Wormhole Potential Analysis

Forward the original title: Analysis of the potential of new cross-chain force - Wormhole

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The New Year is coming to an end. Everyone should have a happy New Year, and the market is booming. We still need to continue to explore blockchain projects. Many students in the group asked me how to discover some new projects. It is actually very simple. Take me for example, I talk about a blockchain project every day. In fact, many projects are related. For example, we talked about the Jup project before. When we talked about it, we discovered its two cross-chain bridges, one is Wormhole and the other is Onramp, both of which are in the beta testing stage. So, does this arouse your curiosity? It definitely aroused my curiosity (especially its name), so I looked up Wormhole and found that this project is indeed awesome, and it has not issued coins yet, so there is an opportunity. Today we will introduce Wormhole, which may issue an airdrop in the future.

Introduction

Simply put, Wormhole is a decentralized universal cross-chain information transfer protocol that allows assets and information to be transferred between different blockchain networks.

Initially, Wormhole was just an asset bridge, but with the gradual development of the multi-chain ecosystem and the increasing number of multi-chain applications, Wormhole has evolved into a universal AMB (Arbitrary-Message-Briage) bridge that supports the transfer of any message between 24+ heterogeneous public chains. It is also known as a universal cross-chain message transfer protocol or interoperability protocol. The function of Wormhole’s asset cross-chain bridge is undertaken by the front-end application Portal Bridge and provides services to the outside world.

Wormhole is not a blockchain (L1 or L2), but an underlying protocol that provides a means of communication for blockchains or Rollups. Wormhole is not a simple asset bridge, although there are protocols built based on Wormhole that have this function. It includes both asset transmission and information transmission (contract calls, status updates, etc.).

Core organizational structure

The core organizational structure of Wormhole is based on the PoA (Proof of Authority) mechanism and consists of a group of trusted entities called Guardians. These Guardians are not randomly selected, but are well-known entities with capital and reputation endorsement. Currently, Wormhole’s Guardian network consists of 19 members, including well-known companies such as Chorus One, Everstake, Figment, and xLabs. Wormhole consists of several noteworthy components. Before we dive into each component, let’s talk about the names of the main components and how they fit together.

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 log with details about the emitter and a sequence number that identifies the message. This could be your xDapp or an existing ecosystem protocol. Some existing contracts that act as emitters include:

xAsset Contracts - contracts that allow converting normal tokens into xAssets and enabling these xAssets to be bridged.

Relay Contract - A contract that allows cross-chain applications to send messages to a specific blockchain through a decentralized universal relay network.

Worm Router Contract - A contract that allows developers to make their Dapps cross-chain applications to interact purely through client code on any Wormhole supported chain.

Wormhole Core Contract - The main contract, this is the contract that Guardians observe and basically allows for cross-chain communication.

Transaction Log - A blockchain-specific log that allows Guardians to observe messages emitted by the core contract.

Off-chain Components

Guardian Network - A validator that exists in its own P2P network. Guardians observe and verify messages emitted by each core contract on the supporting chain to generate VAAs (signed messages).

Guardian - One of 19 validators in the Guardian network, contributing to VAA multisig.

Spy - A daemon that subscribes to messages published within the Guardian network. Spy can observe and forward network traffic, helping to expand VAA distribution.

API - A REST server for retrieving VAA or daemon network details.

VAAs - Verifiable Action Approvals (VAAs) are signature proofs of messages observed from the Wormhole core contract.

Relayer - Any off-chain process that relays VAA to the target chain.

Standard Relay - A decentralized relay network that distributes messages requested on-chain via the Wormhole relay contract. Also called a universal relay.

Specialized Relays - Relays that specialize in handling specific protocols or cross-chain applications. They can execute custom logic off-chain, thereby reducing gas costs and improving cross-chain compatibility. Currently, cross-chain application developers are responsible for developing and hosting specialized relays.

VAAS

VAAs are the core messaging primitives in Wormhole. You can think of them as cross-chain packets, which are emitted whenever a cross-chain application contract interacts with the core contract. A basic VAA has two components - a head and a body. Messages sent by the contract need to be verified by the guardian before being sent to the target chain. Once a majority of guardians have observed the message and achieved finality, the guardians will sign the keccak256 hash of the message body. Messages are wrapped in a structure called a VAA, which combines the message with a guardian signature to form a proof. VAAs are uniquely indexed by (emitter_chain, emitter_address, sequence) tuples. Using this information, the VAA can be obtained by querying Guardian RPC or API. These VAAs are ultimately what the smart contracts on the receiving chain must process to receive Wormhole messages.

Working Principle

Wormhole’s workflow is concise and efficient. Its core is a cross-chain message format called VAA (Verifiable Action Approval). A specific set of contracts, called Wormhole Core Contract, are deployed on each chain supported by Wormhole. These contracts are responsible for converting the application’s cross-chain requests into VAAs.

When a cross-chain request is processed as a VAA, 19 Guardians will monitor these newly generated VAAs. Each Guardian will independently sign the VAA, and these signatures will eventually be combined into a multi-signature. In order to ensure the authenticity and security of the message, at least 2/3 of the Guardians need to sign and approve the VAA.

Next, a role called a Relayer is responsible for relaying these signed VAAs to the target chain. When the Wormhole Core Contract on the target chain receives these signed VAAs, it verifies the signatures and delivers the message to the target application.

It is worth noting that Relayer will incur gas fees when relaying VAA. These fees include the cost of submitting the message to the Wormhole Core Contract and the cost of the target application executing the message. Relayer will advance these fees. Wormhole does not set up a public relayer, so each application needs to design its own incentive mechanism for relayers, or run the Relayer by itself.

Wormhole’s message passing model is multi-cast, that is, the message is notarized by the guardian or oracle network from the original chain, and the relay that brings the message to the target chain is not trusted. This pattern basically requires a very powerful oracle network, the security functions within the protocol depend on this. The Wormhole project has three main in-protocol security features under development: supervision, accounting, and emergency shutdown. These features are developed with public visibility, which gives us insight into how they will ultimately work. These features are awaiting development completion and adoption by guardians.

1. Supervision: This feature is implemented in the guardian/oracle and allows the guardian to monitor the nominal amount of value flow from any regulated chain within a time window. The guardian can set an acceptable upper limit for each chain. Once this upper limit is reached, the flow of assets beyond the chain will be blocked.

2. Accounting: This function is implemented in guardians or oracles, allowing guardians to maintain their own blockchains (also known as wormchains), which can serve as cross-chain ledgers between different chains. This ledger not only allows the guardian to act as a validator on the chain, but also acts as an accounting plug-in. Guardians can reject cross-chain transactions where the original chain does not have sufficient funds (verification is independent of smart contract logic).

3. Shutdown: This function is implemented on the chain, allowing the guardians to reach a consensus to temporarily stop the flow of assets on the cross-chain bridge after realizing the threat of the cross-chain bridge. The current implementation allows implementation via on-chain function calls in the proposed implementation.

Wormhole Core Products and Use Cases

As a cutting-edge explorer of cross-chain communication, Wormhole provides developers and users with a series of powerful products, including Messaging, Connect and Gateway, which respectively involve the protocol, front-end (application) and chain levels. These products are designed to simplify cross-chain interactions while ensuring the highest levels of security and efficiency.

1. Messaging

In a diverse blockchain ecosystem, messaging has become a core requirement. Wormhole’s Messaging Products provides a decentralized solution that allows different blockchain networks to exchange information and value safely and easily.

The core function of Messaging is cross-chain information transfer, and it is equipped with a simplified integration method to accelerate the growth of users and liquidity, and has a high degree of security and decentralization.

For example, let’s say a DeFi project runs on Ethereum but wants to be able to interact with another project on Solana. Through Wormhole’s Messaging, the two projects can easily exchange information and value without complex intermediary steps or third-party intervention.

2.Connect

Wormhole’s Connect product provides a simple bridging tool for applications that can integrate the Wormhole protocol to achieve cross-chain functionality with just a few lines of code.

The main function of Connect is to provide developers with a set of simplified integration tools, allowing developers to integrate Wormhole’s encapsulation and native asset bridging functions into their own applications with just a few lines of code.

For example, an NFT marketplace wanted to bridge its NFTs from Ethereum to Solana. Using Connect, the marketplace can provide its users with a simple, fast bridging tool within its app, allowing them to freely move their NFTs between the two chains.

3.Gateway

Wormhole Gateway is an application-specific blockchain powered by the Cosmos SDK. Through its IBC-based liquidity router, Gateway connects the liquidity and users of Ethereum and other blockchains with the Cosmos chain and applications, providing a bridge for non-native assets to enter the Cosmos ecosystem. It leverages the flexibility of the Cosmos SDK and CosmWasm to achieve seamless composability between the Wormhole Stack and the Cosmos ecosystem, ultimately benefiting Cosmos-based chains and applications in terms of liquidity and user growth.

For example, a DeFi platform on Cosmos wants to bring in liquidity from Ethereum. By using Gateway, the platform provides easy access to liquidity on Ethereum while ensuring transaction security and efficiency.

4.Queries

Allowing application developers to extract any on-chain data on demand. Wormhole said that compared to the push model, Queries provides a latency of less than 1 second and can reduce gas fees by 84%. Wormhole Queries introduces a pull model, where integrators submit query requests to the Wormhole Guardian network, and Guardian processes these requests and publishes the results for on-chain data verification and consumption. This provides application developers with new possibilities, including realizing real-time cross-chain price sources in DeFi and dynamic cross-chain game mechanisms in games. Queries also solves the problem of cross-chain digital identity fragmentation, supports a unified identity system, and improves the user experience of DeFi and social platforms.

Wormhole Ecosystem

The Wormhole ecosystem is mainly divided into three parts: Guardians, connected public chain partners and other partners. The current project ecosystem is 200+.

Connected public chain partners: So far, Wormhole has supported the transmission of arbitrary messages between 24+ heterogeneous public chains including: Solana, Ethereum, BNB Chain, Polygon, Avalanche, Arbitrum, Optimism, Base, Aptos, Sui, Sei, Injective, Algorand, Moonbeam, Near, Oasis, Aurora, Fantom, Karura, Acala, Klaytn and Celo, etc.

Other partners: These partners include various applications built on Wormhole (Bridge, DEX, Aggregator, etc.), projects for cross-chain joint governance through Wormhole, projects integrating Wormhole Connect products, and projects supporting xAsset, such as Uniswap , Lido, Frax, Hashflow, Carrier, Degods, Y00ts, etc.

In addition, Wormhole is also actively expanding cooperation and development with other cross-chain protocols, such as establishing a cooperative relationship with Circle CCTP.

At the same time, Wormhole has also launched multiple funding programs, including Cross-Chain Ecosystem Fund, xGrant program, Wormhole Base Camp Accelerator, etc., aiming to promote the growth and innovation of the ecosystem.

Financing Status

In November 2023, the cross-chain protocol Wormhole completed US$225 million in financing at a valuation of US$2.5 billion and established Wormhole Labs. This makes it the largest crypto project financing of 2023. There was no lead investor in this round of financing, with participating investors including Brevan Howard, Coinbase Ventures, Multicoin Capital, ParaFi, Dialectic, Borderless Capital, Arrington Capital and Jump Trading.

Saeed Badreg, CEO of Wormhole Labs, said that technically this is the company’s first round of financing. And Jump Crypto, the crypto arm of high-frequency trading company Jump Trading, has been incubating the project for several years.

Tokenomics

Although the project token has not yet been launched, the official website has already given specific token allocation, the token name is W, the current total is 10 billion, with an initial circulation of 1.8 billion, 31% for the ecosystem, 23.3% for the foundation, 17% for the community, 12% for core contributors, 11.6% for network partners, and 5% for guardian nodes. It can be seen that the team almost took 23.3 + 12 = 35%, which is not a very high proportion. However, we did not see the airdrop ratio, so it is possible that there was no airdrop.

Finally, let’s summarize this project. This project can be said to be very impressive in terms of financing scale. It has received more than 200 million US dollars in financing and should not be underestimated. The technical solution is somewhat similar to Layerzero. Layerzero verifies through oracles and relays, while Wormhole uses 19 guardian nodes and also requires a strong oracle network. That’s why I’ve said many times that the oracle track is very important! Recently, there have been many cross-chain projects exploding. And we have talked about a lot of new projects in the cross-chain track recently. Is it possible that the cross-chain track will explode in the next bull market? The current project ecosystem is also very strong, having already connected to 25+ public chains. Compared to the slowly progressing Polkadot with 100 chains, this is more practical, connecting to one chain at a time. This project is very promising at the moment, we need to keep an eye on it. Currently, no airdrop information has been seen in the token distribution, but once it goes on the secondary market, as long as the price is reasonable, it must be of great potential, so it can be put on our watchlist for now.

Disclaimer：

1. This article is reprinted from [书中自有大饼屋], Forward the Original Title‘跨链新势力-wormhole（虫洞）潜力分析’,All copyrights belong to the original author [朱老师321]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
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