Blockchain bridges are often consideredone of the best solutions to overcome the problem of lack of interoperability, the main problem of current blockchain technology. The inability to cooperate between the chains causes high transaction costs and hinders the network.
Although quite efficient as a single entity, each blockchain is limited by its domain wall, and each network is restrictedby its rules and protocols. The blockchain bridge comes into play to overcome these differences.
Learn more about a blockchain bridge, its benefits and how it works byreading the following article.
What Are Blockchain Bridges?
Each blockchain network has its protocol, rules, and governance model. These differences are the primary causes of interoperability problems. Luckily, the blockchain bridge is the answer to fulfil your transfer needs on the blockchain network.
Ablockchain bridge is a technology that allows the transfer of tokens or data from one chain to another. This system can facilitate various transactions and transfers, both two-way and one-way. For example, the transfer process between layer 1 and layer 2 or between different networks without significant interruption.
Why Do We Need a Blockchain Bridge?
Blockchain bridges play a crucial role in connecting each isolated crypto ecosystem due to differences in rules and protocols. That way, the blockchain network will be connected to each other,enabling the smooth transfer of tokens or data between chains.
In addition to transfers between networks, blockchain bridges help users access new protocols on each chain to collaborate with different blockchain communities. It can be concluded that the blockchain bridge is a vital component necessaryfor the future of the blockchain industry.
How Do Blockchain Bridges Work?
Basically, a blockchain bridge does many things. One of them is for token transfers between blockchain networks.
For example, Bitcoin (BTC) and Ethereum (ETH) are the top cryptocurrency networks withdifferent protocols and rules. Through the blockchain bridge, BTC users can transfer coins to ETH or make payments at lower fees.
When you, as a BTC user, want to transfer to ETH, the blockchain bridge will store your coins. The blockchain bridge then creates a new coin (Wrapped BTC) equivalent in Ethereum that you can use.
In this case, cryptocurrencies have not gone anywhere. Instead, the number of coins you want to transfer will be locked in the smart contract after gaining access to the same amount of ETH. Should you need to return it to BTC, the remaining ETH will be burned. Later, BTC in the same amount will return to your wallet.
What Types of Blockchain Bridges Are There?
In general, blockchain bridges are categorized into the following types:
One-way and two-way bridges
As the name implies, a one-way bridge allows unidirectional asset transfer processes. An example is creating a Wrapped Bitcoin (WBTC) pegged to the equivalent of ETH. These tokens workfor transactions in ETH but not vice versa. Meanwhile, a two-way bridge can transfer assets between two blockchains.
The application of a sidechain bridge makes it possible to transfer assets between two separate blockchain networks, without the need for a third party. You do this by connecting two independent networks via the sidechain, which will work parallel to the main chain. An example is the Bitcoin-Ethereum Bridge which allows users to transfer coins and other assets to the respective blockchains.
Like a sidechain bridge, a cross-chain bridge also enables the transfer of assets between two different blockchain networks. The difference is that a cross-chain bridge does not require a separate chain to facilitate the transfer process. Instead, cross-chain bridges use other techniques like smart contracts to transfer assets between two networks directly. An example is the Cosmos Network, using an inter-chain communication system (ICC) to transfer assets with different blockchain networks.
List of Popular Blockchain Bridges
Several blockchain bridges often used to transfer crypto assets on different networks include:
This system is popular because it has various interesting features, including crypto transfers. Not only do you see all the balances of different types of coins, but you are also free to transfer balances to other blockchains. However, there are some blockchains that can only be used to make transfers to specific destinations.
Using cBridge allows you to interact using different blockchains and cryptocurrencies. You can access it directly from Binance if you don’t want to use the main bridge. But before carrying out any interaction, you must first connect the cBridge with a wallet.
This two-way bridge can be used to make transfers between the Ethereum or Bitcoin network and Avalanche. This platform also supports ERC-721 and ERC-20 functions, meaning that Avalanche Bridge can be used for cryptocurrency transfers and NFTs.
Benefits of Blockchain Bridges
Of course, there are many benefits and advantages that you will get by using a blockchain bridge. One of them is related to its ability to improve interoperability. Blockchain bridges enable the exchange of tokens, assets and data across severalblockchains, between layer 1 and layer 2 protocols and various sidechains.
Let’s say you want to buy BTC crypto using funds in Ethereum. First, you mustbuy Wrapped Bitcoin (WBTC) to access BTC on Ethereum. However, this is only the Ethereum version of Bitcoin. Not a real asset from Bitcoin.
In addition, the blockchain bridge can also increase scalability and efficiency. This is because blockchain bridge technology is able to handle many transactions at once. The transaction process can also take place faster with lower fees.
Blockchain Bridge Risks
Despite many benefits, the blockchain bridge is also vulnerable to security risks. Why is that? Because until now, the development of blockchain bridges is still in theearly stages. Itallows hackers more freedom to exploit system vulnerabilities to steal assets or disrupt transaction processes.
An example is the hacking of Solana’s Wormhole bridge in 2022. In this case, 120 thousand wETH tokens or the equivalent of US$ 325 million, were stolen by hackers. This is one of the biggest hacking cases affecting the blockchain bridge.
What is the Future of Blockchain Bridges?
The blockchain bridge is a technology that allows users to transfer their tokens from one network to another efficiently. Its presence is considered vital for increasing interoperability and mass adoption in the blockchain industry.
The belief is that the need for blockchain bridges will continue to grow as the internet moves towards Web3. Future blockchain innovations are expected to provide greater scalability and efficiency for users and developers.
Indeed, currently, the blockchain bridge is still imperfect and vulnerable to security problems. Even so, there may be innovative solutions to overcome these security risks. Moreover, developers often hold bug bounties to test the safety of the blockchain bridge.