What is W-ETH (WETH)?
Put plainly, W-ETH is "wrapped ETH" but let's start by introducing the players:
Ether Token
Ether or ETH is the native currency built on the Ethereum blockchain.
Alt Tokens
When a dApp (decentralized app) is built off of the Ethereum Blockchain it usually implements its own form of Token. Think Augurs REP Token, or Bancor's BNT Token.
The ERC-20 Standard
ERC20 is a standard developed after the release of ETH that defines how tokens are transferred and how to keep a consistent record of those transfers among tokens in the Ethereum Network.
Why do you need W-ETH?
ETH does not conform to its own ERC20 standard.
As we mentioned above, ETH was the proto-token of the Ethereum Alt tokens, which means it was built before the ERC20 standard existed.
Wrapping ETH allows you to trade directly with Alt Tokens
The reason you need W-ETH is to be able to trade ETH for other ERC20 tokens on decentralized platforms like Radar Relay. Because decentralized platforms running on Ethereum use smart contracts to facilitate trades directly between users, every user needs to have the same standardized format for every token they trade. This ensures tokens do not get lost in translation.
SO this is awkward...you don't actually wrap anything.
When you "wrap" ETH, you are not really wrapping so much as trading via a smart contract for an equal token called W-ETH. If you want to get plain ETH back you need to "unwrap" it. AKA trade it back for plain ETH.
Once you have the W-ETH you can freely trade with anyone holding an ERC-20 token.
The future of W-ETH
Steps are being taken to update the ETH codebase to make it compliant with its own ERC20 standards. Weird, we know. Additionally, ERC20 may be replaced by other standards as problems and solutions arise. There's already an ERC223 in the works.
In your own insights, how this w-eth affects the ethereum blockchain? Is it useful in the world of altcoins?