Terra Goes Live on Wormhole V2
Wormhole V2 for Terra is here.
Welcome to the next era of inter-chain DeFi, ushered in by a generic cross-chain messaging bridge between Solana, Ethereum, Binance Smart Chain (BSC), and now — Terra.
Wormhole unlocks a whole new dimension of cross-chain value and message transfer between the Terra economy, Solana, BSC, and Ethereum. Terra’s Wormhole Guardian set is now live, and the launch is concurrent with Wormhole V2, meaning that Terra Wormhole incorporates the explicit design improvements from Wormhole V1, outlined further below.
So what does Wormhole mean for the Terra economy and the broader inter-chain DeFi community? How can you wield Wormhole for various opportunities to accrue profit, design sophisticated cross-chain yield strategies, ingest assets from other chains, build new apps and protocols, collaborate with projects across different consensus designs, and more?
Let’s dive in.
What is Wormhole?
Blockchains have a communication problem.
They can’t effectively reconcile state transitions across different consensus systems (e.g., Solana finality → PoS finality of ETH 2.0) without excessively burdensome state proof validation. The result is a communication bottleneck, where the inter-chain superfluidity of assets is handcuffed by a dearth of generalized message pathways between chains.
Many current cross-chain bridges, such as Terra’s Shuttle Bridge, eschew decentralization for a more centralized multi-sig conduit between chains. Others, like Polygon on Ethereum, rely on an independent consensus model from the root chain (i.e., Ethereum) to improve gas efficiency, throughput, and usability.
However, both models ostensibly swap decentralization for convenience. What if you could have both?
Cross-chain attestation solutions further down the decentralization spectrum are more attuned to the censorship-resistant ethos of crypto. But previous attempts have been complicated and mired in technical boundaries, often inducing downstream problems from the complexity of their independent consensus and incentive designs.
Wormhole was originally conceived as an elegant cross-chain attestation engine for a specific type of message passing — token wrapping between Solana and Ethereum. The idea was to implement a cross-chain bridge that would function as a premier liquidity conduit between Ethereum and Solana.
At a high level, Wormhole deploys a simple cross-chain attestation model that relies on a group of cross-chain oracles called “Guardians” that operate as a set of node operators with venerated validation track records and strong incentive alignment with the long-term interest of the root chain — Solana.
The overall problem that Wormhole tilts at is the notion that enabling contracts on one chain (i.e., Solana) to verify messages from another chain (i.e., Ethereum) requires prohibitively cumbersome resources to independently verify state proofs. Wormhole operates as the decentralized, intermediary oracle network that observes and verifies messages on one chain and relays them to the other chain — relying on the consensus and finalization of the connected chains to ossify state changes conducted between interacting chains.
It’s a much lighter and expedient solution to cross-chain message passing than many of its predecessors.
Critically, Wormhole opted for a leaderless “Guardian” design where the intermediary oracle network (i.e., Wormhole) does not maintain its own consensus. This differs significantly from a remote sidechain implementation of a PoS-based oracle network since Wormhole relies on the consensus finality of the connected chains rather than its own node operators.
As a result, Wormhole does not require complex consensus, finality, or leader election characteristic of previous cross-chain bridges. It’s entirely dependent on the root chain and remote chains’ consensus assurances. The absence of a Wormhole staking token and standalone PoS validation simplifies Wormhole’s design while concurrently reducing its probability of misaligned incentives creating security vulnerabilities.
Simpler is often better.
Guardians on Wormhole perform the same computation while observing an on-chain event on a supported chain, signing VAA’s where a ⅔ majority of Guardians nodes observing and signing a specific on-chain event triggers a valid response of the involved smart contracts on the respective chains, intermediating the transfer of tokens across chains. Basically, if ⅔ of the Wormhole Guardians approve an on-chain event independently, the asset transfer is executed and settled on the interacting chains.
For a more technical-oriented rundown of Wormhole’s signature scheme and design choices, please refer to the official Github wiki.
Notably, the demand for Wormhole’s elegant cross-chain attestation model has outstripped its initial scope since the V1 launch. For example, parties wishing to transfer non-ERC20 tokens from Ethereum to Solana (e.g., NFTs), insurance pools backing specific asset transfers, and features like multi-casting from a single chain to multiple connected chains — such as relaying data published by Pyth Network from Solana to both Terra and Ethereum applications.
With Terra introduced as the newest chain in the Wormhole set, transfers between Solana, BSC, Ethereum, and Terra also fit the mold of expanding Wormhole’s scope in V2.
Terra’s Wormhole inclusion officially launches with V2 compatibility, so what are the primary differences between Wormhole V1 and V2? According to the Wormhole team:
“The goal of the Wormhole 2.0 upgrade is to enable a wider range of both 1:1 and 1:n messaging applications to be built on Wormhole without requiring changes to the core protocol for each new use case.”
More succinctly, this means reconfiguring the protocol so that it is fully decoupled from the application logic — meaning Wormhole only provides low-level interaction for other tokens and protocols without holding or interacting with tokens directly.
The change primarily revolves around message passing. Rather than directly delivering messages (e.g., token transfers) to a target contract on a supported chain (e.g., Solana → Ethereum) like in V1, Wormhole V2’s generic delivery protocol can actually vary significantly between the distinct use cases of contracts interacting with the bridge.
Continues the Wormhole team:
“Examples of such applications that third parties could build are Unicast messaging between two specific contracts on different chains (e.g., token or NFT swaps) or Multicast from a single chain to a specific set of connected chains, such as relaying data published by price oracles like Pyth or Chainlink.”
By further simplifying the Wormhole design, V2 only provides signed attestations of finalized chain state. Only the signed attestations requested by contracts on supported chains will be published on the Wormhole P2P network and signed by the Guardian set — alleviating much of the overhead required to deliver the message to the specific contract on the target chain (e.g., Ethereum).
For Wormhole, the current Guardian set is comprised of the following 19 node operators, all of which support Terra Wormhole V2 now:
- Staked.US
- p2p validator
- Everstake
- Chorus
- Smith MCF
- Chainode Tech
- Chainlayer
- Staking Fund
- 01node
- HashQuark
- Moonlet
- Inotel
- Figment
- Forbole
- Dokia Capital
- Staking facilities
- Syncnode
- Certus One
- fmadata
Node operators are carefully selected, and there have been zero uptime errors on the Wormhole mainnet so far amongst the Guardian set.
Terra x Wormhole x IBC — Inter-Chain Optionality
The pending Columbus-5 mainnet upgrade for Terra probably has many of you wondering about the benefits or competitive characteristics of Wormhole compared to IBC.
Well, it’s a bit nuanced, but #LUNAtics should view Wormhole and IBC as complementary to each other rather than competitive. They provide cross-chain optionality with explicit benefits and trade-offs.
The primary difference between Wormhole and IBC is that Wormhole is a lower-level protocol solution targeting the connection of a smaller number of high-usage chains. If IBC’s OSI Model analog is TCP/IP, then Wormhole is more akin to Ethernet.
More specifically, IBC is a higher layer protocol providing an out-of-the-box solution for pBFT chains (e.g., Cosmos) with cheaply verifiable light clients to communicate seamlessly via a “hub and spoke” model where spokes, application-specific chains like Terra, maintain their own consensus but can openly exchange data with other IBC-compatible chains. Conversely, Wormhole targets chains with sizeable and cumbersome states, like Ethereum and Solana, using a more bespoke design specific to high-usage, non-IBC compatible chains.
Wormhole functions more as a conduit that shuttles data between more high-usage, disparate chains like Solana, Ethereum, and Terra — all of which have distinct consensus and security designs.
Some explicit benefits of Wormhole’s design detailed in the official Github repo for V2 message passing include:
- Wormhole is a lower-level building block than IBC and specifies no high-level semantics like connections or target chains, leaving this to higher-layer protocols (think “Ethernet”, not “TCP/IP”). This is more flexible and less complex to implement and audit and moves the complexity to the upper layer and libraries only where it is needed.
- Long-range attacks and other PoS attacks are prevented by guardian set update finality on the connected chains. After a brief convergence window, the old guardian set becomes invalid and no alternative histories can be built.
- Instead of relying on inclusion proofs, Wormhole uses a multisig scheme, which is easier to understand and audit and cheaper to verify on all connected chains. The extra guarantees offered by an inclusion proof are not needed in the Wormhole network, since it merely shuttles data between chains, each of which has a provable and immutable history.
So, what does this all mean for you, the anxious #LUNAtic waiting to explore the inter-chain realm?
TFL will be converting its Shuttle bridge implementations to Wormhole, meaning that the Terra — ETH and Terra — BSC Shuttle bridges will be migrated to Wormhole, which will remain available on the Terra Bridge UI just with different back-end functionality. Solana will be added to the Terra Bridge UI as well, utilizing Wormhole. Stay tuned for further updates.
Eventually, the goal is for Terra Bridge to serve as the unified front-end for inter-chain transfers between Terra and other chains, including both Wormhole and IBC.
Wormhole Navigation for #LUNAtics
Wormhole V2 is live today, but its front-end UI is still being finalized and should be released soon. Stay tuned for more updates about how non-technical users can access the new user-friendly Wormhole front-end once it’s available.
The Wormhole V1 UI in the link below is in the process of being deprecated and users SHOULD NOT use this interface to send tokens between Terra, Ethereum, BSC, and Solana while the contracts are being migrated to V2 and the new interface is released.
https://www.wormholebridge.com
***A note signifying the contract migration is also displayed on the UI in the screenshot below. Do NOT use the interface below for token transfers. Please wait until the new UI is released before moving funds via Wormhole V2, especially if you’re not a developer and are unfamiliar with how the protocol works at a technical level.
To build on Wormhole V2, users should read the guidelines in the Wormhole design documents below and the official Wormhole Github repo from Certus One, including Certus One’s reference node implementation. More documentation from the Wormhole team is set to follow shortly and will be announced by TFL to help the #LUNAtic community alongside users and projects on connected Wormhole chains to interact with the bridge.
https://github.com/certusone/wormhole/blob/dev.v2/design/navbar.md
Additionally, please check out the Wormhole Discord with any questions and additional conversations about the bridge.
In the meantime, Terra Bridge will be converted from Shuttle to Wormhole, a brand new UI will be released from the Wormhole team, and several applicants in the Terra Spacecamp Hackathon have signaled a desire to build their own UIs for Wormhole V2 as well.
Terra x Wormhole — Welcome to Seamless Inter-chain DeFi
Projecting the potential of Terra’s inclusion into Wormhole is exciting.
Wormhole officially opens a direct cross-chain pipeline from Terra to Solana. While Terra’s Shuttle bridge has been widely used already to interact with Ethereum and BSC (e.g., ERC-20 mAssets, UST on Curve, mAssets on Pancake, etc.), the Solana ecosystem remained an untapped opportunity for the Terra economy until now.
The Terra ecosystem has, in fact, already worked with the Solana ecosystem, particularly MercurialFi — a Curve-like protocol on Solana. TFL initiated a governance proposal to list UST on a Mercurial 3Pool alongside base stables USDT and USDC, where UST effectively replaced DAI’s role in the Curve 3Pool on Ethereum.
The proposal was to introduce LUNA incentives to the 3Pool for UST liquidity, which has played out amazingly well. Over $60 million in assets in just over a week made the Mercurial 3Pool with UST one of the largest UST-focused pools in DeFi. The Mercurial pool is now $86 million at the time of writing.
The demand for UST, a censorship-resistant, infinitely scalable, algo-pegged USD stablecoin is clearly strong on Solana.
However, the collaboration with Mercurial required a hack of sorts to accomplish, one which produces a distinct limitation. At the time of the collaboration, Terra Wormhole was not live, meaning that to add UST to the Mercurial 3Pool, their team had to create a walkthrough explaining how to move ERC-20 UST (liquidity sourced from Curve) to Solana as a wrapped UST version using the Ethereum → Solana Wormhole bridge since the Terra circuit was not yet live.
One of the collateral effects is that the liquidity of USDC and USDT on Solana far outpaced UST at the time. Since porting UST liquidity to Solana via the Ethereum → Solana Wormhole bridge meant sourcing UST liquidity from Ethereum’s Curve pool and moving across chains via an extra step, the 3Pool’s composition was somewhat imbalanced as UST liquidity inflows to the pool were outstripped by the other base stables USDT and USDC.
This is no longer a hurdle for Mercurial or any other Solana app that wants to import Terra asset liquidity, particularly UST. With Wormhole V2 now live for Terra, users simply use the Terra → Solana Wormhole V2 bridge rather than going through Ethereum as an intermediary step.
Beyond Mercurial, there are also several other Solana and Terra collaborations in the works with TFL.
For example, Saber, the stablecoin and wrapped asset AMM on Solana (currently 4th by TVL), launched a USDT — UST pool via the same roundabout format as Mercurial. At the time of writing, the pool’s liquidity is roughly $24 million. With Wormhole V2 now live, users simply swap Terra-native UST to wrapped UST on Solana and deposit it into the pool following the guidelines from the Wormhole team earlier in the article.
Saber is also pending a TFL-initiated governance proposal on Terra Station to introduce similar LUNA liquidity incentives as Mercurial for its UST pool.
At TFL, we view the Wormhole bridge as a powerful opportunity to expand the supply of UST (a key growth metric) and induce further protocol seigniorage, benefitting LUNA stakers and holders. The need for a censorship-resistant stablecoin with a low cost of issuance and inter-chain liquidity is lucid — a notion only compounded by recent regulatory activity focusing on centralized stablecoins.
On Solana, Wormhole accelerates the opportunity for the Solana community to access and quickly establish UST as one of the network’s premier stablecoins. Immediate advantages include Solana’s reduced DeFi protocol reliance on centralized, custodial stablecoins under regulatory scrutiny, access to aUST and its 20% APY Anchor rate, and eventually (once IBC goes live), Secret UST (sUST) — a private, infinitely scalable stablecoin sourced from Secret Network and available on Solana via Terra.
Gotta love interoperability.
Uptake of UST across the Solana and Terra Wormhole bridge is expected to be massive, as aptly demonstrated by only 2 stablecoin pools on Solana accounting for ~$100 million in liquidity already. A direct pipeline from Terra to Solana will only alleviate the friction that led to the imbalance of the Mercurial pool but also unlocks so many more potential synergies as two booming DeFi economies fuse together.
First, from a TFL perspective, we can unleash Terra’s flagship protocols on the Solana ecosystem.
This means everything from Mirror’s mAssets on AMM pools and money markets on Solana to UST serving as a base pair or collateral in multiple DeFi protocols on Solana. And of course, wielding aUST on Solana for diverting UST pool liquidity to Anchor via Wormhole to bolster LP rewards. Eventually, SolAnchor will be introduced — a direct avenue for Solana users to earn the Anchor savings rate on stablecoin deposits without leaving Solana. Or what about cross-chain leveraged trading of mAssets on Mango Markets? Lots of exciting opportunities.
On the other hand, importing Solana assets to the Terra economy is equally as enticing. bSOL as collateral on Anchor Borrow anyone? Wormhole makes bSOL possible, and soon.
Solana and Terra collectively maintain a $15 billion market cap with some of the most innovative, ambitious, and ardent communities behind them. The upside potential for mutual synergies between the network is huge.
Wormhole extends the tendrils of demand for UST across diverse DeFi ecosystems. UST is quickly becoming the mycelium of inter-chain DeFi, arising where there is a persistent demand for a censorship-resistant stablecoin that fulfills the currency mandate of crypto and extending into corners blighted by centralization.
To the Solana, Ethereum, and BSC communities, we’d like to extend a warm welcome to collaborate with the Terra economy, including Terra assets like UST, ecosystem projects, and of course, our amazing #LUNAtic community.
Let’s realize the full potential of inter-chain DeFi together. Enter the Wormhole.
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If you’re interested in building something on Terra, Wormhole-related, or are ideating something interesting that has mutual synergies between Terra, Solana, BSC, and Ethereum, please let us know by filling out the Airtable application form below!
