Definition Of Wormhole Uniqueness And How it works?

A wormhole is a decentralized, adaptable message-passing protocol for blockchains that allows blockchain coordination. In detail, we have, What Makes a Wormhole Unique? How Does a Wormhole Work? Wormhole in the Media

A wormhole is a decentralized, universal message-passing protocol that links to multiple blockchains. In simple terms, permitting distinct blockchains such as Ethereum, Binance Smart Chain, Terra, Solana, Polygon, Avalanche, and Oasis to intercommunicate with each other. It discourses on two of the main problems that beset blockchains today:

  • Tokens are hard to move between blockchains without relying on centralized exchanges for bridging and swapping tokens. However, this means users are subject to counterparty risk.
  • Decentralized applications (DApps) and smart contracts on different blockchains cannot communicate with each other, making interoperability between chains difficult to achieve.

This is achievable because Wormhole decodes this by scrutinizing several chains for messages articulated by clever contracts on those chains. This is accomplished through the Wormhole Core Layer, a core contract deployed on each chain that routes the accepted messages to the target chain, the essence of the previously mentioned universal message-passing protocol. A protection network consisting of 19 nodes secures Wormhole, with the system enabling communication protocols like token and NFT bridges, cross-chain oracles, and other messaging applications that won’t function without Wormhole’s edifice.

How Does A Wormhole Work?

Wormhole Token Bridge

Consequently, the most recognized feature of Wormhole is none other than the Wormhole Token Bridge. It allows the distrustfulness and without permission, transfer of crypto assets between layer-one blockchains like:

  • Solana
  • Ethereum
  • Binance Smart Chain (BSC)
  • Polygon
  • Terra
  • Avalanche
  • Oasis

Secured by Guardians: Validator Nodes

Approved by the previously mentioned guardians, the token transfers a set of hand-picked validator nodes, surveying activity on the chains. Most of the largest staking providers in the world serve as guardians, such as the world’s largest staking service provider, Everstake, and Certus One, the developer of Wormhole.

After asking for a transfer, the guardians prove it and subsequently lock the platform’s native tokens in a smart contract. The equivalent number of tokens is minted as a wrapped asset on the target chain. To learn more about how wrapped assets work, read our deep dive into wrapped Ethereum. Each bridging transaction incurs a minuscule transaction fee and the standard gas fees that have to be paid to the sender and receiver chains. While gas fees on chains like BSC, Solana, Polygon, and Avalanche are very low, fees on Ethereum can be $50 or higher. The current version of the Wormhole Token Bridge is the V2 Bridge, which is built on top of the Wormhole Core Layer but not considered a part of it. It is as decentralized as the core layer and Solana’s and Terra’s primary decentralized token bridges. Furthermore, it has more than $1 billion in TVL and supports NFTs.

What Makes A Wormhole Unique?

A wormhole has several critical advantages over “ideal” token bridges.

One of them is its range of supported blockchains, giving users access to a plethora of DeFi protocols without having to resort to centralized solutions. For example, you can transfer ERC-20 tokens from Ethereum to other chains and use the Defi protocols there. Specifically for Ethereum users plagued by high gas fees, this is a welcome solution to a problem that will seemingly persist for a while. Likewise, token holders from other chains can get access to the sprawling Ethereum DeFi ecosystem.

Similarly, Wormhole supports Solana and Terra, two of the hottest layer-one blockchains on the market that both boast rapidly growing TVL thanks to their own flourishing DeFi ecosystems. This places Wormhole apart from most other bridges that do not support all three “major” DeFi chains.

Bridge NFTs Across Chains

Expansionary as it is, the Wormhole NFT portal allows users to send their NFTs across different blockchains. Correspondingly, this is a feature not supported by other popular token bridges.

DApps Built Natively Across Chains

Barring the token bridge, Wormhole also helps decentralized applications built on top of it. Thanks to Wormhole’s architecture, developers can approach applications from a protocol-first design standpoint. These can be chain-agnostic or leverage the strengths of each blockchain. For instance, an application may opt for Solana to confirm transactions because of its low transaction fees but choose Ethereum as its final settlement layer because of Ethereum’s protection.

Virtually, Wormhole permits applications to use different layer-one blockchains as layer-two solutions. Inventors can build decentralized exchanges, chain-agnostic wallets, or even multi-chain DAOs.

Wormhole Media

Even though Wormhole has a clear use point and an appealing value request, it, alas, has generated the most media engagement for a massive $320 million hack that targeted its bridge between Solana and Ethereum. One hundred thousand wrapped ethers were missing as a result of the biggest hack of 2022 and one of the biggest DeFi hacks in history. The hacker minted the sum on Solana and redeemed 93,750 wrapped ether on Ethereum while swapping the rest for SOL and USDC on Solana. The Wormhole team got the hacker through their Ethereum address and offered a $10 million reward for returning the stolen funds, but none of this worked.

As Tom Robinson reported, the co-founder of the blockchain analytics firm Elliptic, said this hack demonstrated again the exposure of DeFi services and that their security still has not reached a level that is adequate to store huge sums in them. Nevertheless, to their credit, the backers of Wormhole stepped in and replaced the stolen funds. Jump Crypto, the crypto venture capital firm behind Certus One, the developer of Wormhole, deposited the 120,000 wETH back into the smart contracts that got exploited. Jump’s president, Kanav Kariya, said that he had aged “two years in two weeks” but backed up the company’s stance that Wormhole is crucial infrastructure for a multi-chain future. As a result of this exploit, Wormhole launched a $10 million bug bounty program on ImmuneFi, which is to provide users with more security and back up the protocol’s commitment to DeFi. The program concentrates on averting such vulnerabilities but also on problems like governance manipulation, divulgence of private keys, Sybil attacks, amongst others.

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