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If you are familiar with the cryptocurrency world, you may have heard of wrapped ether at one point or another. This article will find out what wrapped ethers are, how to wrap ether when you buy Ethereum, the purpose of wrapped ethers, and how to unwrap a previously wrapped ether.
What is a wrapped ether when you buy Ethereum?
A Wrapped Ether (WETH) is a coin that is linked to an original Ethereum cryptocurrency (ETH). The original cryptocurrency is held in a protected digital sandbox while the wrapped version is published on a host blockchain. The process of wrapping Ethereum when you buy Ethereum is mainly converting an ETH to WETH.
An ETH or WETH is interchangeable at any point in time. There was no added value when a WETH was converted, i.e., $1 WETH= $1ETH and vice versa. The only additional cost is the transaction fees attached when you exchange these coins.
This wrapped ether can be used in several websites and decentralized apps that use ERC-20 tokens. Ethereum is used to pay network transaction fees because it lacks the functionality of ERC-20 tokens. A wrapped ether is mostly used to access the DeFi ecosystem rapidly and use its tokens in yield farming, lending, staking, and other platforms.
Why should you wrap ether when you buy Ethereum?
There are various reasons for wrapping Ether. Most cryptocurrency traders or investors wrap Ether because it is interoperable with other ERC-20 crypto tokens. This means that it is highly fungible. There is also a potentially high liquidity rate when you buy a wrapped Ethereum than when you buy Ethereum.
Another reason for wrapping ether when you buy Ethereum is that its security is improved since its custodians normally exclusively employ secure exchanges. Furthermore, because the custodian holds the private keys in a safe place, you have more control over your crypto tokens.
Lastly, another reason for wrapping Ethereum is that a wrapped ether has quicker transaction speeds and reduced transaction costs compared to the unwrapped form of ether. All these reasons are why most people advise you to wrap your ether when you buy Ethereum.
How do you wrap ether?
You may wrap your Ether manually or automatically. This means that you can either buy Ethereum and wrap it yourself, or buy a wrapped Ether directly from the seller. The process of wrapping ether manually is quite s
To wrap your ether manually, you engage with the WETH smart contract. After wrapping your ether, you are expected to get the same value of your wrapped Ethereum as your normal Ethereum. Your ETH is secured in the smart contract and may be swapped for WETH at any moment. ETH reserves back up the WETH coin generated after conversion.
This process is quite seamless, and all you have to do is follow a step-by-step process. While wrapping ether, you can interact directly with the WETH smart contract so that it takes your ETH and credits your wallet with WETH at a 1:1 ratio with your transaction fees. The process of converting back is quite similar, though.
Before that, you must have some ETH in a wallet, such as MetaMask. Then, link your wallet (in this example, MetaMask) to an Ethereum-based DEX, such as Uniswap. You can swap your ETH for WETH using the Uniswap DEX or directly through your Metamask wallet.
Step-by-step process of wrapping ether:
- Go to the Uniswap website and register your wallet.
- Pick Ethereum as your preferred network.
- Choose ETH at the top and WETH at the bottom. When you select a token, WETH should appear above the list.
- Choose the quantity of ETH you want to wrap and then click the wrap button.
- Then you must confirm the transaction in your cryptocurrency wallet.
- You will need to pay for gas used for the conversion; this cost is known as the transaction fee. Ensure you have some additional ETH on hand.
- Go through the transaction information again to avoid errors and then click confirm.
- You’ll receive WETH in your wallet in a matter of seconds.
How do you unwrap Ether?
If you have wrapped ether or the token WETH, you can easily unwrap it to obtain ETH. You will receive the same value of your ETH back after unwrapping it. The burnt WETH is restored as ETH and placed into the crypto wallet of the previous WETH possessor. This process is similar to wrapping ether, and you will also need a wallet.