ETH
Wrapped ETH — the ERC-20 version of Ether powering every Ethereum DeFi market.
WETH (Wrapped Ether) is a 1:1 ERC-20 token representing ETH, created because the original ETH pre-dates the ERC-20 standard and cannot interact directly with ERC-20-based smart contracts. Users wrap ETH by depositing into the canonical WETH9 contract (0xC02a…6Cc2 on Ethereum mainnet), which holds ETH and mints WETH, and can unwrap at any time at a 1:1 rate. In DeFi lending, WETH is both the most-borrowed asset (by high-leverage ETH stakers using looped stETH/wstETH positions) and a major collateral asset on protocols like Aave, Morpho, and Compound. Its approximately $5.1B in DeFi lending TVL (DeFiLlama, April 2026) makes it the second-largest lending asset after USDC.
- No issuer credit risk beyond the original WETH9 smart contract, which is immutable and has been audited; the contract simply holds ETH 1:1.
- The most-borrowed asset in leveraged ETH-staking strategies: users deposit wstETH, borrow WETH, swap for more wstETH, and loop to amplify staking yield. Aave V3 e-mode allows up to ~93% LTV on wstETH/WETH pairs.
- Borrow rates for WETH track ETH staking yields; when staking APY rises, borrow demand falls and WETH rates compress — the two rates are arbitrage-linked.
- Aave V3 is the largest single venue for WETH borrowing, followed by Morpho (curated ETH vaults including re7 Labs and MEV Capital) and Euler V2 (DeFiLlama, Q2 2026).
- In June 2026, the Ethereum Foundation publicly disclosed 3,400 ETH deployed into Morpho Vaults V2 for yield, following a 2,400 ETH allocation in October 2025 — the most high-profile institutional use of DeFi ETH lending.
Frequently asked questions
Is there any risk to holding WETH vs plain ETH?
WETH carries a thin additional smart-contract risk from the WETH9 wrapping contract, but that contract is immutable and has operated without incident since 2017. The more material risk in a lending context is liquidation risk on your borrow position, not the wrapping mechanic itself.
Why does borrowing WETH make sense for ETH stakers?
The looped stETH/wstETH strategy works because staking yield (roughly 3–4% APY from Lido as of mid-2026) exceeds the cost of borrowing WETH in an e-mode market (which tracks utilization). Running the loop 3–5x amplifies the net spread into mid-to-high single-digit returns. The risk is liquidation if the wstETH/ETH price ratio depegs below the liquidation threshold — this happened briefly in June 2022, causing mass forced unwinds.
Do I need WETH to use DeFi or can I use ETH directly?
Most modern DeFi protocols accept native ETH through router contracts that wrap it automatically before depositing into the lending pool. However, WETH is useful when you want explicit ERC-20 control, are using protocols that do not auto-wrap, or are moving between chains where ETH would need to be bridged anyway. In practice, the user-facing difference is minimal on major protocols.