summary
A blockchain bridge is a protocol that connects two blockchains and allows them to interact with each other. To participate in DeFi activities on the Ethereum network, users only need to hold Bitcoin and do so without selling it to do so through the blockchain bridge. Blockchain bridges are fundamental to interoperability in the blockchain space.
Lead
To understand blockchain bridges, you first need to understand the concept of blockchain. The mainstream blockchain ecosystems, including Bitcoin, Ethereum, and BNB Smart Chain, all follow their own consensus protocols, programming languages, and system rules.
The blockchain bridge protocol connects two economically and technologically independent blockchains and allows them to interact with each other. The bridging protocol functions similarly to a real-life cross-island bridge connection, while “island” refers to an independent blockchain ecosystem.
As a result, blockchain bridges enable what is known as “interoperability”, where digital assets and data carried on one blockchain can interact with another. Interoperability is the cornerstone of the Internet, meaning that machines around the world can communicate with each other using the same set of open protocols. There are many unique protocols in the blockchain space, and blockchain bridges are essential to facilitate the exchange of similar data and value.
Why do you need a blockchain bridge?
As the blockchain space grows, one of the major limitations is the lack of ability for different blockchains to work together. Each blockchain has its own rules, tokens, protocols, and moreSmart contracts。 Blockchain bridges help break down these silos and bring isolated cryptocurrency ecosystems together. An interconnected blockchain network allows tokens and data to be exchanged seamlessly.
In addition to enabling cross-chain transfers, blockchain bridges can also play other beneficial roles. Through blockchain bridges, users can access new protocols on other chains, while developers from different blockchain communities can collaborate. In other words, blockchain bridges are a key element of the blockchain industry’s future interoperability.
How does a blockchain bridge work?
The most prevalent use case for blockchain bridges is token transfers. For example, suppose you put Bitcoin (BTC) to go toEthereumInternet. One way is to sell BTC and then buy Ether (ETH). However, this incurs transaction fees and is subject to the risk of price fluctuations.
The other way is to use a blockchain bridge instead of selling cryptocurrency. After bridging 1 BTC to an Ethereum wallet, the blockchain bridge contract locks the BTC and creates the equivalent wrapped Bitcoin (WBTC), an ERC20 token compatible with the Ethereum network. The amount of BTC to be transferred is locked in a smart contract, while the equivalent token is issued or minted in the target blockchain network. Packaged tokensis a tokenized version of another cryptocurrency. It is anchored to the value of a particular asset and usually supports the redemption (dewrapping) of the anchored asset at any time.
For users, this process requires several steps. to useBinance BridgeFor example. First, select the chain you want to bridge, and determine the amount. Then, deposit the cryptocurrency to the address generated by Binance Bridge. Once the cryptocurrency is sent to that address within the time limit, Binance Bridge will send you the equivalent amount of wrapped tokens in another blockchain. To get your funds back, simply reverse the process.
What are the types of blockchain bridges?
Blockchain bridges can be categorized based on function, mechanism, and degree of centralization.
Managed and unmanaged bridging
By general category, blockchain bridges are divided into two categories: custodial (centralized) and non-custodial (decentralized).
Managed bridging requires users to trust a central entity to operate the system correctly and securely. Users should do their research extensively to ensure that the entity is trustworthy.
Non-custodial bridging operates in a decentralized manner, relying on smart contracts to manage the lock-up and minting process of cryptocurrencies without the need to trust the bridge operator. In this case, the security of the system is almost the same as the underlying code.
Divide blockchain bridges by function
The other classification is based on the functions of blockchain bridges, such as wrapper asset bridges and sidechain bridges.
Wrapped asset bridges enable interoperability of cryptocurrencies. For example, by wrapping BTC as:Packaged Bitcoin (WBTC), an ERC20 token that is compatible with the Ethereum network, can move Bitcoin to the Ethereum network. Sidechain bridges connect the main blockchain and its child sidechains, enabling interoperability between the two. The reason why the connection is needed is because the main chain and the sidechain may have different consensus mechanisms. For example, the xDai bridge connects the Ethereum mainnet with Gnosis Chain (formerly known as the xDai blockchain), which is an Ethereum-based stable payment sidechain. xDai is secured by a group of validators who are not the same validators who maintain the Ethereum network. With the xDai Bridge, value can be easily transferred between the two chains.
Divide blockchain bridges by mechanism
It can be divided into one-way bridging and two-way bridging. One-way bridging means that users can only bridge assets to the target blockchain, but not back to the native blockchain. A two-way bridge bridges assets in both directions.
Advantages of blockchain bridges
The most significant advantage of a blockchain bridge is its improved interoperability. With blockchain bridges, including:Layer 1 and Layer 2 protocols, as well as various sidechains, can be exchanged between different blockchains, such as tokens, assets, and data. For example, Bitcoin users who hold WBTC can use the Ethereum ecosystem’s decentralized applications DAppandDecentralized Finance (DeFi)Serve. Blockchain with interoperability is key to ensuring the future success of the industry.
Another advantage of blockchain bridges is improved scalability. Some blockchain bridges are able to process a large number of transactions, which increases efficiency. For example, the Ethereum-Polygon decentralized bidirectional bridging is an extension solution for the Ethereum network. As a result, users benefit from increased transaction speed and reduced transaction costs.
The risks that exist with blockchain bridges
Blockchain bridges have various limitations at the same time. Attackers have exploited smart contract vulnerabilities in some blockchain bridges to maliciously steal large amounts of cryptocurrencies from cross-chain bridges.
Users using managed bridging are also exposed to hosting risks. Theoretically, the centralized entity behind a custodial bridging could steal users’ funds. If you’re using managed bridging, choose an established brand with a long-term track record.
Another potential technical limitation is the transaction rate bottleneck. Bottlenecks in the throughput capacity of a single chain will hinder the realization of large-scale blockchain interoperability.
While bridging can alleviate congestion on a busy network, moving assets to another chain doesn’t solve the scalability problem, as users don’t always access the same set of DApps and services. For examplePolygon BridgeSome Ethereum DApps will not be available, and scaling efficiency will be limited.
Finally, blockchain bridges can expose the underlying protocol to risks associated with trust differences. Blockchain bridges connect various blockchains, so the overall security strength of an interconnected network is the strength of its weakest link.
What does the future hold for blockchain bridges?
The Internet is a game-changer, in part because of its high level of interoperability. Blockchain bridges play a vital role in improving interoperability and widespread adoption in the blockchain industry. An important innovation in this technology allows users to exchange assets between multiple blockchain protocols. Blockchain bridges have seen significant growth in the number of bridges, the number of users, and the total amount of transactions.
As the Internet gradually evolves towards Web3, the demand for blockchain bridges will grow accordingly. Future innovations will bring greater scalability and efficiency to users and developers. Innovative solutions may also emerge to address the security risks associated with bridging. Blockchain bridges are essential to create an open, decentralized blockchain space that is interoperable.
summary
Continuous innovation drives the development of the blockchain industry. First came the birth of groundbreaking protocols such as Bitcoin and Ethereum, and then the emergence of various alternative Layer 1 and Layer 2 blockchains. The number of cryptocurrencies and tokens has also grown exponentially.
Due to independent rules and technical constraints, blockchain bridges are needed between innovative products to achieve interoperability. Blockchain ecosystems are bridged to be stronger and more interoperable, making them more scalable and efficient. Cross-chain bridges have been the subject of numerous attacks. Therefore, there is still a long way to go to improve the safety and robustness of bridge design.