WETH de-anchoring FUD: Panic, jokes, and insecurity

Although the "instigator" has long clarified that WETH depegging is a joke, WETH FUD continues to ferment, which to a certain extent reflects the current extreme lack of security in the crypto market.

Written by: flowie, ChainCatcher

“Why did WETH decouple? Did Vitalik misappropriate ETH?”

At noon today, a joke on Justin Sun’s Twitter was taken seriously by many people. It turned out that Justin Sun retweeted a tweet that “WETH has been decoupled” and said that “I will invest 2 billion US dollars in the WETH Foundation with my BFF (Best Friend Forever, but in fact everyone knows what the relationship between these two people is) Vitalik Buterin to fill the gap.” Soon this tweet was taken seriously by many media and reported one after another, which quickly triggered community discussions and even panic. The WETH Foundation (WEF) he mentioned is even an institution that has never existed.

In fact, WETH has not depegged, and it is almost impossible to depeg. According to data from platforms such as Uniswap and Coinmarketcap, as of press time, WETH is priced at $1,171, and the current ratio with ETH is 1:1.

And Justin Sun is not the first crypto KOL to joke about "WETH depegging".

According to Cointelegraph, false news about WETH depegging has been spreading since November 26. One of the "instigators" is @cygaar, a blockchain developer and contributor to the ERC-721A token standard.

He tweeted: “WETH is about to become insolvent. To save this space, I will reluctantly bail out anyone holding WETH at a rate of 0.5 ETH per WETH. You can thank me when the crisis is over.”

Subsequently, many crypto KOLs, including members of the Ethereum community, also participated in this spoof. Anthony Sassano, co-founder of EthHub, claimed that WETH was about to experience a "complete collapse."

Gnosis co-founder Martin Köppelmann tweeted "with certainty" that "WETH is no longer fully backed by ETH," and "we may soon see a bank run due to WETH redemptions." Ethereum bull and The Daily Gwei host Anthony Sassano made up a story, saying that he had received news from an insider who he had known for many years, "He firmly believes that WETH will decouple and experience a complete collapse."

The more KOLs amplified the rumor, the more confusion it caused, and many people began to mistake it for the truth. Soon, the KOLs who participated in the spoof tweeted that it was a joke.

@cygaar responded that “WETH depegging” is actually a “shit post” and “look who is reading my content”. Prior to this, @cygaar also posted a related tweet saying, “WETH will never depeg, and its code and logic are very simple. In fact, it only takes 60 lines of code to implement.”

To eliminate WETH FUD, perhaps we should first clarify the basics: What is WETH? Why does WETH hardly decouple? This is also explained in detail in cygaar's long push content, which ChainCatcher compiled.

1. WETH is an ERC20 token. This means that the logic of WETH is built in a simple smart contract on the Ethereum blockchain. WETH is encapsulated with ETH 1:1, making it easier for users to use ETH in various dApps.

2. You can find the token contract of WETH on the Ethereum browser, where you can notice the balance mapping on line 32, which is the mapping that stores how much WETH each user owns.

3. The core functions are: deposit, withdrawal, and transfer. The deposit function (line 38) is very simple. You get as much WETH as you deposited. On line 39, the user's WETH balance increases, and the amount of ETH they can send in a transaction also increases.

4. Withdrawal (line 42) is also very simple. The contract first ensures that your balance is less than or equal to the withdrawal amount. After that, it reduces the user's WETH balance and sends that amount of ETH back to the user.

5. TransferFrom (L63) is very similar. It first checks if the user has enough WETH to transfer. If someone other than the user is transferring, it then does an approval check (L69-72). Finally, the balances of the source and destination accounts are adjusted.

6. As we can see here, it is impossible to have more or less ETH in the contract than what was deposited. The code states that no matter what ETH you deposited into the contract, you can withdraw it. If you see any comments about WETH crashing, you can safely ignore them.

In general, the logic of WETH is automated through smart contracts rather than controlled by a centralized entity. WETH always maintains a 1:1 exchange with ETH, so there is no need to worry that it will be like wBTC, which will be greatly affected by centralized entities such as custodians (holding BTC used to support wBTC and owning the private key for minting Tokens) and handlers (sending or receiving BTC to mint/destroy wBTC).

But it is worth mentioning that although the code logic of WETH itself is very simple and the initiators have already clarified that the WETH depegging is a joke, WETH FUD continues to ferment. To a certain extent, it also reflects the current extreme lack of security in the crypto market due to the market crash after the FTX crash and the secondary crisis that lasted for several days.