What Is Wormhole in Crypto? A Beginner’s Guide – Unchained

Wormhole is a cross-chain blockchain protocol that facilitates the transfer of assets and data across blockchain ecosystems.

Cross-chain communication protocol Wormhole enables users to transfer assets like fungible tokens and NFTs between blockchains. This article explains what Wormhole is, how it works, and the problems it solves. 

What Is Wormhole in Crypto?

Wormhole is a cross-chain blockchain protocol that facilitates the seamless transfer of crypto assets and data across blockchain ecosystems. The protocol uses a proof-of-transfer mechanism to ensure the security and reliability of cross-chain transfers.

Think of Wormhole as a bridge that allows blockchains to communicate with each other flawlessly. 

Wormhole was created to solve two issues in Web3: 

• 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.    

How Does Wormhole Work? 

Wormhole connects blockchain networks by “wrapping” data into messages from the source blockchain, which it emits to the destination blockchain via a system that is governed by 19 validators.

The participating blockchains are supported by a “Core Bridge” contract that is governed by a proof-of-authority consensus mechanism.  

Wormhole connects blockchain networks by “wrapping” data (messages) from the source blockchain. The verified messages are then relayed to the destination chain, where they are processed to finalize the cross-chain transaction.

The Wormhole crypto bridge uses a simple, five-step process as follows:  

• The emitter deposits data into Wormhole’s smart contract on a supporting blockchain.
• A smart contract wraps the data in readiness to send to the new blockchain.
• The newly created “wrapped” data is ready for relaying to the destination blockchain.
• The message is sent to the destination message in real-time and is received in its original form.
• The user retrieves the original data from the smart contract.     

The Wormhole crypto ecosystem is secured by a peer-to-peer (P2P) network of Guardian nodes that picks, signs, and validates messages written to the Wormhole Core Contract. 

Messages and transactions passing through Wormhole are deemed valid if 13 out of the 19 Guardians sign the same message. They become Verified Action Approvals (VAAs).  

A Relayer network within the Wormhole architecture then relays the VAAs to their destination protocol. Relayers cannot modify the VAA during the process, guaranteeing the security of the ecosystem. Once the VAA has been delivered, the destination protocol verifies the signatures on the messages to authenticate its legitimacy.

Wormhole Tokenomics and Upcoming Airdrop 

The $W development team already unveiled its tokenomics.

The schedule has allocated 23% of the token amount to the Foundation’s Treasury, 17% to the community, 31% to the ecosystem and incubation, and 12% to the core contributors. The remaining 17% will be shared between guardian nodes and strategic partnerships. 

Out of the 1.7 Billion tokens apportioned to the community, the team has assigned 1.1 Billion tokens to an upcoming community airdrop, with the remaining 6% scheduled to unlock four months later.  

Wormhole Crypto Key Features 

The significance of Wormhole crypto transcends its cross-chain bridging and Wormhole messaging, which enables dApps to send and receive messages between at least 30 blockchains. Its other key features include the following: 

Wormhole ZK 

Wormhole integrates zero-knowledge (ZK) proofs into its core protocol to enhance the security of its cross-chain transfers and improve trust assumptions. ZK proofs facilitate permissionless verification for messages to enable parties to authenticate the validity of cross-chain transfers cryptographically without third-party intervention.  

Wormhole Queries 

Wormhole Queries enables developers to access blockchain data effectively and economically. Developers can leverage this feature to query on-chain data on demand instead of relying on centralized data providers to maintain local copies of the entire blockchain. As a result, developers can retrieve information like smart contract states or token balances without incurring overhead processing. 

Wormhole Gateway 

The Wormhole Gateway is an appchain that aims to bridge the existing gap between Cosmos and other blockchains. The Gateway leverages the Cosmos SDK to provide a developer-friendly environment that enables developers to create and deploy DApps within the Cosmos ecosystem. 

Wormhole Connect 

Wormhole Connect is designed to simplify the integration of Wormhole’s cross-chain capabilities into dApps using three lines of code to incorporate wrapped or native tokens directly into the dApps. This streamlines the development process by lowering the entry barrier to Wormhole’s cross-chain functionality. 

The Bottom Line

Wormhole represents a leap forward into the blockchain interoperability ecosystem by achieving efficient cross-chain communication. The technology behind the Wormhole Gateway has the potential to revolutionize how users interact with blockchains, bolster interoperability, reduce costs, and amplify benefits for users and developers.