Blockchain bridges: Guide to cross-chain data sharing LogRocket Blog

Blockchain bridge projects, the web3 ecosystem could become stronger and more immersive for users. Developers from different blockchain ecosystems to collaborate and build new platforms for the users. If Chain A held fifteen tokens and then transferred five tokens to Chain B, Chain A would still have fifteen tokens , but Chain B would have five more. Another consideration of cross-chain bridges is finality—the guarantee that the funds on the destination chain are available once they have been successfully committed on the source chain. Without guaranteed finality, a reversed transaction on the source chain could have detrimental consequences on the destination chain, such as the creation of unbacked bridged tokens.

  • Poly Network is one of the most popular cross-chain bridges with over $335 million TVL and supports 32 prominent blockchains.
  • This was originally run as a blockchain bridge by BitGo, and in 2022 is supported and available via a growing partner network of exchanges.
  • It enables the flow of data and tokens across what would otherwise be siloed sets of data on different blockchains.
  • The Avalanche team introduced an update for the bridge in June 2022 and included support for transferring assets between Bitcoin blockchain and Avalanche network.
  • The Umbria Narni Bridge enables blockchain asset transfer using liquidity pools, where assets are held across multiple chains.
  • The software behind cross-chain bridges works with cryptocurrencies and other digital assets.
  • In addition, you can also learn about the risks of a blockchain bridge and examples of projects.

Therefore, communication between the main network and the sidechain requires a bridge. Trusted bridges have trust assumptions, and they move away from the security of the underlying blockchain by trusting external verifiers. Centralized bridges are referred to as “trusted bridges” because they depend on a central entity or system.

Manage Digital Assets at Scale

Every blockchain is created in a protected ecosystem with its own set of rules and consensus protocols, resulting in limitations for each blockchain. As a result, there is no direct communication or token transaction between blockchains. Blockchain bridges, on the other hand, enable the transfer of tokens and information from one chain to another.

How Do Blockchain Bridges Work

However, this would incur transaction fees and expose you to price volatility. Naturally, developers are reluctant towards big changes, lest deviating from the decentralizing philosophy. We may be inching toward an innovative and normalized crypto economy, but any progress is better than limiting ourselves to what already exists. If you would do this regularly, you’d have to convert bitcoin to ETH on a trading platform, withdraw it to a wallet then deposit again to another exchange.

Improving scalability

The working of a blockchain bridge can involve exchange of decentralized identities, off-chain information and smart contract calls. The Stargate Bridge is a LayerZero-based protocol that facilitates the exchange of native assets between blockchain networks. Users can send native tokens straight to non-native chains without the use of an intermediary or wrapped token. Stargate is designed to provide instant guaranteed finality, cross-chain interoperability, and uniform liquidity. Trustless bridges are decentralized bridges that depend on machine algorithms (i.e., smart contracts) in order to operate.

How Do Blockchain Bridges Work

The idea here is that they take your BTC and “wrap” it in an ERC-20 contract, giving it the functionality of an Ethereum token. To put this in perspective, think of how you can use your Visa to pay for your MasterCard bills; or how PayPal can pay for all your online purchases no matter where you’re buying from. Different systems with different protocols yet transactions are fast and seamless. That’s because interoperability has always kept the financial system in place long before cryptocurrency was a thing.

Trustless Bridges

You should also review transparent information on your bridge’s leadership and security procedures. Lastly, since DeFi is largely unregulated and doesn’t require KYC (know-your-customer) documents, it’s easier for bridge hackers to avoid legal repercussions. Even if authorities track down a hacker, there’s no clear regulatory framework to deal with cross-chain bridge hacks. Additionally, some bridge projects make their codes open source to promote transparency. Open-source codes help build trust and make it easier for malicious actors to review, copy, or manipulate a bridge’s software.

Ethereum’s layer-2 scaling solution Arbitrum has a native trustless bridge where users can transfer digital assets between the two chains. The competing smart contract blockchain Polkadot also has a trustless “Snowbridge” that helps users transfer tokens between Polkadot and Ethereum. The reason these bridges exist is due to a lack of inherent interoperability and exchange of information between blockchains. Without these bridges, cryptocurrency would remain as isolated tokens that are not usable on different blockchains, just like being stranded on an island.

Bridge Tokens Securely Across Blockchains

Therefore, a trustless blockchain bridge does not need any central intermediaries or custodians. Blockchain bridges offer an effective means of transferring data and value between different blockchains. In addition, they also provide many opportunities for DeFi protocols, decentralized applications , and Web3 gaming projects. Blockchain bridges have various risks, which should be understood so your funds can be protected.

How Do Blockchain Bridges Work

The ability to transfer tokens between congested, high-fee blockchains and a low-fee, high-performance blockchain opens up many possibilities. This is particularly advantageous for Web3 gaming projects and microtransactions, which can benefit from the lower fees and improved performance of such blockchains. While crypto bridges are built to be safe, there can be vulnerabilities in any new technology. Crypto traders need to understand that cross-chain bridges are a new technology and this a prime target for hackers. RSK is the most secure smart contract network in the world and enables decentralized applications secured by the Bitcoin Network to empower people and improve the quality of life of millions. Because blockchain bridges are still in the early stage of development, there are still some security concerns.

Examples of Bitcoin Bridges

Not revealing the code behind the bridge minimizes potential attack vectors. Users to access new platforms and leverage the benefits of different chains. Alternatively, L1s like Solana and Avalanche are designed differently to enable higher throughput but at the cost of decentralization. But, what do you do if you want to make a similar exchange to use a different blockchain?

Trusted (Centralized) Bridges

But, the basis for its widespread adoption lies squarely with the evolution of cross-chain technology. Federations allow trustworthy groups to validate occurrences on one chain on another. This is also a robust approach, but it relies on third parties or mediators, which can be a limitation in some cases. However, because each sidechain is isolated, what is a blockchain bridge any security impairment will only affect the sidechain itself and not the main chain. Cloaking is a technique where a different version of web content is returned to users than to the search engine crawlers. A Clos network is a type of nonblocking, multistage switching network used today in large-scale data center switching fabrics.

Author: outlet

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