What is WETH?

WETH, or Wrapped ETH, is a tokenized version of ETH that adheres to ERC-20 token standards, allowing for compatibility with Ethereum dApps and other ERC-20 tokens. This alignment enhances its utility, enabling functions such as staking, yield farming, lending, and participation in liquidity pools. The value of WETH remains anchored to ETH at a 1:1 ratio, ensuring consistent pricing across platforms.

Custodians facilitate the wrapping and unwrapping of ETH into WETH, which involves sending ETH to a custodian like a multi-signature wallet, DAO, or smart contract. Users can interact with decentralized exchanges by connecting their web3 wallets to wrap ETH into WETH, while centralized exchanges handle the process through burning and minting mechanisms. Developers indicate that future updates to ETH aim to make it compliant with ERC-20 standards, potentially reducing the necessity for WETH.