Wormhole goes multichain with native token transfers

NTT will enable developers to tailor their token transfers to meet the requirements of their projects while maintaining the inherited properties on each chain

article-image

Wormhole and Adobe Stock modified by Blockworks

share

Cross-chain messaging platform Wormhole has introduced native token transfers (NTT) as a way to preserve token characteristics and address liquidity fragmentation across different blockchains.

Sending tokens across different blockchain platforms today usually requires a token bridge. These bridges often use either the “lock and mint” or “burn and mint” approach when enabling these transfers.

This process involves users locking up the native asset into a smart contract on one chain and then swapping it for a synthetic version of that asset before it is transferred to a different chain. Once on another chain, users will again need to go through the process of switching the synthetic asset to a native token. 

Read more: Wormhole garners whopping $2.5B valuation as new unit emerges

However, according to Nikhil Suri, product lead at the Wormhole Foundation, because interoperability protocols deploy wrapped assets on behalf of a project, these assets are non-fungible between the different interoperability protocols, leading to liquidity fragmentation, which can result in a bad UX and sub-optimal markets. 

“Another drawback of wrapped assets is that they are owned by interoperability protocol contracts, so they conform to a fixed token implementation. This limits flexibility for protocols looking to take their own tokens cross-chain since their tokens won’t behave consistently on all chains and will not retain any advanced functionality,” Suri told Blockworks.

Another way of transferring assets across different blockchains today could be by having a unified liquidity pool shared by multiple different chains. However, this type of bridging can not guarantee instant finality as the different chains must ensure enough liquidity in the pools to fulfill all requests. 

Read more: Why cross-chain messaging is becoming more popular

Unlike existing methods for transferring tokens across chains, NTT involves protocols natively deploying their canonical token to multiple blockchains and using interoperability layers to facilitate the transfers between these canonical deployments.

This means that when new tokens are transferred using the “burn and mint” or “lock and mint” method with Wormhole NTT, instead of swapping the native token for a synthetic asset before sending it to another chain and then switching it back again once it arrives on the destination chain, users will be able to directly transfer native tokens from one chain to another.

“In comparison to wrapped assets, native token transfers ensure that projects maintain ownership, upgradeability and customizability over their tokens on various blockchains. This means that tokens can maintain their unique characteristics no matter which chain they are transferred to,” Suri said. “Native token transfers also avoid liquidity fragmentation by transferring value instead of double counting it.”

For this reason, Suri believes that native tokens are more than just a technical evolution, but also a step toward realizing the potential of blockchain technology.

“They can serve as long-term solutions that are able to evolve alongside the protocols that leverage them,” he said.  “As we move forward, interoperability will continue to play an important role in shaping a robust and user-centric DeFi space and provide projects with the sovereignty to define what works best for them.”

Updated Feb. 29, 2024 at 2:15 pm ET: Clarified new tokens are transferred using the “burn and mint” or “lock and mint” method with Wormhole NTT rather than multichain.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Permissionless is a conference for founders, application developers, and users. Come meet the next generation of people building and using crypto.

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

4.png

Research

This months PPGC covered four main areas. Firstly, debriefing the progress and status of the mainnet implementation of the Ahmedabad hard fork. Secondly, a retrospective on the testnet phase of the Ahemdabad Hard Fork. Thirdly, an update on PIP-36 which involves replaying failed state syncs. Lastly, PIP-47 which pushes upgrades to the Polygon Protocol Council.

article-image

Institutions to test out the settlement of “digital assets and currencies” on a network that annually carries more than 5 billion financial messages

article-image

After Bitwise’s XRP ETF filing this week, one industry watcher notes: “Politics will determine whether this happens soon or in a few years”

article-image

Plus, a look back at some of the SEC’s biggest enforcement moves under Gurbir Grewal

article-image

The forward-looking financial system is being championed by several contributors to India’s UPI digital money system

article-image

Multiple teams are pursuing integration cross-chain and off-chain

article-image

An SEC spokesperson told Blockworks the Ripple judgment clashes with Supreme Court precedent and securities laws