Blockchain bridges, more commonly called cross-chain bridges, link two blockchains and allow people to move cryptocurrency from one chain over to the other. So, for example, if you have bitcoin but you want to spend it like Ethereum currency, you can do that through the bridge.
A primary issue of blockchain was the lack of ability to collaborate. Although nimble and somewhat proficient alone, each blockchain is restricted by its own domain’s boundaries. This often resulted in high transaction costs and congestion.
Blockchain bridges act as a go-between for two separate platforms that need to share data, feedback, or other information. These different blockchains each have their own rules and operate with different types of coins; the bridge provides a consistent connection so users can move easily between them.
Cross-chain bridges that connect various blockchains greatly improve the experience for most cryptocurrency users. Though Layer 2 solutions exist to achieve similar goals, they come with trade-offs like being slower or not compatible with other systems. Cross-chain bridges don’t have these limitations because they aren’t dependent on any one blockchain.
How do blockchain bridges work?
The most popular use for blockchain bridges is transferring tokens between cryptocurrency networks, but they can also do other things like convert smart contracts and send data. For example, the two largest cryptocurrency networks – bitcoin and Ethereum – have completely different rules and protocols.
However, through a blockchain bridge, bitcoin users can transfer their coins to Ethereum in order to take advantage of the various opportunities offered there that they would otherwise not be able to on the bitcoin blockchain.
The blockchain bridge will enable you to transfer some of your bitcoin to Ethereum by holding your coin and creating equivalents in ETH. Instead of actual movement, the desired BTC transfer gets locked in a smart contract while you gain access to an equal amount of ETH. If you want to convert back to BTC, the bridge will burn the ETH–which may have changed value since being transferred–and returns an equal amount of BTC originally specified by you into your wallet.
In order to do this repeatedly, you would have to convert your bitcoin into ETH on a trading platform, withdraw it to a wallet, and then deposit it once again onto another exchange. By the time it arrived there, you would have accrued more fees than what you originally intended. To give you some perspective: think of how easily you can use your Visa to pay for MasterCard bills; or how PayPal can be used for all online purchases no matter the store website.
Systems that follow different protocols can work together efficiently because interoperability has always been a key element in the financial system. Blockchain technology is becoming increasingly commonplace, and solutions like cross-chain bridges are helping it become more normalized.
Although a blockchain bridge might be the most practical method for reaping benefits from the blockchain ecosystem, there are also certain disadvantages to this approach that should be taken into consideration by everyone in the blockchain landscape. Just like Web 3.0, bridges between blockchains are still in development and no single Design has been determined as being optimal yet by the community of developers working on this problem.
Furthermore, the risks associated with a blockchain bridge vary depending on the type. These risks have different effects on users and blockchain community members. For example, a trusted blockchain bridge raises concerns about potential censorship from centralized control. Moreover, exposing assets to malicious bridge operators through custodial risk could also harm users.
However, a trustless bridge also comes with the dangers of malware or glitches in the smart contract code. Also, since users are responsible for their assets in a trustless system, there is always a chance they could lose them through user error.
Trust-Based vs Trustless Blockchain Bridges
Centralization is one downside of blockchain bridges that aren’t often spoken about. In order to convert your coins to another cryptocurrency, you need to entrust them to someone else, which means giving up control over them.
If you’ve ever seen a wrapped token—such as wBTC—this is the process that creates it. With this method, they take your BTC and ‘wrap’ it in an ERC-20 contract, making it have the same qualities as an Ethereum token. When you want to quickly transfer a large sum of cryptocurrency, trust-based bridges are fast and affordable. However, there aren’t many reliable services to choose from. If you use one of the lesser-known brands, you’re taking on more risk — which isn’t worth it for small traders.
Alternatives are decentralized blockchain bridges or trustless bridges. These act like actual blockchains by having individual networks validate transactions. This makes users feel safer when they’re transferring coins.
Trustless bridges are a great option for those worried about their coins ending up in the wrong hands. The downside to using decentralized bridges is that they rely on freelance services. This can be problematic because freelancers are not always held accountable if something goes wrong during the process.
Here are some of the most popular blockchain bridges people use to transfer cryptocurrency.
- Binance Bridge – Decentralized bridge provides access to a large number of tradable cryptocurrencies, including but not limited to Ethereum, Solana, and TRON.
- AnySwap – This platform is popular for more than just transferring crypto. Once you connect a wallet, you can see your balances across different types of coins. You can also freely transfer funds from one place to another. However, there are certain blockchains where you can only transfer to a specific destination.
- cBridge – You can access this solution directly from Binance, or you can use its main bridge. Similar to any trustless bridge, cBridge allows you to interact with a variety of blockchains and cryptocurrencies. One downside is that you need to connect a wallet before using the platform.
Decentralization has always been one of the defining factors of blockchain technology, which makes it a priority over other operative improvements, such as scalability. Developers are usually reluctant to make big changes, especially if those changes deviate from the decentralizing philosophy.
However, blockchain bridges are a sign that they are starting to move past that notion. We may be slowly progressing toward an innovative and normalized crypto economy, but any progress is better than limiting ourselves to what already exists.
The following outlines the basics of blockchain bridges, their working, types, and advantages to show how they have the potential to shape the future of blockchain. The blockchain community can leverage bridges for interoperability and scalability benefits, as well as offer true decentralization. With the growth in blockchain bridge projects, the Web3 ecosystem could become more user-friendly and immersive.
The easy transfer of assets back and forth between different blockchain networks can help developers break through traditional barriers in dApp development. With the continuing popularity growth of blockchain applications like DeFi apps, NFTs and DAOs, bridges offer users a much more seamless experience. Learn more about web3 and the importance of a blockchain bridge for the future now.