Over the weekend, fears circulated in the crypto community stemming from claims that Wrapped Ethereum tokens could be at risk of losing their 1:1 value against ETH. However, the claims are no more than elaborate jokes about recent contagion fears.
Crypto Twitter has been indulging in jokes about the state of Wrapped Ethereum for the last 24 hours, but not everyone is in on it.
Many prominent crypto community figures, including Hsaka , banteg , and CL , recently shared increasingly brazen claims about the Ethereum network’s Wrapped Ethereum token (wETH) somehow depegging or being exploited.
“wETH hack went unnoticed since 2019,” stated pseudonymous Yearn Finance lead developer banteg, “after investigating more than 90 million deposit and withdrawal events, I’ve found a supply discrepancy between the total supply wETH contract reports and the actual outstanding wETH.” He then posted: “It appears the contract holds 1 wei more than it owes. How is it possible?”
wETH is a token that aims to stay at 1:1 parity with ETH; it is used in many smart contracts and on non-Ethereum blockchains. As the token is widely used across various crypto ecosystems, it would be easy to believe that a failure would have catastrophic consequences for the crypto space.
At least one newspaper organization took the claims at face value. Bloomberg ran an article early this morning stating that crypto analysts were having “concerns” about Wrapped Ethereum. The article was quickly amended when crypto community members started sharing it around Twitter mockingly.
Wrapped Ethereum is not issued by a centralized party, like Circle or Tether, but by various smart contracts. Ethereum users can “wrap” their ETH manually by placing it into the smart contract, receiving the same amount of wETH in return. They can then swap back their wETH for ETH any time they want. Many different protocols and platforms are offering to wrap ETH into wETH, including OpenSea .
The advantage of wETH is that it’s an ERC-20 token, just like other coins in the Ethereum ecosystem—for example, UNI, MKR, or LDO. Therefore, it has the same characteristics as these tokens and allows smart contracts to process ETH the same way they’d process any other ERC-20 token without needing any technical modifications.
Because wETH does not have a single custodian (again, unlike USDC or USDT), the token itself does not pose any systemic risk to the crypto space. However, it’s theoretically possible for some wETH tokens to lose value if their specific custodian loses the ETH backing the wrapped token.
The crypto space has been rife with rumors of systemic risks since leading crypto exchange FTX collapsed spectacularly in a matter of days at the beginning of November. The event caused a chain reaction of insolvencies in various entities connected to FTX in some manner or other, including BlockFi, Voyager, Genesis, and Digital Currency Group. But the concerns about wETH losing its peg or being exploited can be put down as yet another expression of the crypto community’s typical gallows humor.
Disclaimer: At the time of writing, the author of this piece owned BTC, ETH, and several other crypto assets.
The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.
You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.
See full terms and conditions.
News Jun. 8, 2022
Rumors of insolvency are circulating around EVODeFi, a bridge to several DeFi ecosystems that may be $66 million short of funds. Possibly $66 Million in Unbacked Funds On June 7,...
News Nov. 22, 2022
Digital Currency Group (DCG) currently has $2 billion worth of loans according to a letter sent to shareholders today. DCG Outlines Lending Situation In a shareholder letter sent to investors...