What is a Crypto Bridge?
The blockchain space is growing quickly but is still fragmented and nascent. This means that if you own one type of cryptocurrency or another, it can be challenging to interact with projects that don’t yet support your preferred coin. A blockchain bridge creates an on-ramp for any asset to be invested in the DeFi economy and will reinforce trust in the space by cementing interoperability.
What is a Blockchain Bridge
A blockchain bridge is a protocol that allows the exchange of assets, digital or physical, from one blockchain to another. By establishing a connection between the two blockchains, bridges enable the possibility of cross-chain transactions.
A blockchain bridge can connect two economically and technologically separate blockchains to enable interactions between them. These protocols function like a physical bridge linking one island to another, with the islands being separate blockchain ecosystems.
Blockchain bridges enable interoperability, an essential attribute of the internet. Interoperability allows for a seamless exchange of value and information between protocols.
Why we need Blockchain Bridges
Blockchains are isolated by design. Different blockchains are run by different mining pools and there are no bridges between them. Data on one chain is not portable to another chain and the tokens that you mine by mining on one blockchain cannot be used on another. The larger ecosystem of blockchains has a real-life impact on how people use blockchain technology, consume blockchain applications, exchange tokens and data, conduct business, and interact with each other.
In other words, blockchain bridges are a critical component of an interoperable future of the blockchain industry.
How do blockchain bridges work?
The most common use case for a blockchain bridge is token transfer. When you bridge 1 BTC to an Ethereum wallet, a blockchain bridge contract will lock your BTC and create an equivalent amount of Wrapped BTC (WBTC), which is an ERC20 token compatible with the Ethereum network. The amount of BTC you want to port gets locked in a smart contract, and the equivalent tokens on the destination blockchain network are issued or minted. A wrapped token is a tokenized version of another cryptocurrency. It’s pegged to the value of the asset it represents and typically can be redeemed for it (unwrapped) at any point.
Risks of Crypto Bridges
In order to overcome scalability problems and meet user demand, blockchain interoperability platforms are connecting competing networks through smart contract-based bridges.
In recent years, attackers have exploited vulnerabilities in the smart contracts powering some of these bridges with the result of misappropriated cryptocurrency. To avoid this situation, users should select trusted custodial solutions. Traders may also want to consider that introducing a single bottleneck for large-scale cross-chain transactions could be limiting to scalability and interoperability.
Bridges in modern web3
Blockchain bridges are critical to enhancing the blockchain industry’s interoperability and mass adoption. The need for blockchain bridges will likely continue to grow as the internet moves toward Web3. Future innovations may provide greater scalability and efficiency to users and developers. There could be innovative solutions to address the security risks associated with bridges.
The visionary moment in the internet’s history was when people realized that they could use it to send messages across different networks. Many of today’s most innovative and revolutionary applications rely on this interoperability, enabling people to connect with each other across global borders and share information in a matter of seconds.
Closing thoughts
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 numerous attacks on cross-chain bridges, the search for a more secure and robust bridge design continues. In Cyberscope we focus on contract security and conduct smart contract Audits for every type of contract including bridges.
