ethereum blockchain doesn’t have versions of all the native coins of other blockchains.
How To Buy Wrapped Ethereum (WETH)
Currently, no exchange offer Wrapped Ether (WETH) for direct purchase using cash so to buy WETH, you will have to follow a three-step process:
1. Buy Ether with cash
If you already have some Ether you need to swap then you should skip this step but if you don’t have any, you will have to get some with your cash. You are buying Ether because you can swap it directly with WETH.
This step is important because readily having Ether to swap for WETH reduces gas fees in the process.
Make sure to purchase your Ether from trusted crypto marketplaces like Binance, Kucoin, etc.
2. Send your Ether to a crypto wallet
After you have successfully purchased Ether, you will have to send it to an Ethereum-compatible e.g Metamask wallet.
To send Ether to your Metamask wallet from your Binance account, follow these steps:
- Copy your Metamask wallet address.
- Go to your Binance wallet and click “withdraw” on your Ether balance.
- Paste your Metamask wallet address (make sure to check if the address you copied is the same as your Metamask wallet address)
- After you’ve confirmed the address you pasted to be yours, withdraw your ETH from your Binance wallet.
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3. Connect your Metamask wallet to a price aggregator
Now that you have Ether in your Metamask wallet, the next step is to connect it to a decentralized exchange where you can buy WETH.
There are several decentralized exchanges on Ethereum where you can purchase WETH. You just have to make you choose to use a trusted decentralized exchange with good rates to minimize the risks of losing some or even all of your funds to fraudsters.
You can use a decentralized exchange (DEX) aggregator to find the best prices without having to manually compare these exchanges. Using DEX aggregators can save you both time and money so go ahead and use them.
After you have chosen an exchange to buy from, go ahead and swap your Ether for WETH and confirm the transaction in your Metamask wallet.
FAQs On How To Buy WETH
No, WETH is not supported on the Coinbase platform
ETH is the native currency of the Ethereum blockchain and does not comply with the ERC20 standard while WETH is an ERC20 compatible version of ETH that allows it to be traded for other tokens.
No, there is no difference between WETH and ETH in value as 1 ETH = 1 WETH.
WETH can be used to pay gas fees, make fees, make payments, trade-in decentralized exchange exchanges, and many more.
WETH is considered to be cheaper sometimes because if you have WETH, you will have to save a bit of gas by using it directly.
Conclusion
The Wrapped Ether is a token that represents the original native cryptocurrency of the Ethereum blockchain. Unlike Ether, Wrapped Ether (WETH) was built to be compatible with the ERC20 standard and this makes it easy to trade ETH for other ERC20 tokens.
WETH became relevant is to allow decentralized financial activities without involving third parties and for better interoperability. Several tokens are built on the Ethereum blockchain and these tokens resort to the ERC20 standard to carry out contracts.
References
- coinbase.com – How to buy WETH
- support.opensea.io – What’s WETH? How do I get it?
- ledger.com – Buy Wrapped ETH Securely
- buycryptocoinnow.com – How to Buy WETH (WETH)?
- coinclarity.com – How & Where to Buy WETH
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