What Are Blockchain Bridges?

Blockchain Bridges

The finance industry has seen significant shifts over the past few years with the growing popularity of cryptocurrency. The success of cryptocurrencies has prompted evangelists to propose that the next version of the internet, Web3, should also be driven by blockchain. Development platforms like Ethereum are already working towards making this a reality, creating tokenized applications like DeFi. But as Web3 development creates a complex ecosystem of blockchain scaling solutions, the number of blockchain protocols is also increasing.

To create seamless integrations between these protocols so that assets can move between different chains without trouble, we need blockchain bridges. This article will look at crypto bridging, how blockchain bridges connect blockchain worlds, and why they are pivotal in building Web3.

 

What Is a Blockchain Bridge?

Blockchain bridges are connections between two blockchain ecosystems. Just as a physical bridge connects two physical locations, a blockchain bridge integrates two different blockchain worlds running on similar or varying protocols. This connection allows the transfer of data and tokens between the ecosystems. Bridges help blockchains propagate the ‘distributed ledgers’ beyond the local limits of a mesh network, creating seamless interconnections.

All blockchains are developed in isolated environments, with different rules and consensus mechanisms inside each network. Therefore, two blockchains cannot communicate natively, meaning tokens and assets cannot move freely from one blockchain to another. This is where blockchain bridges come into the equation, as they are the middleware between two ecosystems.

For example, someone wants to exchange Bitcoin for Ethereum ETH. For this to happen, you will need an exchange that transforms Bitcoin into Ethereum. A Bitcoin to Ethereum bridge, such as tBTC, makes this action occur seamlessly.

How Does a Blockchain Bridge Work?

Bridging in blockchain has a few steps that work in tandem to transmit information (assets, contract calls, proofs, state) from the source blockchain to the destination blockchain.

  • Monitoring: An agent known as an oracle, validator, or relayer monitors the state on the source blockchain.
 
  • Message Relaying: When an actor discovers an event happening on the blockchain, it initiates an information transfer from the source blockchain to the destination blockchain.
 
  • Consensus: In some cases, monitoring actors need to be in consensus to be able to transmit information to the destination blockchain.
 
  • Signing: Actors or agents cryptographically sign information being sent to another blockchain.
 

Blockchain bridges are based on the Burn-and-Mint protocol. Tokens are not transferred but are burned (destroyed) on the source blockchain and minted (created) on the destination blockchain.

 

Trusted vs. Trustless Bridges

Blockchain bridges can be either trusted or trustless. A trusted or federated bridge runs similar to a private or permissioned blockchain. A central entity manages and oversees bridge transactions, and a set of criteria is established that an individual must meet to become part of the central federation. Like most centralized operations, there are trust assumptions on the custody of the funds and the bridge’s security. Users make decisions based on the reputations of the bridge and do not control their assets. PolyNetwork and PoS Bridge are examples of Trusted Bridges.

 

Unlike the federated model, a trustless bridge is entirely decentralized and operates via a network of agents that are not centrally governed. Just like public blockchains, anyone can join the network as an agent. Agents are incentivized to ensure bridge transactions are correctly validated. Syscoin bridge is an example of a trustless bridge.

 

Benefits of Blockchain Bridges

The best blockchain bridges enable a multitude of benefits, including:

  • Fixing development issues and lowering transmission costs

Developers building apps for a particular blockchain platform often face the issues of slower transactions between two blockchain ecosystems and higher incurred costs during high-traffic periods and congestion. Using blockchain bridges, developers can easily send the tokens to a blockchain that processes them faster at a lower cost. Blockchain bridges enable developers to continue building apps on their preferred platforms without bearing interoperability headaches or routing costs.

 
  • Greater scalability across different blockchain networks

Both blockchain ecosystems benefit from using a blockchain bridge. First, a blockchain bridge reduces network traffic by distributing token processing across other, less congested blockchain networks. Additionally, a bridge makes the blockchains infinitely scalable by removing the consensus and different ecosystem-specific rules.

 
  • Faster, near-instantaneous payments and settlements

Blockchain bridges resolve scalability issues that popular blockchain networks like Ethereum often face, thus enabling instantaneous peer-to-peer transactions. Payments and settlements are not impacted by network congestion or traffic. Instead, workloads are transferred to lower congestion blockchains for instant processing.  DApps the biggest beneficiaries of blockchain bridges, accomplishing complex transactions in lesser hops and at a faster rate.

 

Examples of Blockchain Bridges

As of March 2022, there is $21.8 billion worth of cryptocurrencies locked in bitcoin bridges. Some of the most popular crypto bridges include:

  • WBTC or Wrapped Bitcoin: The world’s largest blockchain bridge, with $11.28 billion worth of crypto in TVL (Total Value Locked).
 
  • Multichain or MULTI: The largest cross-chain bridge in existence, with a TVL of $6.26 billion.
 
  • Avalanche, Polygon, and Fantom Anyswap: Some of the largest bridges in the Ethereum platform, with a combined TVL of $15 billion.
 

Blockchain bridges have greatly improved blockchain performance and lessoned network congestion. Bridges are crucial for developers and users, enabling interoperability between different blockchain worlds. Future development for blockchain bridges will reduce the token verification overheads, move to the more secure ‘bonded’ and ‘insured’ models, and introduce bridge aggregators for a better user experience across the board. Blockchain bridges are one of the many emerging advancements that are helping improve the blockchain experience that will help increase the technology’s adoption rate.

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