Guest Post by OneArt: Blockchain Bridge Explained: What is It and How Does It Work?
- August 21, 2023
- Posted by: New
- Category: FinTech
Blockchain bridges assist in bridging the gaps between different blockchain networks and connecting the disparate crypto ecosystems. Bridges allow vital data, assets, smart contracts, and even instructions and feedback to be shared between the various layers of a blockchain and between multiple blockchains. Every blockchain project features specific defining parameters unique to the project, which create problems with interoperability. The working of a blockchain bridge can involve exchange of decentralized identities, off-chain information and smart contract calls. The two primary types of blockchain bridges are custodial and trustless.
On this note, always double-check against phishing to ensure you transfer funds to a genuine bridge application. Users are also responsible for their funds because there is no centralized system to do that for them. Manual checkpoints are similar to a trusted model as it depends upon a third party, i.e., the officials, for its operations. As a user, you trust the officials to make the right decisions and use your private information correctly. The Wormhole incident was quickly eclipsed by the attack on the Ronin Bridge resulting in the loss of an estimated $625million of tokens at the end of March.
Most Popular Blockchain Bridges
Another possible technical restriction is the limited speed of transactions. A bandwidth limitation in a particular chain can hinder the significant interoperability function of the blockchain industry. The solution to making blockchain interoperable is cross-chain bridges. With a TVL of over $288 million, Portal is one of the top bridges in Web3, according to DeFi Lama. Finally, some choose bridges mainly because of personal preferences and how it is more native compared to exchanges. DeFi is booming, and scammers now come up with cloned websites to defraud unsuspecting users.
By minting tBTC, users can use a Bitcoin-equivalent asset to interact with Ethereum dApps. This includes using Bitcoin’s value to borrow and lend, mint stablecoins, provide liquidity, and much more. Bridges streamline the process of moving digital assets from one blockchain to another.
What Is a Blockchain Bridge and How Does it Work?
Users can assess the risks based on the quality of external audits and the reputation of the founding team. Poly Network is one of the most popular cross-chain bridges with over $335 million TVL and supports 32 prominent blockchains. You can bridge your asset from chain A to chain B to explore some dApps in chain B. Trusted bridges are more suitable for those prioritizing speed and lower gas fees over cross-chain security. But a slightly different mechanism happens when you bridge tokens back to the original blockchain—for example, exchanging WETH on Cardano for ETH on Ethereum.
WBTC is your bitcoin, but wrapped in the ERC20 token standard to become compatible with the Ethereum network. A blockchain bridge is a portal connecting several distinct blockchains, enabling users to transfer data and assets across different blockchains. While trustless bridges might not be as cheap as their counterparts, they are more secure if the underlying technology has proven its worth.
Advantages of blockchain bridges
Self check-in is similar to a trustless model as it removes the operator’s role and uses technology for its operations. Users always remain in control of their data and don’t have to trust a third party with their private information. Let’s say you have ETH on Ethereum Mainnet but want cheaper transaction fees to explore different dapps. By bridging your ETH from the Mainnet to an Ethereum L2 rollup, you can enjoy lower transaction fees. Build your identity as a certified blockchain expert with 101 Blockchains’ Blockchain Certifications designed to provide enhanced career prospects.
Porting tokens cross-chain can help solve scalability issues related to high demand. In 2017, the first blockchain game of sorts, CryptoKitties, was released to the public. Due to extremely high demand and Ethereum’s network limitations at the time, the network ended up congested. Fees soared, and all transactions on Ethereum took between hours and days. In short, a user connects to the system and transfers tokens to another address paying a transaction fee.
It’s pegged to the value of the asset it represents and typically can be redeemed for it (unwrapped) at any point. Future advancements in blockchain bridges might give users and developers more scalability and efficiency. And https://www.xcritical.com/ there might be found creative ways to deal with the security issues posed by bridges. Building an open, decentralized, and interoperable blockchain space requires using blockchain bridges, and thereon lies their relevance.
- Fees soared, and all transactions on Ethereum took between hours and days.
- Bridges are crucial to onboarding users onto Ethereum L2s, and even for users who want to explore different ecosystems.
- One of the most common use cases for the blockchain bridges or crypto bridges is to own native crypto assets.
- Whether it is a trusted or trustless bridge, both can be infiltrated, resulting in the permanent loss of funds.
- Using a blockchain bridge, users can transfer assets from one blockchain to another, allowing them to access different networks and use different services.
There are thousands of cryptocurrencies out there, and new projects spring up all the time. But before you invest across multiple chains, it’s important to understand exactly how blockchain bridges work and why this technology is critical for crypto’s success. A trusted https://www.xcritical.com/blog/what-is-a-blockchain-bridge-and-how-it-works/ bridge is a cross-chain protocol controlled by a centralized entity. During bridging, the asset control moves from the users to the centralized authority. Users have to “trust” the integrity and efficiency of the centralized entity to perform the transaction.