Wormhole: A Cross-Chain Communication
By Selene Wang | Crescent City Capital Market Analyst Intern
1. Introduction to Wormhole
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Wormhole is a generic message passing protocol that enables communication between blockchains. This simple message passing protocol enables developers and users of cross chain applications built by developers to leverage the advantages of multiple ecosystems.
- Wormhole is not a blockchain itself, it provides a means of communication between blockchains or rollups.
Wormhole provides developers access to liquidity and users on over 30 of the leading blockchain networks, enabling use cases that span DeFi, NFTs, governance, and more. The wider Wormhole network is trusted and used by teams like Circle and Uniswap, and to date, the platform has facilitated the transfer of over 40 billion dollars through over 1 billion cross-chain messages.
Wormhole was created to solve two issues:
- Interoperability: Smart contracts and decentralized applications (dApps) from different blockchains aren’t designed to “talk” to each other, especially because of their differences in programming languages and how the networks operate. To solve this, Wormhole interrogates different chains for messages emitted by their resident smart contracts using the Wormhole Core Layer, an essential contract it deploys on each chain. The innovative message-passing protocol then directs messages from the source chain to the target chain, facilitating cross-chain communication.
- Token Transferability: In the past, users relied on centralized exchanges to swap or bridge digital assets between blockchains, a practice fraught with counterparty risks for users. The Wormhole crypto bridge introduces a trustless, permissionless solution for transferring tokens across layer-one (L1) blockchains.
2. Wormhole’s Architecture
Wormhole connects blockchain networks by “wrapping” data (messages) from the source blockchain. The verified messages are then relayed to the target chain, where they are processed to finalize the cross-chain transaction.
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On-Chain Components
- Emitter – A contract that calls the publish message method on the Core Contract. The core contract will write an event to the Transaction Logs with details about the emitter and sequence number to identify the message. This may be your xDapp or an existing ecosystem protocol.
- Wormhole Core Contract – Primary contract, this is the contract which the Guardians observe and which fundamentally allow for cross-chain communication.
- Transaction Logs – Blockchain specific logs that allow the Guardians to observe messages emitted by the core contract.
Off-Chain Components
- Guardian Network – Validators that exist in their own P2P network. Guardians observe and validate the messages emitted by the Core Contract on each supported chain to produce VAAs (signed messages).
- Guardian – One of 19 validators in the Guardian Network that contributes to the VAA multisig.
- Spy – A daemon that subscribes to messages published within the Guardian Network. A Spy can observe and forward network traffic, which helps scale up VAA distribution.
- API – A REST server to retrieve details for a VAA or the guardian network.
- VAAs – Verifiable Action Approvals (VAAs) are the signed attestation of an observed message from the wormhole core contract.
- Relayer – Any off chain process that relays a VAA to the target chain.
- Standard Relayers – A decentralized relayer network which delivers messages that are requested on-chain via the Wormhole Relay Contract. Also referred to as Generic Relayers
- Specialized Relayers – Relayers that only handle VAAs for a specific protocol or cross chain application. They can execute custom logic off-chain, which can reduce gas costs and increase cross-chain compatibility. Currently, cross chain application developers are responsible for developing and hosting specialized relayers.
3. Key Features
(1) Cross-Chain transfers
Wormhole supports the seamless transfer of tokens and data across different blockchain networks. This enables applications to operate beyond the confines of a single blockchain, accessing a wider variety of tokens, assets, and data from various chains. This cross-chain capability breaks down barriers between isolated blockchain ecosystems, helping create a more interconnected and efficient digital asset environment.
(2) Secure messaging
One crucial element of Wormhole’s design is its secure messaging system. This system protects data as it’s transmitted across blockchains, guaranteeing compatibility and preserving confidentiality and accuracy throughout the entire network. This high level of security is crucial for applications that need dependable and confidential communication channels across diverse blockchain systems.
(3) NTT for token multichain functionality
Wormhole’s NTT protocol allows tokens to maintain their original features when transferred between different blockchains. This means that a token created on one blockchain can still be used on another, with all its inherent properties, such as voting and staking abilities, intact. This feature is essential for projects that aim to broaden their scope while maintaining the distinctiveness and usefulness of their tokens.
The purpose of Wormhole’s protocols isn’t limited to connecting assets. They aim to establish a smoother, more effective, and safer blockchain environment. By allowing for the transfer of assets and data between different blockchains, Wormhole is helping lead the way towards a future of blockchain interoperability, where developers can construct genuinely decentralized applications (DApps) that draw from the strengths of multiple blockchains. This could be a game-changer for developing DApps, as it opens up new possibilities for functionality, user reach, and innovation in the blockchain space.
4. W token
W is the native token that powers the Wormhole platform, which plays a crucial role in the ecosystem. The token is responsible for governance, fees, and rewards, which are all essential for the platform to function effectively and securely.
- Ticker: W
- Maximum Supply: 10,000,000,000 (10 billion)
- Initial circulating supply: 1,800,000,000 (1.8 billion)
- Token Format: Native ERC20 and SPL (using Wormhole’s Native Token Transfer standard)
- Lock Up: 82% of W are initially locked and such tokens will unlock over the course of four years per the Token Release Schedule below.
- Token Allocation:
![](https://crescentcitycapital.com/wp-content/uploads/2024/06/Wormhole_Tokens__2_-1024x593.png)
5. Market Analysis
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The live Wormhole price on June 2nd is $0.626202 USD with a 24-hour trading volume of $204,184,122 USD. Wormhole is up 4.42% in the last 24 hours. The current CoinMarketCap ranking is #76, with a live market cap of $1,127,163,161 USD. It has a circulating supply of 1,800,000,000 W coins.
The W token has its inception in April 2024, with an overall decreasing trend. The highest price of W was $1.61, and the lowest price of Wormhole was $0.46. It’s important to note that this price history spans only two months. The current forecast for Wormhole in 2024 is bullish. Based on similar past cases like Jupiter, W might break out and form a bullish flag. This could be an indication that Wormhole is a good buy in 2024.
Wormhole represents a significant advancement in blockchain technology, seamlessly connecting different networks to facilitate the exchange of data and tokens. Wormhole’s sophisticated protocols simplify the complexities of interoperability, enabling developers to create expansive multi-chain applications. This breakthrough not only improves liquidity and accessibility to assets but also opens up possibilities for new types of decentralized applications (DApps) that can capitalize on the strengths of various blockchains.
Key features of Wormhole, such as cross-chain transfers, secure messaging, and NTTs, ensure secure and efficient communication across different chains. Additionally, the W governance token plays a vital role in maintaining the platform’s decentralized governance system, highlighting Wormhole’s commitment to fostering a unified Web3 community.
Reference
https://coinmarketcap.com/currencies/wormhole
https://docs.wormhole.com/wormhole
https://unchainedcrypto.com/wormhole-in-crypto
https://wormhole.com/blog/wormhole-w-tokenomics
https://www.okx.com/zh-hans/learn/what-is-wormhole
https://coinedition.com/wormhole-w-price-prediction