wETH (Wrapped Ether) is a “wrapped” version of Ether (ETH), which is an ERC-20 token fully backed by Ether at a 1:1 ratio. wETH is used to improve the compatibility of ETH with various decentralized applications (dApps) and protocols on the Ethereum blockchain.

Key features of wETH:

ERC-20 Standard: Unlike ETH, which is the “native” currency of the Ethereum network and does not comply with the ERC-20 standard, wETH is fully compatible with ERC-20. This makes it easily integrable into smart contracts, decentralized exchanges (DEX), and DeFi protocols.
1:1 Backing: Each wETH token is always backed by an equivalent amount of ETH, which is stored in a smart contract. This means wETH can be exchanged back for ETH at any time on a 1:1 basis.

Uses:

Trading on DEX: wETH is used for trading on decentralized exchanges, such as Uniswap and SushiSwap, as they operate exclusively with ERC-20 tokens.
DeFi Usage: wETH is actively used in various decentralized finance protocols, including staking, lending, and farming.
Compatibility with dApps: Many dApps require the use of ERC-20 tokens to interact with their contracts, making wETH convenient for use in these applications.

Wrapping and Unwrapping Process:

To obtain wETH, the user sends ETH to a smart contract, which then issues an equivalent amount of wETH in return.

To unwrap it, the user sends wETH back to the smart contract, which returns the equivalent amount of ETH.

Advantages:

Convenience for Developers: The ERC-20 standard makes working with wETH more predictable and manageable within the Ethereum ecosystem.
Unification: Using wETH simplifies the interaction of ETH with other tokens and smart contracts.

wETH solves the compatibility issue and provides users and developers with an easy way to use Ether across all aspects of the Ethereum ecosystem, from trading to participating in decentralized applications.