On November 28, 2022, the CEO of the Ethereum Foundation raised alarms over the drop in the value of wETH.
BREAKING: $WETH just lost its peg, CEO of The Wrapped Ethereum Foundation (WEF) @poordart frantically announced to raise and fill their $2b hole. pic.twitter.com/qN39yjYryz
— kinnif (@0xkinnif) November 28, 2022
There is currently a deficit of $2 billion that needs to be cleared, and the wETH cofounder is doing all he can to get the token back to its original position.
However, a member of the Twitter community, Richard Heart, debunks claims that wETH is depegging from ETH in a tweet.
He asserts that won’t happen and even brought up Vitalik Buterin retweeting a user post joking about it.
However, with this recent development, Justin Sun, co-founder and CEO of Tron, commented under the post that he has reached out to Vitalik Buterin, CEO of ETH, on his plan to help wETH bounce back and also offset the $2 billion deficit.
wETH depegging may turn out to be damaging to the ETH network due to the close association between the two assets. To create a wETH, Ether, the native currency of the platform, will need to undergo some transitioning under a smart contract.
The Ethereum network was designed to be developer-friendly, allowing them to leverage the Ethereum virtual machine to deploy smart contracts and build decentralized applications.
Ether is very instrumental in the running of such dApps. However, it is not compatible with all applications, so wETH becomes needed.
Due to the 1:1 trading equivalent provided by wETH, Ether is compatible with all dApps. In addition, wrapped ETH can be converted back to Ether, and vice versa.
Wrapped versions of cryptocurrency are not unique to the Ethereum platform, as there are several other wrapped tokens on other networks.
An excellent example is wrapped Bitcoin, or wBTC. Moreover, wETH is not only valid on the Ethereum platform but can also be utilized on other blockchain platforms.
A more straightforward way to understand wrapped tokens is by considering stablecoins, which function as a wrapped version of fiat, making them useful in other fields, like blockchain. A good example is the USDT, which is pegged to the US dollar at a 1:1 value.
Similarly, all wrapped tokens are pegged to a cryptocurrency with an equivalent value. Hence, they will boost the liquidity and interoperability of the crypto token.
Nevertheless, the level of impact this event will have on the ETH network is not yet known, but it will undoubtedly unfold with time. Therefore, the best option is to wait to see how events will turn out in the coming days and months.
