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A “wormhole” typically refers to a protocol or mechanism that facilitates the interoperability and transfer of digital assets, such as tokens or data, between different blockchain networks. Wormhole solutions aim to bridge the gap between separate blockchains that might have different technical specifications, consensus mechanisms, or protocols.
Wormhole technology enables the creation of a virtual channel connecting two blockchain ecosystems, allowing assets to be securely moved from one blockchain to another. This can be particularly valuable for projects that want to expand their token’s usability across multiple blockchains or enable cross-chain functionality for various applications.
The solution of wormhole innovation tackles two prominent challenges currently faced by blockchain technology:
- Transferring tokens between blockchains necessitates reliance on centralized exchanges for token bridging and swapping. Unfortunately, this exposes users to counterparty risk.
- Interoperability between decentralized applications (DApps) and smart contracts across distinct blockchains remains a challenge, impeding seamless communication between chains.
How Wormwhole Works: Wormhole Token Bridge
While the Wormhole Token Bridge stands out as the most notable feature, it’s important to note that it’s not the sole feature. This bridge empowers the secure and open transfer of cryptocurrency assets between layer-one blockchains, including:
- Solana
- Ethereum
- Binance Smart Chain (BSC)
- Polygon
- Terra
- Avalanche
- Oasis
Guarded by Sentinel Nodes—Validators Ensuring Security
The assurance of token transfers rests on the vigilant oversight of selected validator nodes, known as guardians. This assembly of distinguished nodes diligently monitors chain activities. Among these guardians are esteemed entities like Everstake, a globally recognized staking provider, and Certus One, the visionary creator behind Wormhole.
Upon submitting a transfer request, these guardians meticulously validate the transaction and subsequently lock the native tokens of the platform within a smart contract. Simultaneously, an equivalent amount of tokens is generated as a wrapped asset on the targeted blockchain.
For a comprehensive understanding of wrapped assets, delve into our detailed exploration of wrapped Ethereum.
Every bridge transaction carries a nominal transaction fee in addition to the standard gas fees mandatory for the sending and receiving chains. While chains such as BSC, Solana, Polygon, and Avalanche boast meager gas fees, Ethereum’s fees can scale to $50 or beyond.
Presently, the Wormhole Token Bridge’s latest iteration is the V2 bridge, which is constructed atop the Wormhole Core Layer, although it is not integrally a component of it. It inherits the same level of decentralization as the core layer and parallels Solana’s and Terra’s primary decentralized token bridges. Impressively, it boasts a total value locked (TVL) exceeding $1 billion and extends support to non-fungible tokens (NFTs).
What Makes Wormhole Unique: It Supports a Wide Range of Blockchains
One notable aspect is its extensive range of compatible blockchains, offering users direct entry into a diverse array of DeFi protocols, sidestepping the need for centralized alternatives. As an illustration, you’re able to seamlessly transfer ERC-20 tokens from Ethereum to various other chains and engage with DeFi protocols in those ecosystems. This proves especially advantageous for Ethereum users grappling with elevated gas fees, providing a welcome remedy to a persisting issue.
Conversely, holders of tokens from alternative chains gain entry to Ethereum’s expansive DeFi landscape.
Moreover, Wormhole extends support to Solana and Terra, both prominent layer-one blockchains renowned for their burgeoning Total Value Locked (TVL), fostered by thriving DeFi ecosystems. This unique feature distinguishes Wormhole from many other bridges that do not encompass all three of these pivotal DeFi chains.
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