WETH stands for Wrapped Ether. It is a version of the native Ethereum token (ETH) that is compatible with the ERC-20 standard. The ERC-20 standard is a common interface that ensures interoperability between tokens of this standard. This is important because, although Ether is the native cryptocurrency of the Ethereum network, it is not compatible with the ERC-20 standard.

Wrapped Ether (WETH) is therefore used to facilitate transactions between ETH and ERC-20 tokens. In fact, WETH is simply a 1:1 representation of ETH, but in a format that can interact more easily with smart contracts on Ethereum.

Here's how it works in practice:

  • You "package" your ETH to create WETH via a smart contract.
  • You use your WETH to trade with smart contracts that require ERC-20 tokens.
  • If you want to convert your WETH back to ETH, you can "unwrap" your WETH via the smart contract.

Thus, WETH primarily serves as a mechanism for ETH to interact more easily with the vast ecosystem of ERC-20 tokens on Ethereum.

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