WETH is a DeFi-compatible version of ETH. ETH is the native currency of the Ethereum chain used for gas fees and security.
Wrapped Ether is a large-cap asset that represents the protocol`s native governance or utility token. This asset is exposed to the underlying risks of Optimism bridge, a protocol rated as Average.
Wrapped Ether has an uncapped supply but has inflation control or burn mechanisms in place. ETH on Optimism is backed 1:1 by ETH locked in the Optimism bridge protocol on the Ethereum chain. ETH is "wrapped" to make it compatible with DeFi smart contracts. 1 Wrapped ETH is always equal to 1 ETH.
Wrapped ETH is highly correlated to the overall market.
Ether can be thought of as the "fuel" or gas fee that powers the Ethereum network. Ethereum refers to the actual blockchain technology or smart contract platform that underpins Ether. Whenever you send ETH or use an Ethereum application, you must pay a fee in ETH to use the network. This fee acts as an incentive for a block producer to process and verify your transaction.
Ether serves two main purposes: one as a gas fee to transact on the Ethereum network and second as a speculative store of value. Currently, Ethereum users pay the transaction fees in ETH and ETH holders bear the cost of inflation from miner block rewards. In the absence of speculation, ETH holders are betting that demand for ETH from users of decentralized applications (dApps) outpaces the rate of inflation via block rewards. The second purpose comes from its monetary premium as a non-sovereign store of value. With the transition to ETH 2.0 and recent changes to its monetary policy (EIP-1559), ETH is expected to better compete with BTC as a monetary asset given its scarcity, durability and censorship-resistant qualities.
Ether is used within the Ethereum ecosystem to perform a range of functions, including its native use as a gas fee to transact on the network, use as collateral for DeFi lending applications (to be lent or borrowed), use as medium of exchange for alternative crypto assets and non-fungible tokens (NFTs), acceptance in select retailers and service providers, and lastly, earned as reward for completing bounties. Additionally, in ETH 2.0, users will also be able to lock their ETH by becoming a validator to help secure the network in exchange for block rewards and transaction fees.