Coin Healthcheck: Wrapped ETH (WETH)

About

Wrapped Ether (WETH) is a tokenized version of the original Ether, the native cryptocurrency of the Ethereum blockchain.

WETH is pegged to the value of Ether and is used to facilitate direct trade with ERC-20 standard tokens.

As the original Ether was created prior to the ERC-20 standard, it does not comply with the ERC-20 standard tokens, and thus cannot be traded directly on ERC-20 compliant DeFi applications or decentralized autonomous organizations (DAOs), unlike the interoperable ERC-20 tokens themselves.

State of the Project

✅ Native coins of one blockchain can’t be utilized on another due to a lack of interoperability. Wrapped ETH facilitates interoperability between dApps, enabling operations across different blockchains and scalability protocols operating above Layer-1.

✅ Wrapped ETH does not require any intermediaries such as centralized crypto exchanges. WETH is generated by depositing ETH into a smart contract, and is backed 1:1 with Ether.

✅ WETH is interoperable with other tokens of the ERC-20 standard.

✅ The wrapped variant of ETH supports faster, cheaper transactions compared to the native Ether.

✅ WETH token can be also used to make payments, pay gas fees, and for trades on decentralized exchanges.  

✅ Many Ethereum-based decentralized applications (dApps) use WETH in place of Ether for direct, decentralized peer-to-peer trading.

The Website and Whitepaper

❌ WETH does not have a viewable whitepaper. 

❌ The official website of the token is extremely brief, providing only a short explanation of what WETH is and why is it needed. Largely proffers additional links to other content generated by the same devs/community.

Development Stage

✅ Initially developed and implemented by 0x, the first WETH token was released at the end of 2017.

❌ Currently, there are a range of different versions of wrapped Ether. The asset’s developers are reportedly still working towards creating a canonical WETH standard.

✅ The latest version of wrapped ETH is WETH10, and was announced back in May 2021. It offers the flash mint feature, which is a part of its flash loan functionality. This means that users can borrow any available amount of assets from a smart contract with no collateral. However, the loan and repayment must be made within the same transaction.

Team

✅ The WETH website is maintained by a group called ‘Radar Relay Inc.’ According to their LinkedIn page, Radar Relay is operated by 10 employees based in Denver with a focus on creating products for the “next financial system.” 

✅ Launched in 2017, Radar Relay presented itself as an open order book relay on the 0x protocol, and not as a digital asset exchange. New features such as margin trading,  lending, and trade execution guarantees were all enabled in 2021. 

✅ The project has been acquired by BLOCKCAP, one of the largest digital asset miners in North America in 2021. 

Community

❌ WETH’s social media presence can be described as scarce at best. The token’s  Twitter account, which has 12 followers, has been inactive since April 2020.

✅ WETH, and wrapped tokens in general, are popular topics for discussion in community forums.

Key Metrics

Max supply: Differs according to the data provider checked:  7,900,729 WETH according to CoinGecko, or 1,153,917 on CoinMarketCap.

Circulating supply: No data provided.

Market Cap: No data provided.

All-time high (ATH): $4,863.70 (November 2021)

Markets

✅ Comes in almost 100 trading pairs on Uniswap and SushiSwap. 

Wallets

✅ ERC-20 compatible wallets like MetaMask or Trust Wallet. 

Asset allocation:

✅ More than half of all owners (57%) have held WETH for less than 18 months.

✅ Over 422,000 unique addresses hold wrapped Ether tokens as of this writing.

Verdict

• Wrapped tokens enhance interoperability, as they enable the creation of more bridges between different blockchains, thereby improving the flow of digital assets. This in turn leads to higher liquidity on decentralized exchanges. 

• Transactions conducted in wrapped Ether are faster and cost less. It also enabled investors to their Ethereum coins in the DeFi space.

• Alternative Ethereum token standards, like ERC-223, could pose an existential risk to the usage of wrapped Ether. Developers are already working through the improved ERC-223 token standard, which should allow the transferal of tokens to be made in the same way as ETH transactions.

• WETH still does not have a single defined standard. It also relies considerably on the custodian issuing and burning the WETH tokens, be it a smart contract or a multi-signature wallet. This means there is a high risk of losing holdings were something to happen to that relatively centralized smart contract, or were the user to redeem their assets on a non-native blockchain.