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The Year of Wormhole: How The Project Evolved

In recent years many blockchains have emerged. These chains face the well-known interoperability issue: assets and information are locked within a chain. It limits liquidity and app development. 

When it comes to transferring data between chains, there has not been much to do. In the past, one could use simple bridges or centralized exchanges like Coinbase or Binance. But it was not sustainable, especially in terms of decentralization. 

With an increasing need for compatibility, there was a demand for a more advanced solution. And its name is Wormhole.

What Is Wormhole?

It launched as a bridge between major chains and evolved into a multi-chain generic message passing protocol. Wormhole offers a cross-chain development environment for decentralized applications (dapps) and cross-chain assets and data. 

Wormhole is a hub for chain interoperability when this interoperability is most needed. What is behind its story?

It started as a bridge between Ethereum and Solana in 2020. In August 2021, Wormhole transformed into a decentralized generic interoperability protocol. Initially, it supported Solana, Ethereum, Terra, and Binance Smart Chain, but rapidly grew to cover multiple other blockchains. 

The team also developed a set of products

  • xDapp for developers of dapps. 
  • xAssets for creating path-independent cross-chain fungible tokens. 
  • xData for accessing data from all supported chains. 

At the moment, Wormhole supports the following chains:

  • Ethereum
  • Solana
  • Terra
  • Binance Smart Chain
  • Polygon
  • Avalanche
  • Oasis
  • Fantom
  • Karura
  • Cela
  • Aurora
  • Acala
  • Klaytn
  • Terra 2.0

Wormhole had a skyrocketing growth. Let's look at the figures. 

The first eight messages were sent via Wormhole in September 2021. This number grew to 1000 daily average in November, 2000 in December, and 8000 in April, peaking at over 44 000 in May. 

In July 2022, the protocol processed over 60 000 transactions worth $78 million. 

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Source: DappRadar

The total value locked (TVL) reached $4.6 billion before the current market downturn. Now it stands at around $470 million on average. Ethereum accounts for 80% of TVL. 

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Source: defillama

How Wormhole Works

At the core stands the interoperability platform. Wormhole has a Core Bridge contract on each of the supported chains. A core contract on one chain creates a message to send information to another chain. 

Verifiers called "Guardians" run a full node for each connected chain. VAA (Verified Action Approval) is signed if the message is verified successfully. Afterward, VAA stays on a Guardian network so that it can be retrieved by a user and later sent to the target chain to process the message.

Other products also work on this platform. xAssets allows creating assets outside the main chains, but they are compatible with each chain. It helps to avoid double wrapping tokens. 

xData is a more general implementation of xAssets that allows the distribution of any other type of information across supported chains. It helps to execute multi-chain smart contracts. 

How Wormhole Maintains Security

Verifiers, or Guardians, are crucial to Wormhole's operations. Guardians check a core contract on each chain and produce Verifiable Action Approvals (VAAs), signed messages with packaged data within. 

Guardians usually run full nodes for each chain to observe the contracts. Wormhole partnered with the most significant and reliable staking validators to ensure security. Everstake is one of Wormhole's core partners

As of July 2022, there were 19 Guardians in the network. Wormhole needs 13 out of 19 approvals from Guardians to approve a transaction. 

In February 2022, Wormhole's bridge between Ethereum and Solana suffered a hack worth more than $320 million. It was a severe challenge, but the team found a way out and restored operations. Users didn't lose any funds. 

Conclusion

Interoperability solutions are a clear trend in blockchain, and Wormhole is a key player here. Even though it launched just a year ago, it has a solid track record with exciting prospects. 

Wormhole will become a go-to place for all cross-chain communication in the future.

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