Social media is the modern agora. Individuals from all over the world have a place where they can voice their concerns and share their thoughts. Crypto Twitter constantly evolves as a repository of questions, answers, explanations, and speculations. A recent campaign has had members wondering if Wrapped Ether (wETH) could be at risk of losing its 1:1 value against Ethereum. There’s no reason to worry because the claims are nothing more than elaborate jokes. Don’t take these claims at face value; otherwise, you risk getting into financial trouble. It’s highly unlikely that wETH will collapse anytime soon.
So, What’s Wrapped Ether (wETH)?
Wrapped Ether, wETH for short, is a token pegged to Ether, meaning that it’s linked to the ETH price. Its purpose is to allow the trading of assets in decentralized exchanges, which isn’t currently possible due to their blockchains. Bitcoin (BTC), for instance, is only compatible with its own blockchain, so it’s useless on the Ethereum blockchain. wETH can be deployed on several platforms and decentralized applications (DApps) that support ERC-20 tokens. The pegged price of the cryptocurrency refers to the fact that it attempts to minimize volatility. You can wrap your Ether manually by placing it in a smart contract. You’ll receive the same wETH in return.
Ethereum’s DeFi ecosystem is large. The markets are always open, and there’s no central authority to block payments or deny access. DeFi provides openness to business sectors and offers multiple options in terms of regional currency. Using wETH brings many opportunities in terms of staking and investing. More exactly, you can explore the world of DeFi, interact with DApps, and swap ETH for other altcoins. Despite the fact that Ether is the native cryptocurrency of the Ethereum blockchain, it’s not compatible with its applications. This is the reason why you must convert your coins into wETH. To access DApps on the blockchain, you’ll need a Web3 browser.
Wrapped Tokens Aren’t Unique to Ethereum
Wrapped tokens have become a major innovation of the DeFi space. Contrary to popular opinion, Ethereum isn’t the only blockchain that is compatible with the ERC-20 standard. There are other wrapped tokens, such as Wrapped Bitcoin (WBTC). As mentioned earlier, wrapped tokens are assets that make it possible to use cryptocurrencies from one blockchain to the other. They’re similar to stablecoins like USDT, which follow the price of the US dollar. Wrapped tokens are created and destroyed through minting and burning. To mint WBTC, for instance, BTC is sent to a custodian who stores the BTC in a digital vault.
The Advantage of wETH Is That It’s an Erc-20 Token
wETH is ERC-2o compatible, so it is used to interact with other ERC-20 assets. In case you didn’t know, ERC-20 is the technical standard used by Ethereum, which allows tokens to function properly within the ecosystem. As opposed to Bitcoin, Ethereum isn’t just a blockchain. Other tokens can run on top of it, and DApps can be built using smart contracts. In this respect, the tokens are a representation of an asset, right, ownership, and so on. ERC-20 makes it easier for companies to create their own cryptocurrency. Some of the largest and most popular ERC-20 tokens are Binance USD, Polygon, Shiba Inu, and Uniswap.
wETH is an ERC-20 token, which basically means that it has the same features as the aforementioned tokens and enables smart contracts to process ETH in the same manner they’d process any other ERC-20 token. ERC-20 tokens allow developers to integrate a cryptocurrency wallet, ensuring the safety and security of the purchased assets. Selecting the best wallet is no rocket science, but take into account factors like ease of use, control over the private keys, compatibility with the chosen device, and backup options. You can use a software wallet or a hardware wallet. Given that the crypto market is prone to cyberattacks, a hardware wallet would be the best choice.
Will wETH Depeg?
Right now, many are convinced that wETH will depeg and experience a complete collapse. The issue with this prediction is that it lacks sufficient analytical support. The best thing you can do is keep calm and disregard the concerns. wETH isn’t a security owing to its decentralized development and expansion, so there’s no custodian. Your Ether is redeemable, meaning you can withdraw your funds at any time. There’s always the risk that DeFi could be exploited, but no major incident has occurred. wETH hasn’t deviated from its ETH peg, and there’s no reason to believe it will happen any time soon.
As the name suggests, stablecoins are stable, as they’re pegged to the price of another asset. They offer the benefit of security and immediate payment processing but without the price volatility of traditional cryptocurrencies. Stablecoins like wETH are valuable and can be quickly sent around the globe, including to places in the US. Popular uses include but aren’t limited to NFT trading, adding funds to liquidity pools, and crypto lending. To sum up, the main point of wETH is to enable decentralized financial activities without recurring to intermediaries. It all comes down to the ERC-20 standard.
Final Thoughts
Many projects that leverage the Ethereum blockchain use the ERC-20 technical standard to operate their platforms. wETH is designed to maintain a fixed value, even when the price of ETH changes. You can wrap Ether on most decentralized exchanges and on platforms such as Binance. Wrapping involves sending ETH to a smart contract that provides wETH in return. Your tokens are visible on the blockchain, and the only costs you incur are the transaction fees when you exchange these coins. Given that interacting with smart contracts is technical in nature, you should better use a decentralized exchange that allows peer-to-peer transactions.
For now, it’s safe to say that wETH isn’t in danger. If you’re planning to invest in cryptocurrency, don’t believe rumors and always trust your gut. Be fully informed of the risks and costs associated with trading. Indeed, a crisis of confidence has been generated as far as wrapped crypto assets are concerned. But don’t believe everything you read on the Internet.
