The key to maintaining WETH’s peg with ETH is its 1:1 convertibility. If WETH were cheaper, people would buy it and convert it to the more expensive ETH to make a profit. This opportunity would increase WETH’s demand and, therefore, price. If WETH were more expensive, people would purchase ETH and convert it to WETH to sell, increasing WETH’s supply and lowering its price. These principles of supply and demand ensure that the peg remains relatively stable.
What Is Wrapped Ether (WETH) and How to Wrap It?
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