WETH (Wrapped Ether)

WETH is Wrapped Ether, an ERC-20 token pegged 1:1 to Ethereum's native ETH that enables ETH to be used in DeFi protocols, DEXs, and NFT marketplaces that require ERC-20 compatibility. It functions by locking ETH in a smart contract to mint equivalent WETH tokens, which can be unwrapped back to ETH at any time. The token maintains parity with ETH while providing the fungibility and interoperability needed for decentralized finance applications.

WETH itself does not generate any yield. It is simply a wrapped version of Ethereum's native ETH that keeps a 1:1 value peg. Wrapping ETH into WETH lets it be used in many decentralized finance (DeFi) applications that require the ERC-20 token standard.

However, WETH enables yield generation by acting as a primary asset for liquidity and collateral across the DeFi ecosystem. You can put your WETH to work in several ways:

• As liquidity in decentralized exchange (DEX) pools – you earn a share of the trading fees.
• As collateral in lending markets – you earn interest from borrowers.
• In various yield farming strategies – where protocols reward users with tokens.

The actual yield comes from external DeFi protocols like Uniswap, Aave, and Compound. WETH provides the necessary compatibility for ETH to participate in these systems. The WETH contract itself has no built-in fees or reward emissions.

Wrapping ETH into WETH or unwrapping it back only requires paying the standard Ethereum network gas fee. All yield is generated by how you use WETH in other DeFi applications, not by holding WETH alone.