What are Cross-Chain Bridges?

There would be no data transfer in the other direction as the new Blockchain does not have any data to send. This was represented by the launch of the first interbank Blockchain bridge. Since then, bridge technology has expanded rapidly and is now used in many different industries. A bridge is primarily used to create a bridge between different Blockchain networks by using a gateway. This article will explain more about what you should know about bridge and what it is used for.

What is the Need for Blockchain Bridges

And that goes way deeper for plenty of blockchain projects, especially DeFi protocols, and NFT collections. Some networks have different advantages and disadvantages, and it is important for them to grow following the user’s demand for what they are offering. It was December 2008 when the concept of Blockchain spread to the world due to Bitcoin’s whitepaper release.

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. This is possible thanks to what we call ‘wrapped tokens’ – synthetic representations of existing tokens that what is a blockchain bridge and how it works are designed to support a different token standard. Bridges are crucial to onboarding users onto Ethereum L2s, and even for users who want to explore different ecosystems. However, given the risks involved in interacting with bridges, users must understand the trade-offs the bridges are making. These are some strategies for cross-chain security(opens in a new tab).

For example, a bridge can be used by an organization that is working with an Ethereum-based Blockchain and needs to transfer data to a HyperLedger-based Blockchain. A bridge that allows for two-way data transfer between two Blockchains is referred to as a two-way or bidirectional bridge. A bidirectional bridge would allow for data to be transferred in both directions between two Blockchains. A unidirectional bridge is a type of Blockchain bridge that allows one-way communication from one Blockchain to another.

On top of it, the community of blockchain developers believes that the best design for a blockchain bridge has not been created yet. In addition, the risks with a blockchain bridge depend on the type and have a different impact on users and the blockchain community. The maturity and evolution of blockchain technology have led to the demand for blockchain bridge projects to improve interoperability among different blockchain networks. The following discussion offers a detailed introduction to a blockchain bridge and its working alongside the value advantages it presents for the blockchain community. In addition, you can also learn about the risks of a blockchain bridge and examples of projects.

What is the Need for Blockchain Bridges

Once the transaction is complete, a confirmation is sent across the chains, followed by a waiting period for further security. After the waiting period, the corresponding number of coins is released on the sidechain, where the user may access and spend the coins. When transacting from a sidechain to the main chain, the process is reversed. If Chain A held fifteen tokens and then transferred five tokens to Chain B, Chain A would still have fifteen tokens (with five tokens locked), but Chain B would have five more.

Relays allow blockchain networks to monitor transactions and events occurring on other chains. Relays operate on a chain-to-chain basis, without the participation of dispersed nodes, allowing a single contract to serve as a central client for other nodes on many chains. In this way, relays can validate the whole history of transactions as well as certain central headers on demand. However, some relay solutions, such as BTC Relay, necessitate a significant expenditure in order to run and provide operational security.

Decentralised bridges provide solutions to blockchain interoperability that are trustless but struggle to apply to any domain or any type of asset. Bridge security is arguably even more critical than security at a typical, single-chain DeFi application. If an attacker exploits a vulnerability in the code of a decentralized application, only its users may lose funds tied to its smart contracts. Trust-minimized bridge implementations do not require trusted central entities to communicate between blockchains. Instead, they use light clients, which receive source chain block headers on the target blockchain. With reference to a complete history of block headers, a light client can attest that the source blockchain did indeed confirm a transaction before minting wrapped assets on the target chain.

Stateless simplified payment verifications (SPVs) are less expensive to run compared to relays, and smart contracts can validate a portion of the proof-of-work genesis history. Merged consensus approaches are robust and provide two-way interoperability between chains through the relay chain. Merged consensus is fairly powerful, but it is usually necessary to build it into a chain from the start. The Wrap Protocol, which as of this writing will soon be rebranded as the Plenty Bridge, can be used to transfer ERC20 and ERC721 tokens between the Tezos network and Ethereum, Polygon, and BSC. The Tezos blockchain uses validating nodes known as bakers to implement its proof-of-stake consensus algorithm.

  • Since then dozens of bridges have gone live, sporting unique tradeoffs, strengths, and use-cases.
  • A relayer script then communicates block headers from the source blockchain to the target blockchain.
  • Thus, blockchain bridges are a necessity to allow the transfer of data, value and information efficiently among different protocols.
  • For example, Bitcoin, Bitcoin Cash, and Dogecoin are 3 big coins that people love investing in, but don’t have the ability to do things like invest in Aave.
  • However, because each sidechain is isolated, any security impairment will only affect the sidechain itself and not the main chain.

Wrapped asset bridges allow for the transfer of assets between blockchains. For example, wrapping bitcoins to create Wrapped BTC (WBTC) allows users to interact with bitcoin-like currencies on the Ethereum network. XDai is secured by a set of validators different from those who maintain the Ethereum network; these validators can only be trusted by parties who have deposited money into Gnosis Chain itself.

What is the Need for Blockchain Bridges

Porting assets from one blockchain to another blockchain comes with a myriad of benefits. First, the blockchain onto which you port assets might be cheaper and faster than its native blockchain. This is certainly true for Ethereum, where high transaction fees and slow throughput make it difficult for newcomers to get involved in decentralized finance (DeFi). Blockchain bridges are a step forward to creating an open Web 3.0, where different networks can communicate and operate with one another. As a result, we can expect to see significant innovation and progress within blockchain technology.

Via the use of bridges, blockchain has the potential to become more relevant and easily adaptable. However, there are a number of challenges that must be faced in order https://www.xcritical.in/ to prevent security risks, bad practices, and errors in the technology. Let’s say you want to own native Bitcoin (BTC), but you only have funds on Ethereum Mainnet.

That could be recent Bitcoin transactions or updated Ethereum account balances. While this approach reduces the reliance on a single entity, it is more inefficient because multiple nodes need to communicate to approve a message and relay it to the other chain. The more nodes in the middle, the more inefficient the bridge will be, but a compromise of a majority share of nodes by a malicious external entity becomes less feasible, too. Several bridges have already been built or are in development in the testnet stage for the Polkadot ecosystem. Self check-in is similar to a trustless model as it removes the operator’s role and uses technology for its operations.

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