What is a Blockchain Bridge & Why it is Important?

Down the road, users may encounter more cross-chain applications that allow them to use their tokens on one blockchain as collateral for acquiring assets on another blockchain. In February of 2022, the blockchain bridge Wormhole was targeted by a massive exploit that resulted in the loss of funds totaling nearly $330 million. And in August of 2022, the popular crypto bridge Nomad was hit by hackers who made away with nearly $200 million worth of crypto. Crypto bridges are the solution for investors who want to take digital assets from one chain and spend, swap, or invest those assets on another blockchain.

• This was originally run as a blockchain bridge by BitGo, and in 2022 is supported and available via a growing partner network of exchanges.
• Bifrost has developed an EOS network bridge that enables trustless cross-chain asset transfer.
• Wrapped Bitcoin and similar projects, such as imBTC and HBTC, each provide a simple and effective solution to the problem of moving value across siloed blockchains.
• It is decentralized and insured by design, offering a unified standard for cross-chain transfers.
• Wormhole locks in an origin token with a smart contract, wrapping the coin in a Wormhole minted token on the target blockchain.

No other cross-chain bridge service supports as many token types as Multichain. When choosing a cross-chain bridge, users should be sure the specific blockchain network https://xcritical.com/ — as well as token or NFT — they are looking to bridge is supported. Different networks also have varying fees, which can be volatile and change quickly.

While data stored on the chain is fully transparent, the infrastructure of the network is designed to serve a stand-alone ecosystem. Although blockchain technology has proven to be effective in some scenarios, it has a siloed nature, preventing the progress of DeFi and other decentralized applications. Rather than utilizing the functionalities of different dApps to facilitate growth, the technology is limited due to the lack of communication between separate chains. The internet is a revolutionary system partly because of its high interoperability. Blockchain bridges are critical to enhancing the blockchain industry’s interoperability and mass adoption.

The Importance of KYC for Crypto Exchanges

The architecture combines the proof-of-stake consensus model and the Plasma Framework. Polygon has about 65,000 TPS on one single chain and a block time of two seconds. The platform was launched in 2017, and it is powered by the MATIC token. The cryptocurrency industry is populated by numerous blockchains that generate value and utility for investors, but these blockchains operate independently of one another. This platform was developed by the Germany-based Tixl organization, which rebranded as the Autobahn Network in March 2022.

Imagine different banks worked in silos with no integration between any of them. If you operate with one bank and your friend operates with another, trying to move money across to the other would not only be a headache, but it might be downright impossible. For this reason, interoperability – and the lack thereof – is one of the biggest problems blockchains are facing at the moment.

If you have Bitcoin and would like to move some of it to Ethereum, the blockchain bridge will retain your Bitcoin and convert it into similar amounts of ETH that you can use. Your Bitcoin is locked in a smart contract while you receive access to an equivalent amount of ETH. If you own assets on Ethereum Mainnet, ideally, you would need to use a bridge to transfer your assets from Ethereum to Bitcoin to possess native Bitcoin. Your wrapped Bitcoin will be bridged and converted into native Bitcoin.

Intending to make different blockchains accessible and interoperable, blockchain bridges fill in various gaps in the crypto ecosystem. Today, interoperability between blockchains is facilitated by many of the best blockchain bridges in the crypto space. Wormhole is a communication bridge that links Solana to other decentralized financial networks. The bridge enables the transfer of assets between blockchains, with Solana’s fast transaction speeds and low costs.

Scope for a Blockchain Bridge

The advantages of a blockchain bridge can offer benefits to developers and investors alongside the blockchain networks connected by the bridge. Blockchain bridges can offer better opportunities for increasing the number of users and more opportunities for development and transfer of assets. The smooth transfer of assets between blockchain networks is made possible by cross-chain technology, which lowers traffic and gas costs.

Features and Tokenomics CoinMarketCap takes a deep dive into Hashflow, a decentralized exchange guaranteeing the best token swap prices on the market. While bridges open up new markets and work toward a brighter multi-chain future, they come with their own security challenges, as proven by a huge $326 million exploit on the nascent Wormhole bridge in February 2022. For instance, sending a Solana coin to an Ethereum wallet via a bridge would involve the Ethereum wallet receiving a wrapped token, essentially, an ERC20 version of the original SOL token. That’s why true cross-chain token transfers are impossible – after all, tokens that are designed to run on chain A adhere to a different standard than the standard required by chain B. But while this obstacle may seem insurmountable, it can be circumvented.

In the world of blockchains, a cross-chain bridge serves a somewhat analogous purpose. The Cosmos Gravity bridge transfers funds and data back and forth between Ethereum and Cosmos. The Gravity module is implemented on the Cosmos chain and is responsible for minting tokens. Interlay is a trustless bridge between Bitcoin to Polkadot, which allows the minting of Bitcoin-backed assets onto Polkadot as PolkaBTC. Other networks such as EOS and more have several token bridges designed between them.

What Is Blockchain Interoperability?

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List of blockchain bridges focused on addressing unique user requirements. Here is an outline of the notable blockchain bridge variants you can use for transferring assets and information between blockchain networks. Just like physical bridges, the blockchain bridge connects two separate blockchain networks or applications. Future advancements in blockchain bridges might give users and developers more scalability and efficiency.

Cosmos Gravity Bridge

All blockchains have their limitations, that’s exactly why bridges have been created. The main point of a blockchain bridge is to act as a way for different blockchains to interact with each other. Many blockchains lack interoperability, meaning that they can’t communicate well with each other on their own.

Then, you must deposit the specified amount of crypto to the address generated by the bridge. Once the crypto is received at the other end, the blockchain bridge will send you the wrapped token equivalent to the crypto’s value. Different blockchain bridges are available today, Ethereum bridge, Binance bridge, etc.

Cross-Chain Bridge has support for bridging both tokens and NFTs across multiple networks. Another approach to enabling cross-chain bridge transfers is by using a liquidity pool. With a liquidity pool, a cross-chain bridge provider holds inventory — or pools — of various coins where one can be exchanged for another.

The Future Of Blockchain Bridges

RSK bridge contracts are upgradeable, ensuring a smoother move to the decentralized bridge in the future. Users can move tokens between networks using the token bridge dapp with the Nifty wallet or Metamask with a custom network setup. Ronin was created by the Vietnamese company Sky Mavis, which develops the popular NFT-based video game Axie erc20 vs kcc Infinity. In the case of this bridge hack, it seems attackers used social engineering to trick their way into accessing the private encryption keys used to verify transactions on the network. And the way these keys were set up to validate transactions was not maximally rigorous, allowing attackers to approve their malicious withdrawals.

Cross-chain bridges are not limited to any specific cryptocurrency or network. Any blockchain network may be compatible with cross-chain bridges if software developers with the right skills and knowledge create one. To send your bitcoin to your Ethereum wallet, you can use Wrapped Bitcoin . Wrapped Bitcoin is a cross-chain bridge that creates a new WBTC token on the Ethereum network and holds a bitcoin in a smart contract on the Bitcoin network. The number of WBTC is always equal to the number of bitcoin in the WBTC cross-chain bridge smart contract. After using the cross-chain bridge, you have a Bitcoin-backed ERC-20 token you can use on the Ethereum network.

Rubic Bridge – soon to be integrated with Ledger Live

Binance Bridge, for example, you will first select the chain you’d like to bridge from and specify the amount. You will then deposit the crypto to an address generated by Binance Bridge. After the crypto is sent to the address during the time window, Binance Bridge will send you an equivalent amount of wrapped tokens on the other blockchain. If you want to convert your funds back, you simply go through the reverse process. Blockchain bridge projects to improve interoperability among different blockchain networks.

All wrapped bitcoin is held in custody by BitGo, making it a centralized bridge. Conversely, bridged assets on Wormhole are held by the protocol, meaning it is more decentralized. Blockchain networks are decentralized and rely on their own governance rules and communities.

In the past years, she came up with many clever ideas that brought scalability, anonymity and more features to the open blockchains. She has a keen interest in topics like Blockchain, NFTs, Defis, etc., and is currently working with 101 Blockchains as a content writer and customer relationship specialist. This concept is a lot similar to Layer 2 solutions even though the two systems have different purposes. Layer 2 is built on top of an existing blockchain so while it does improve speed, the lack of interoperability remains. Cross-chain bridges are also independent entities that don’t belong to any blockchain.