Wrapped tokens are typically used to resolve cross-chain incompatibilities. However, another use case for these tokens includes resolving token standard inconsistencies on the same blockchain. WETH is one such token.
WETH is an ERC-20
compatible token designed to enable the use of Ethereum’s native cryptocurrency, Ether, within the blockchain’s dApps. You might be wondering why not use Ether directly. The issue is that Ether, despite being Ethereum’s underlying crypto token, does not conform to the ERC-20 token standard that the vast majority of Ethereum’s dApps use.
The Ethereum blockchain and its Ether crypto were launched in July 2015, before the ERC-20 standard was created. The ERC-20, as a unified token standard, was first proposed only in November 2015. As a result, while the tokens used by Ethereum’s dApps ensured compliance with this standard, the Ether cryptocurrency did not.
This made the use of Ether directly in the dApps impossible. WETH was launched in order to resolve the standard inconsistency. WETH is pegged to Ether at a 1:1 rate. Any Ethereum user may swap Ether for WETH and vice versa at this fixed rate. Unlike Ether, WETH is freely usable within dApps on the chain, opening up opportunities for Ether holders to benefit from the platform’s rich ecosystem.