Blockchain technology has come a long way since 2008 when the Bitcoin white paper was published. Since then, an explosion of blockchain networks have been created, with a huge variety of designs and intended functionality. When choosing a cross-chain bridge, users should be sure the specific blockchain network — as well as token or NFT — they are looking to bridge is supported. Different networks also have varying fees, which can be volatile and change quickly. For example, developers can benefit from the lower fees offered by the different L2 solutions by deploying their dapps across rollups, and sidechains and users can bridge across them.
When I started looking at blockchain bridges, I kept hearing “bridges are hard”, but beyond the general reasoning of complexity and high total value locked it wasn’t clear why. Here, I’ll try to explain why bridges are hard through the lens of a visual threat model that encompasses the entire bridge technology stack so you can make your own determination on which bridges to trust. When a developer builds a decentralized application on a particular platform, they generally lock in to using that platform and enjoying all of its benefits. The only problem is that they lock the project out of the benefits of other blockchains – each one speaks its own language, so to speak, so data from one blockchain can’t be read by another.
Support for bringing smart contracts, tokens and NFTs from the Ethereum mainline to different blockchain networks is among the most common feature across cross-chain bridges. Just by looking at the words “cross”, “chain”, and “bridge”, you can presume that a cross-chain bridge has something to do with enabling some sort of connection or transfers between different blockchains. As such, despite the difference in two chains (different protocols, rules, governance models, etc.), a cross-chain bridge ensures that they interoperate securely. Best blockchain bridges enables better usability of assets from main blockchain networks on layer 2 networks. Since layer 2 solutions offer cost-effective and faster transactions, blockchain bridges can also offer conclusive benefits for scalability while reducing transaction fees. A blockchain bridge, sometimes known as a “cross-chain bridge”, allows the seamless transfer of assets and data between two distinct protocols.
Wrap Protocol (Plenty Bridge)
This potential technical issue can hinder large-scale blockchain interoperability by blocking a single chain’s throughput capacity when it receives transactions from many chains. Stateless simplified payment verifications are less expensive to run compared to relays, and smart contracts can validate a portion of the proof-of-work genesis history. This approach was originally conceptualized by the now-defunct Summa. Cross-chain development continues to grow in complexity, due in part to the growing number of blockchains and the differences between the chains.
As a result, users can benefit from faster transactions and lower transaction costs. But Polkadot also allows parachains and external networks like Bitcoin or Ethereum to interoperate via bridges. For example, a chain anchoring verifiable credentials on Polkadot could be used for KYC requirements by a gaming company built on Ethereum.
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An example of an atomic swap is where a token on the first blockchain is relocated so that it is unavailable, and another token is produced on the second blockchain. In this example, the token on the second blockchain must be established only if the token on the first blockchain is confirmed to be unavailable. Miners and validators are required for proof-of-work and proof-of-stake sidechains, respectively. With proof-of-work models, miners can be rewarded through merged mining, which involves simultaneously mining two different cryptocurrencies based on the same algorithm. Georgia Weston is one of the most prolific thinkers in the blockchain space. In the past years, she came up with many clever ideas that brought scalability, anonymity and more features to the open blockchains.
If you want to convert your funds back, you simply go through the reverse process. To understand what a blockchain bridge is, you need to first understand what a blockchain is. Bitcoin, Ethereum, and BNB Smart Chain are some of the major blockchain ecosystems, all relying on different consensus protocols, programming languages, and system rules. Porting assets from one blockchain to another blockchain comes with a myriad of benefits. First, the blockchain onto which you port assets might be cheaper and faster than its native blockchain.
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As compared to a trusted blockchain bridge, the trustless variant leverages algorithms and smart contracts over a blockchain network. Therefore, a trustless blockchain bridge does not need any central intermediaries or custodians. With separate rules and technologies, they need blockchain bridges to be interconnected. A blockchain ecosystem linked by bridges is more cohesive and interoperable, opening up opportunities for better scalability and efficiency.
With cross-chain transactions taking anywhere between 1 minute to 2 hours depending on the blockchain/bridge/network congestion etc, there is a huge scope for disruption and optimisation in this growing field. Kana Labs is working on this! #Aptos #SOLANA #Shardeum pic.twitter.com/SLEEazrutO
— Kana Labs (@kanalabs) January 13, 2023
Writer and researcher of blockchain technology and all its use cases. It’s a huge deal in the world of decentralized finance because it introduces connections between previously isolated networks. Several organizations are looking for ways to connect their services and integrate with other Blockchain networks. Another excellent example of a bridge is the one between the Ripple network and the Bitcoin network. One example of a bridge is the interoperability between the Ethereum network and the HyperLedger network. The Ethereum network uses a standard called the ERC-20 standard for its tokens, while the HyperLedger network uses a different standard called the HyperLedger Fabric.
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However, there are certain blockchains where, if you want to transfer from, you can only go to a specific destination. Binance Bridge, for example, you will first select the chain you’d like to bridge from and specify the amount. You will then deposit the crypto to an address generated by Binance Bridge. After the crypto is sent to the address during the time window, Binance Bridge will send you an equivalent amount of wrapped tokens on the other blockchain.
- For example, the Ethereum-Polygon Bridge is a decentralized two-way bridge that works as a scaling solution to the Ethereum network.
- If not trusted, these bridges are also the least capital efficient because they need to scale collateral proportional with the economic throughput they are facilitating.
- The blockchain bridge by Binance serves as a bidirectional bridge between Ethereum and the main Binance chain.
- With new programmable chains emerging and gaining popularity, we can expect the future of blockchain applications to be all about cross-chain interoperability.
- For example, this includes decentralized identities, smart contract calls, and off-chain information (i.e., market price or game score feeds).
- A trusted bridge is an example of a hybrid bridge used when organizations want to control access to data.
One advantage of a unidirectional bridge is that it does not require an intermediary and is, therefore, straightforward. However, unidirectional bridges can only transfer data in one direction and cannot be used to receive data. Unlike trusted bridges, there is no central authority that directs the data exchange. It is essential to note that the first bridge was only used for research purposes. At this time, the financial industry recognized the potential of Blockchain technology and began adopting it for the use of interconnecting networks.
As a result, while there could be significant activity and innovation within an ecosystem, it is limited by the lack of connectivity and interoperability with other ecosystems. Imagine different banks worked in silos with no integration between any of them. If you operate with one bank and your friend operates with another, trying to move money across to the other would not only be a headache, but it might be downright impossible. Without interoperability, working across networks would simply fail. For this reason, interoperability – and the lack thereof – is one of the biggest problems blockchains are facing at the moment. After deciding on the type of bridge most beneficial for your business, it is crucial to determine exactly what data you would like to exchange between the Blockchains.
Risks of Blockchain Bridge
Now that we understand what a blockchain bridge is and how it works, let’s explore some existing blockchain bridge projects. As mentioned, there are many blockchain bridges available, allowing users to cross between the leading blockchain networks. In the same way that different blockchain networks have unique defining parameters, so do blockchain bridges. One blockchain bridge is not compatible and interoperable with every asset and network in the industry.
In order to convert coins into another cryptocurrency, users must rely on the members of the federation to verify and confirm the transaction. The federation members are largely incentivized to keep transactions running; they are not focused on identifying and preventing fraud. Trust-based bridges can be a quick and cost-effective choice when transferring a large quantity of cryptocurrency. However, it’s important to understand that federation members are largely incentivized to keep transactions running, not to identify and prevent fraud.
Nonetheless, if you want to become a blockchain developer with advanced skills and go full-time crypto, we encourage you to visit courses available at Moralis Academy. When working on example projects, we normally focus on testnets, and this https://xcritical.com/ is exactly what we will do herein as well. In case you lack experience with testnets, check out our Ethereum testnet guide. With that said, our cross-chain bridge will enable users to transfer funds between the Rinkeby and Mumbai testnets.
Since LiteNodes are smart contracts, they can’t run and update themselves. Relayers are scripts running on traditional servers, that periodically read blocks from one blockchain, and communicate them to the LiteNode running on the other. Blockchain bridges enable interoperability, an essential attribute of the internet. Interoperability allows for a seamless exchange of value and information between protocols.
What is a Blockchain Bridge?
No other cross-chain bridge service supports as many token types as Multichain. A cross-chain bridge enables an exchange of information, cryptocurrency or NFTs from one blockchain network to another. It enables the flow of data and tokens across what would otherwise be siloed sets of data on different what is a blockchain bridge and how it works blockchains. Cryptocurrency network Ronin disclosed a breach in which attackers made off with $540 million worth of Ethereum and USDC stablecoin. The incident, which is one of the biggest heists in the history of cryptocurrency, specifically siphoned funds from a service known as the Ronin Bridge.
Unfortunately, their insurance mechanisms are often reflexive; if a protocol token is used as collateral, there is an assumption that the dollar value of that token will be high enough to make users whole. Furthermore, if the collateral asset is different from the insured asset, there is also a dependency on an oracle price feed, so the security of the bridge could degrade to the security of the oracle. If not trusted, these bridges are also the least capital efficient because they need to scale collateral proportional with the economic throughput they are facilitating.
Blockchains Have a ‘Bridge’ Problem, and Hackers Know It
Blockchain bridges establish a credible impression of how they are important for the future of blockchain. Bridges offer a promising tool for hopping between different blockchain networks seamlessly. The advantages of a blockchain bridge can offer benefits to developers and investors alongside the blockchain networks connected by the bridge. Blockchain bridges can offer better opportunities for increasing the number of users and more opportunities for development and transfer of assets. Cross-chain bridge providers often support multiple types of blockchains, though specific support varies from provider to provider.