Wormhole Bridging and Applications
A rich ecosystem of dapps exists on many blockchains. These dapps provide many services and different use cases:
- NFT collections and protocols
- Decentralized exchanges (DEX)
- Decentralized Autonomous Organizations (DAOs)
- Borrow-Lend Platforms
- Blockchain games
- Metaverse platforms
- and so much more.
As helpful as dapps are, they have limitations, many of which are because of their base blockchain technology. The limits: Blockchains cannot access off-chain data; they also cannot interact with other blockchains. Fortunately, developers have built solutions for both limitations; blockchain oracles and cross-chain bridges.
Sadly, the latter can be complicated for noobs and the average user who wants to move their assets between any blockchain with minimal friction. Today, many users are still reluctant to use and interact with cross-chain bridges and cross-chain applications because the space is a mess of incompatible assets. However, Certus One took notice of these challenges and built a solution, Wormhole Bridge. What sets the Wormhole apart from other cross-chain bridges is its core layer that allows any developer to communicate any message to any blockchain in the ecosystem. This article will expand on Wormhole, how bridging works, Wormhole token bridges, and applications. Let’s dive in!
What is Wormhole?
Wormhole is an interoperability protocol that validates and secures cross-chain communication through VAAs (Verifiable Action Approvals) — Wormhole’s version of validated cross-chain messages. Once a message has been verified, off-chain actors known as relayers can send the data to other blockchains. In 2020, Certus One released the V1 as an ERC-20 ⇄ SPL token bridge between Ethereum and Solana. It became a success and was responsible for the massive increase of TVL of early Solana and Serum ecosystems. Today’s Wormhole V2 connects to multiple chains, including BSC, Polygon, Avalanche, Fantom, Celo, and Arbitrum, across an unrivaled number of smart contract runtimes. The protocol does this by emitting messages from one chain to another and is observed and verified by a Guardian network of nodes. The message is then submitted to the target chain for processing after verification.
Wormhole’s Role in the DeFi Ecosystem
Blockchains like Solana, Ethereum, Arbitrum, Polygon, and BSC are vibrant ecosystems with huge TVLs; however, they are incapable of communicating with each other. This lack of inter-blockchain communication means there is no straightforward way to move tokens between two blockchains. The primary method has been centralized bridges and exchanges to transfer the assets. This method is not ideal as you are giving an entity your funds and trusting that “they’ll do the right thing.” Apart from that, smart contracts and dapps on these blockchains can’t communicate with each other. With the dominance of DeFi, smart contracts, and L2 dapps, it is a painful limitation. This is where Wormhole comes in — the core layer serves as the foundation of the entire ecosystem solving the communication problem without centralization through token bridges.
Into Wormhole Token Bridges
Wormhole’s token bridges work by deploying a contract on each blockchain — the core contract. Other contracts can interact with that contract to verify the authenticity of any message they receive. That said, the unique mechanism of the core layer is not the core contract but rather the guardian network. This network comprises 19 guardians who observe and sign the messages sent from every blockchain supported by Wormhole.
Note that a Wormhole message is valid once ~ two-thirds of the guardians (13) have signed it. Also, it is their signature that the core contract verifies when accessing the authenticity of a message. Running a guardian node is quite difficult as it requires observing every blockchain on Wormhole. As such, the guardians are some of the most reputable validators in the world, as you can see in the image below:
Because the token bridge is popularly used, there is a widely held misconception that Wormhole is only a token bridge, but that is not the case. While a V1 token bridge was launched in 2021, and the V2 token bridge is built on top of the core layer, the latter is not a part of the core layer. The current TVL is $267,019,097, a 94.43% decrease from its peaks of over $4 billion due to the bear.
Wormhole Applications
What are some of the applications of Wormhole in the decentralized ecosystem?
- Protocol first design: Rather than being limited by building on a specific blockchain, developers can create solutions and design protocols that can be implemented across multiple networks. To do this, they can use standard sets of data and actions and implement them on each blockchain using smart contracts.
- Chain agnosticism: Protocols on Wormhole are chain agnostic. For instance, they can choose to leverage the strengths of each blockchain individually — an application might choose to offload transactions onto Solana because of fees and performance and still use Ethereum as the final settlement layer. This feature creates more flexibility, allowing multi-chain dexes, multi-chain DAOs with cross-chain governance, chain agnostic wallets and NFTs, and much more.
Summary
Wormhole aims to increase interoperability and unify the decentralized ecosystem. Applications no longer have to be restricted to one specific blockchain but can operate on multiple chains. Achieving this is possible with the core layer, which acts as the entire ecosystem’s foundation and token bridge, allowing for seamless communication between blockchains. Overall, Wormhole’s goal is to create a more connected and accessible decentralized ecosystem that can fully realize the potential of blockchain technology.
Originally published at Mirror.
