If you wish to transfer tokens from one blockchain to another, you’ll likely need a blockchain bridge to make this possible.
What Are Blockchain Bridges?
A blockchain bridge is a tool that allows you to transfer assets across different blockchains, addressing one of the most common issues with blockchains – the lack of interoperability.
Bridges are used to generate synthetic derivatives that replicate an asset from a different blockchain because blockchain assets are not always interoperable.
A blockchain bridge lets you “wrap” (or turn) a single Solana currency into an Ethereum wallet-based token and send it elsewhere. If you do this. In this situation, the Ethereum wallet would receive a “bridge” version of Solana that has been turned into an ERC-20 token – the generic token standard for fungible Ethereum blockchain tokens.
Security concerns accompany bridges, as demonstrated by the $326 million attack on the Wormhole bridge in February 2022, which opened new markets and worked toward a brighter future for multi-chain technology.
Types Of Bridges:
Designs and complexity for bridges abound. In general, there are two types of bridges: Trusted & Trustless Bridges.
1. Trusted Bridges
For their operation, trusted bridges are reliant on a central body or system. Assumptions about the safety of the bridge and the safety of the monies are based on trust. The reputation of the bridge operator is what most people rely on. It’s time for users to relinquish control of their cryptocurrency.
2. Trustless Bridges
Smart contracts and algorithms are used to power trustless bridges. Because the security of the bridge is equal to the security of the underlying blockchain, they are trustless. Trustless bridges allow users to retain control of their money using smart contracts.
Why Do We Need Blockchain Bridges?
Every blockchain has its own set of constraints. It was necessary to use rollups for Ethereum to maintain scalability and keep up with demand. L1s like Solana and Avalanche, on the other hand, are designed differently to increase throughput but at the expense of decentralisation.
As a result, each blockchain has its own set of rules and consensus procedures. A lack of interoperability between blockchains is a result of this. To facilitate the movement of data and tokens between blockchains, bridges have been built.
What Are The Most Significant Blockchain Bridges?
As of March 2022, DeFi Llama estimates there was $21.8 billion of crypto locked up in bridges. Wrapped Bitcoin is the largest blockchain bridge, accounting for about half of the bridge market, with a total value of $10.2 billion (TVL). Multichain, according to DeFi Llama, is the world’s largest cross-chain bridge, with a TVL value of almost $7 billion.
In terms of total TVL value, the Avalanche Bridge leads the pack with around $6 billion, followed by Polygon ($5 billion TVL) and the Fantom Anyswap Bridge ($4.2 billion TVL), according to the Dune Analytics dashboard.
Is It Safe To Use Blockchain Bridges?
As is the case with all cryptocurrencies, your investment is at risk. Bridges that are new to decentralisation and have not been thoroughly tested are vulnerable to attack. Qubit, a bridge, was abused for $80 million just one week before Wormhole was breached.
Analysis by blockchain analytic firm Elliptic shows that the Wormhole assault occurred because the attacker was able to generate 120,000 worth of wrapped ethereum without having to stake any ETH through the Wormhole system. The free ETH was then withdrawn by the attacker. The protocol was saved by Jump Trading, a high-frequency trading business.
Bridges that are known to be trustworthy carry a lower risk. When it comes to staking assets, there is a greater chance that a corporation may be corrupt or incompetent, lose control of the staked assets due to incompetence or third-party action, such as a request from the government to freeze assets.
Conclusion: Final Thoughts!
By using blockchain bridges, users no longer have to pick between several blockchain platforms in order to get the benefits of each one. As a result, Ethereum, the most popular DeFi network, gets relieved of some of the pressure, but it also encourages innovation in other ecosystems without the need for a winner-takes-all mindset.