WETH

Wrapped Ethereum (WETH) is an ERC-20 token that represents Ethereum on a one-to-one basis, allowing native ETH to be used in decentralized exchanges, lending protocols, and other smart contracts designed for ERC-20 token compatibility. Since Ethereum itself isn't technically an ERC-20 token but rather the blockchain's native asset, wrapping converts ETH into a standardized token format that integrates seamlessly with DeFi applications. Users can wrap ETH into WETH through smart contracts and unwrap WETH back to ETH at any time with minimal transaction costs, enabling greater flexibility and interoperability across the DeFi ecosystem. Example: A trader on Uniswap might convert 10 ETH into 10 WETH to trade against other ERC-20 tokens in liquidity pools, then unwrap the WETH back to native ETH once their trades complete, ensuring compatibility across the DEX's smart contract systems. Why it matters for DeFi: WETH is foundational to DeFi's functioning, enabling Ethereum's native asset to participate in every ERC-20 compatible protocol. Without wrapping mechanisms, DeFi composability would be severely limited, reducing capital efficiency and liquidity availability across decentralized finance applications.

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