Wormhole, an interoperability protocol enabling asset transfers between blockchains, has revealed updated tokenomics for its native Wormhole (W) token, which includes a token reserve and increased yield for stakers. These modifications may influence the protocol’s governance, as staked Wormhole tokens grant voting power to delegates.
In a Wednesday announcement, Wormhole outlined three key changes to the Wormhole token: a W reserve funded by protocol fees and revenue, a base yield of 4% for staking with enhanced rewards for active ecosystem participants, and a shift from bulk unlocks to biweekly unlocks.
“Wormhole Contributors aim to substantially increase the asset transfer and messaging volume facilitated by Wormhole in the next 1-2 years,” the protocol stated. Wormhole anticipates that as adoption increases, more tokens will be locked and revenue will return to the company.
Founded in late 2020 to provide a bridge for transferring tokens between Ethereum and Solana, Wormhole launched its native token on April 3, 2024.
The token debuted at $1.66 but fell to $0.54 within about 10 trading days. Following the tokenomics revision on Wednesday, the price surged over 6.3%.
Wormhole’s announcement garnered significant attention on X, although some users expressed disappointment regarding the lack of a second airdrop or a buyback-and-burn mechanism in the roadmap. Such mechanisms are commonly utilized to reduce a token’s supply with the intent of enhancing its price.
The new tokenomics may impact the protocol’s governance. The W token functions as a governance mechanism: when users stake their W tokens, they can transfer power to delegates, who vote on the protocol’s operations.
Currently, $45 million in W is staked, with 485 million W used in voting activities.
Dan Reecer, co-founder of the Wormhole Foundation, holds the most significant influence over protocol governance with $30.5 million in Wormhole staked at this time, accounting for 25.1% of the voting power.
Cointelegraph attempted to contact Wormhole for comment but had not received a response by the time of publication.
Related: Flow Traders, Wormhole partner to enhance cross-chain liquidity
Wormhole faces competition in expanding crypto sectors
Interoperability protocols like Wormhole are positioned in a rapidly expanding area of crypto: the capacity to launch assets across various blockchains and ecosystems.
This capability is essential for stablecoin and RWA tokenization issuers who require the ability to deploy assets across multiple chains.
Notable competitors to Wormhole include crosschain messaging service Chainlink, omnichannel deployer LayerZero, and interoperability protocol Axelar.
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