What is a Cross Chain Bridge & Why Should You Care?
Web3 has evolved into an ecosystem where we have different blockchains and scaling solutions designed with their unique set of features and trade-offs. Since the number of blockchain solutions has increased, so does the demand to move assets. Thus, cross chain bridges came as a need of the hour.
Since 2008, when Bitcoin Whitepaper was published, blockchain technology has come a long way. We’ve seen an explosion of blockchain networks with various functionality and designs. There are 100+ active layer 1 blockchain protocols, each of them different in terms of applications, security models, and design trade-offs.
Decentralization is one of the key value propositions of blockchain technology that allows networks to be owned and run by millions of stakeholders rather than more centralized corporate models.
As the number of blockchain networks is growing exponentially, they remain cut off from one another. The lack of interaction among different blockchains is hindering the advancement of technology against its key value proposition — Decentralization.
With so much innovation, economic growth, and free trade, several projects have realized this problem and are trying to tackle it by building cross-chain bridges between networks. This move will unify an increasingly fragmented landscape by allowing applications to build on each other’s services.
What Is A Cross Chain Bridge & How Does It Work?
A cross chain bridge is a connection that lets you transfer assets and arbitrary data from one blockchain to another. It solves blockchain’s main pain point — lack of interoperability.
Both chains may have a different set of protocols. But Crypto bridging creates synthetic derivatives for both chains to interoperate securely for a successful transfer of data.
A blockchain bridge does a lot of cool stuff such as sending data and converting smart contracts. However, the most common utility it offers is — token transfer.
The two biggest cryptocurrency networks, Bitcoin and Ethereum, have radically different rules and protocols. Bitcoin users can move their BTCs to Ethereum through a cross chain bridge and use them in ways that would otherwise be impossible on the bitcoin network.
For example:
When you have bitcoin and want to move some of it to Ethereum, the blockchain bridge will retain your coin and convert it to $ETH equivalents for you to utilize. In reality, none of the involved cryptocurrency changes hands. Rather, you get access to an equivalent amount of $ETH while the quantity of $BTC you want to send is still locked in a smart contract.
When you convert back to $BTC, the $ETH you had, or whatever was left of it, is burned, and an equal quantity of $BTC is returned to your wallet.
Explore 4 Most Popular Use Cases Of A Cross Chain Bridge
Interoperability across blockchains enables users to enjoy the benefits of both without compromising the benefits of the host chain. This has a number of ramifications and applications. The following are some of the scenarios where you can utilize crypto bridging:
1. Cross Chain Interoperability
You can move your digital assets using cross chain bridges between a blockchain like Bitcoin, which has a large market cap but few independent dApps, to one like Ethereum, which has a robust DeFi ecosystem and requires more liquidity.
2. Greater Scalability
Greater scalability is made possible by bridges designed for substantial transaction volumes without requiring users and developers to lose their liquidity and network effect of the original chains. Before the full launch of Ethereum 2.0, this is especially crucial because Ethereum continues to experience congestion problems.
3. Lower Transaction Fees
By using a blockchain bridge, you can enjoy lower transaction fees with utmost efficiency.
You can easily make and receive micro-transfers without paying high transaction fees. This enables better e-commerce and gaming experience.
4. Easy Access to Native Crypto Assets
Let’s assume that you have funds on Ethereum mainnet, and you wish to own native Bitcoin ($BTC). In order to gain exposure to $BTC on Ethereum, you need to do the following:
- You first need to buy $WBTC (the Ethereum version of Bitcoin).
- Now, you need to utilize crypto bridging to bridge your assets from Ethereum to Bitcoin.
- The cross chain bridge will bridge your $WBTC and convert it into native $BTC.
Another possibility is that you have $BTC and want to use it with Ethereum DeFi protocols. In this case, you’d need to utilize crypto bridging the different way, from $BTC to $WBTC, which can then be utilized as an asset on the Ethereum network.
Different Categories of Cross Chain Bridges
We can categorize cross chain bridges based on their various characteristics, such as the kinds of blockchains they support and the trust mechanisms they employ.
According to their characteristics, bridges can be broadly categorized as follows:
Trust-based vs Trustless Blockchain Bridges
One common categorization for cross chain bridges is to divide them into two kinds: trust-based and trustless:
| Trust-based Bridges (Centralized) | Trustless Bridges (Decentralized) | |
| 1 | Trust-based crypto bridging requires users to put their trust in a central entity to operate the system. | Trustless crypto bridging, on the other hand, relies on smart contracts to operate securely. |
| 2 | You give up control of your assets. | You remain in control of your assets through smart contracts. |
| 3 | You need to do extensive research to ensure whether the operator is trustworthy or not. | In this case, the security of the bridge is determined by the underlying blockchain. |
In a nutshell, trust-based blockchain bridges come with trust assumptions and are centralized, whereas trustless bridges are trust-minimized and operate in a decentralized manner.
Cross Chain Bridges: Classified By Functionality
Another categorization is based on the operation of a cross chain bridge. Wrapped asset bridges and sidechain bridges are two examples.
Wrapped asset bridges facilitate crypto interoperability, for example, by wrapping bitcoins to Wrapped BTC ($WBTC), an ERC20 token interoperable with the Ethereum network. Sidechain bridges connect the parent blockchain to its child sidechain, allowing the two to communicate. They are required because the parent and sidechain consensus algorithms may differ.
A sidechain bridge, unlike a bridge that connects two fully independent blockchains, connects a parent blockchain to its child. Because the parent and child follow distinct consensus norms, communication between them necessitates the usage of a bridge.
Cross Chain Bridges: Classified By Mechanisms
Both one-way and two-way bridges are available.
A one-way bridge allows you to bridge assets to one destination blockchain but restricts you from returning to your native blockchain.
Two-way bridges, however, allow you to bridge assets in both directions.
What Are Some Of The Best Crypto Bridging Solutions?
Here’s the list of some of the most popular cross chain blockchain bridges that you can utilize for transferring your digital assets.
Binance Bridge
The goal of the Binance Bridge Project is to improve blockchain interoperability. It enables anyone to convert their cryptocurrency assets into wrapped tokens for use on Binance Chain and Binance Smart Chain, and vice versa.
This integrates the Binance Chain ecosystem with digital assets like $BTC, $ETH, $USDT, $LTC, $XRP, $LINK, $ATOM, $DOT, $XTZ, $ONT, and among others.
The Benefits of Using Binance Bridge:
- Trusted bridge for transferring assets between Ethereum and Binance Smart Chain.
- Quick turnaround times and reasonable transaction costs.
- At any time, users can exchange wrapped tokens for original assets.
- The best way of accessing popular BSC DeFi dApps (PancakeSwap, Venus, BeefyFinance).
Solana’s Wormhole Bridge
Wormhole is well-known for building bridges between chains to make it easier for information of any kind to be transferred between chains.
It serves as a communication between Solana and other leading decentralized finance (DeFi) networks. Solana’s rapid speed and low cost enable existing projects, platforms, and communities to migrate tokenized assets across blockchains with ease.
The Benefits of Using Solana’s Wormhole Bridge:
- A non-custodial bridge utilized for moving assets between Solana and Ethereum but also supports other chains like BSC, Polygon, Avalanche, Terra & Oasis.
- It provides seamless access to Solana’s low-cost and high-throughput blockchain.
- Increases the security of tokens by using smart contracts to oversee the lock-and-mint procedure.
- Support both token and NFT transfers.
Polygon Bridge
Polygon is a platform for building scaling solutions and Ethereum-compatible blockchain networks. By giving developers the means to create scalable decentralized apps (DApps) and boost transaction throughput while paying reduced fees, it seeks to improve the Ethereum ecosystem. Aave, Curve, and SushiSwap are just a few of the well-known Decentralized Finance (DeFi) systems that have already been set up on Polygon.
You must move your assets to the Polygon network in order to connect with DApps and tools there. This is where Polygon Bridge comes into play.
The Polygon Bridge acts as a trustless cross-chain transaction channel connecting Polygon with Ethereum. The use of smart contracts enables users to move ERC tokens and non-fungible tokens (NFTs) to the Polygon sidechain.
The Benefits of Using Polygon Bridge:
- A non-custodial bridge utilized for transferring digital assets between Polygon sidechain and Ethereum Mainnet.
- You can bridge tokens as well as NFTs from Polygon to Ethereum and vice-versa.
- Lower gas fees.
- It uses a decentralized bridging mechanism to increase the security of your assets.
Celer cBridge
Celer cBridge is a trustless and non-custodial cross chain token bridge that supports 110+ tokens across 30+ blockchains and layer-2 rollups.
It is extremely effective to extend the current capabilities and services offered by the Celer State Guardian Network (SGN). It provides intriguing developer-oriented features like broad message bridging for situations like cross-chain DEX and NFTs.
The cBridge is one of the many cross chain bridges that support EVM-compatible blockchains.
The Benefits of Using Celer cBridge:
- Deep liquidity with larger cross chain transfer support.
- Native gas token unwrapping.
- Supports many tokens and multiple chains, including Ethereum, EVM-compatible chains, and L2 protocols.
Avalanche Bridge
Since its inception in August last year, the Avalanche Bridge has made it possible to transfer ERC20 assets securely between the Ethereum and Avalanche networks in no time. In less than a year since its launch, this bridge has executed more than $50 billion in transfers and assisted in the thriving Avalanche DeFi ecosystem’s rapid expansion.
The Benefits of Using Avalanche Bridge:
- Enables fast and secure transfers of ERC20 assets between the Ethereum and Avalanche networks.
- Lower gas fees.
- Providing a seamless bridging experience for users.
UniFarm’s Setu
Setu is a newly launched cross chain bridge by UniFarm that has gone a step ahead of the normal cross-chain bridges in the ecosystem.
When you use any normal bridge to swap your tokens from one chain to another, a part of your tokens is taken away by the bridge itself as their service charge.
If you’re using Setu, you bridge a certain token from one chain and get an equal amount of tokens on the other chain within a blink of an eye.
The Benefits of Using UniFarm’s Setu Bridge:
- A hassle-free bridging solution that is fast and secure.
- As mentioned above, you get the same amount of tokens that you want to bridge.
- You get to provide liquidity of a certain token and get incentivized.
- You can claim your confirmed rewards anytime while your principal remains safe.
Are There Any Potential Risks of Using Cross Chain Bridges?
Yes, there are!
Indeed, a cross chain bridge comes with numerous benefits, but it also has some risks associated with it. Let’s examine a few blockchain bridge downsides in more detail:
Technology Risk
There’s always a technology-based risk associated with the cross chain bridge. For example,
Malicious attacks, spamming, human error, buggy code, software failure, etc.
Smart Contract Risk
Trustless bridges aim to reduce trust assumptions and assure users of improved safety. Trustless blockchain bridges frequently use oracles and smart contracts to control the crypto bridging.
The issue is simple: smart contracts can always be exploited.
The use of vulnerable contracts led to some of the greatest bridge breaches, including the $600 million Poly Network exploit and the $350 million Wormhole attack.
Custodial Risk
Trusted bridges are vulnerable to custodians going rogue and stealing user money. Some bridges prevent this problem by forcing custodians to provide a BOND, which can be slashed in the event of malicious behavior.
Censorship Risk
A cross-chain bridge may stop functioning and impact users if validators or custodians fail to perform their tasks. Additionally, this raises the possibility of censorship, particularly if trusted sources of funding refuse to release funds.
In a nutshell, users’ funds are at risk if:
- The bridge gets hacked.
- The operators have malicious intent in a trusted bridge.
- The underlying code is compromised.
- The user makes an error.
- There’s a bug in the smart contract.
The Future of Cross Chain Bridges
As useful as the concept appears to be, it is not currently the most popular among many members of the community.
On the one hand, Vitalik Buterin recently expressed his doubts about the concept, saying that cross chain bridges could enable cross chain 51% attacks.
On the other hand, spoofing-based cyberattacks on cross chain bridges that took advantage of flaws in the smart contract code, as happened with Wormhole and Qubit, made critics wonder whether cross chain bridges can be anything other than a security liability from a purely technical standpoint.
Is it time to abandon the concept of an ‘internet of blockchains’ connected by bridges?
Let’s find out!
Recalling Malicious Attacks on Cross Chain Bridges
As we’ve seen in the case of Wormhole, Qubit, and Poly Network, the attackers could exploit flaws in the smart contract logic in order to food the bridges spoofed data.
The idea was to get access to the tokens on the destination blockchain without actually depositing anything onto the bridge on the native blockchain.
Actually, the commonality between these hacks is that they included manipulating or exploiting the logic behind a certain procedure for financial gains. A cross chain blockchain bridge connects two layer-1 networks, but layer-2 protocols also function similarly.
As an illustration, when you stake a non-native token into a yield farm, two smart contracts — the ones driving the token and the farm — interact. The criminal will take advantage of any logical holes in the underlying sequences that exist.
So, if we’re willing to say goodbye to cross-chain bridges owing to a number of defective implementations, we might as well silo smart contracts, returning the crypto industry to its own stone age.
The Bigger Point
There is a more important point to be addressed here:
Don’t hold the idea responsible for poor implementation!
Since the hackers always follow the money, they find it highly rewarding to target protocols that many people use.
Everything with the value that is connected to the internet follows the same reasoning.
Banks are also susceptible to hacking, but we’re not in a rush to shut them all down because they’re so important to the whole economy.
It is sensible to restrain our rage because cross chain bridges also play a significant function in the decentralized world.
Blockchain is still a young technology, and the big and intelligent community that surrounds it is still figuring out the best security procedures. Cross chain bridges justify this even more.
They are currently a developing solution that makes it possible to transfer value and data across networks to create something more than the sum of its components. Although there is a learning curve, it’s worth mastering.
Although Buterin’s argument goes beyond implementation, there are still certain limitations.
It is possible for a malicious attacker in charge of 51% of a small blockchain’s hash rate or staked tokens to attempt to steal Ether ($ETH) that is locked on the bridge at the other end. The highest conceivable restriction on how much the attacker can deposit into the bridge is the blockchain’s market capitalization. Therefore the attack’s volume would unlikely exceed that amount. Smaller chains have lower market caps. Therefore the harm to Ethereum would be minor, and the attacker’s return on investment would be questionable.
Even though the majority of cross chain bridges in use today have some shortcomings, it is still too early to dismiss this idea.
Such bridges can transfer assets other than standard tokens, such as non-fungible tokens and zero-knowledge identity proofs, which makes them highly beneficial to the entire blockchain ecosystem.
A technology that increases the value of any project by making it more accessible to more people should not be seen in solely zero-sum terms, and the connectivity it promises is worth taking chances for.
Research & Development Across All Cross Chain Bridge Types
Sure, crypto bridging enables the blockchain ecosystem to innovate but also carries significant risks if teams skimp on Research & Development.
Teams should be rigorous in choosing security above time-to-market despite bridge builders’ increasingly fragmented and competitive landscape.
While having a single, uniform bridge for all purposes would have been ideal, it is more likely that multiple bridge types will be the most appropriate for various applications (e.g., asset transfer, contract calls, minting tokens).
What are the qualities of the best cross chain blockchain bridges?
The qualities of the best bridges include:
- Secure
- Interconnected
- Fast
- Capital-efficient
- Cost-effective
- Censorship-resistant
If we want to achieve the goal of an “internet of blockchains,” we must optimize these qualities.
Since it is still early, it is likely that the ideal designs for blockchain bridges have not yet been found. However, across all bridge types, there are several intriguing areas for research and development:
Bridge Aggregation
Aggregators like Li Finance could enhance the user experience for developers and end users, even though bridge usage would probably follow a power law for certain assets and corridors.
Scaling Liquidity for Liquidity Networks
These are perhaps the fastest asset transfer bridges, with intriguing architectural trade-offs between trust and liquidity.
For example, a bonded validator type approach can enable liquidity networks to outsource capital provisioning, and the router can also be recognized as a threshold multisig with bonded liquidity.
Moving From Trusted To Bonded Models
While “social contracts” are a risky way to secure billions of dollars in user money, bonded validators are far less capital efficient.
Furthermore, complicated threshold signature techniques don’t significantly diminish trust in these systems.
The fact that a signer is part of a group doesn’t change the fact that they are still a trusted third party. Users effectively transfer their funds to outside custodians without collateralization.
Moving From Bonded To Insured Models
Losing money is a poor user experience. Bonded validators and relayers deter malicious conduct, but protocols could go further and directly compensate users with monies that have been cut.
Decreasing Costs Of Header Verification
Finding solutions to reduce block header verification costs for light clients could help us get closer to fully universal and trustless interoperability. A bridge to an L2 would be an intriguing idea to reduce such costs. Implementing a Tendermint lite client on zkSync is one example.
Conclusion
Given that bridges are a byproduct of blockchains, the list above only scratches the surface of cross-chain exchanges.
Building the open, decentralized network of the future demands an open, collaborative, and interoperable mindset, with teams from the blockchain sector cooperating to introduce a new paradigm. In an effort to foster increased creativity, user adoption, and technological relevance, blockchain bridges offer a viable solution to get over the Balkanization of blockchain networks.
Bridges can help us advance toward the next-generation decentralized web by allowing various blockchain protocols to communicate with one another, eliminating the need for strong centralized mediators that don’t have users’ best interests in mind.
Crypto bridging, however, requires a little patience and prior knowledge of leveraging blockchain bridges, as described in walkthrough articles and step-by-step instructions. Users should always exercise caution before using any cross chain bridges or decentralized finance (DeFi) applications because one mistake and the money is gone.
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