Wormhole is a multichain system that connects different blockchains and allows them to interact with each other. They have become especially well known for their token bridge.
Their Native Token Transfers (NTT) improves on the traditional Wormhole token bridge infrastructure which 'wraps' tokens and makes them available for use on different blockchains.
NTTs remove complexity and costs from the bridge process while also maintaining the tokens intrinsic properties. This is a huge step towards true blockchain interoperability and makes cooperation between chains much easier.
Wormhole’s Native Token Transfers (NTT) is an open source, flexible, and composable framework for transferring tokens across blockchains.
Integrators have full control over how their tokens that use NTT behave on each chain, including the token standard, metadata, ownership, upgradeability, and custom features.
Wormhole Docs
Native Token Transfers (NTT) vs. Native Bridging
Wormhole's Native Token Transfers (NTT) remove complexity and costs from the traditional bridge process while maintaining the tokens intrinsic properties.
- The drawback to traditional crypto bridges and wrapped tokens is that they lose any extra ability or functions which they have on their native blockchain.
With NTT, instead of receiving a wrapped token which limits technical capabilities of the cryptocurrency, a user receives the native token on the new blockchain.
- Wrapped condition prevents the tokens from being upgraded and can cause issues with self custody.
The bridge process is different for each wrapped token (of which there are many). Users can unwrap tokens, but this is often an inconvenient process.
- Unwrapping tokens can also be expensive due to a phenomena called 'liquidity fragmentation,' which requires multiple liquidity pools on both blockchains, significantly increasing inefficiencies.
Notations for a wrapped tokens vary but are always modified version of the original crypto ticker.
- wSOL (wrapped SOL)
- renBTC (Ren Bitcoin, a BTC token which can be traded on Ethereum blockchains)
- WBTC.e (Wrapped Bitcoin on Avalanche)
With NTT, users receive the native token on the blockchain they are transferring to.
How do Native Token Transfers (NTT) work?
Similar to its traditional token bridge, Wormhole Native Token Transfers (NTT) work by "locking" or "burning" tokens on the source chain and minting the tokens on the destination chain.
The key difference is that NTT focuses on maintaining the token's integrity across chains and avoids the need for wrapping.
Lock and Mint
This method is primarily used when a blockchain (such as Polygon) wishes to maintain the original token supply on their blockchain.
- Tokens are locked on the source chain and then an equivalent amount is minted on the destination chain.
- Locking prevents the tokens from being used on the source chain.
- An equal amount of tokens is represented on both the source chain and the destination chain.
Burn and Mint
This method is primarily used when a blockchain (such as Cosmos) wants the original token supply to remain consistent across all chains.
- Tokens on the source chain are burned and then an equivalent amount is minted on the destination chain.
- The tokens are completely removed from circulation on the source chain.
- The total token supply remains the same.
The option to 'lock and mint' or 'burn and mint' hinges on different developer and blockchain needs.
What makes Native Token Transfers (NTT) tokens different from wrapped tokens?
The process is similar, but Native Token transfers (NTT) have many key improvements:
- Enables seamless token transfers with fewer steps for users
- Maintains clear ownership of tokens
- Allows for upgrade authority and token customization
- Removes need for liquidity pools, pool fees and slippage
- Avoids token supply inflation concerns
The open source NTT framework can be integrated with any token contract, standard or protocol governance processes.
- This enables developers to maintain full control over their tokens across multiple blockchains.
NTT introduces advanced rate limiting with inbound and outbound rate limits which are configured for each blockchain. This helps prevent network congestion.
How does Wormhole ensure security and integrity with Native Token Transfers (NTT)?
Transaction security and integrity is ensured with the multisig Wormhole Guardian node network.
There are currently 19 independent Guardians representing the largest blockchain networks in the world. They are some of the most well known brands and trusted operators in crypto.
It is the guardians role to observe messages and sign the corresponding payloads. Each guardian performs this step in isolation, later combining the resulting signatures with other guardians as a final step.
The resulting collection of independent observations form a multisig which represents a proof that a state has been observed and agreed upon by a majority of the wormhole network.
Wormhole NTT
The Guardians work together in a multisig consensus mechanism. Collectively the node network can observe every transaction on every chain.
Guardians are responsible for signing off on all transactions.
We are pleased to introduce Wormhole's Native Token Transfers (NTT) token bridge to the Backpack Wallet!
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