As the blockchain ecosystem expands, more features are enabled for cryptocurrency investors. There are hundreds of blockchain networks that are isolated from one another without being able to communicate or share data effectively. Ethereum network users can't deploy smart contracts on the Bitcoin blockchain, and Bitcoin holders can't use their tokens for transactions on the Ethereum network.
The need for blockchain interoperability only deepens as the crypto ecosystem grows at a dizzying speed. Cross-chain bridges appeared as a solution to the lack of interoperability of different blockchains that work as isolated networks with no entry or exit.
Without further ado, let's dig into the subject and discover what cross-chain bridges are exactly and how they are helping different blockchain networks.
What is a cross-chain bridge?
Cross-chain bridges, also called blockchain bridges, are protocols that connect two blockchain networks, allowing users to transfer digital assets and information from one blockchain to another.
A cross-chain bridge acts like an intermediary between two independent chains, allowing the transfer of data, tokens, and smart contract exchanges that otherwise would not be possible.
With the emergence of multiple blockchain networks like Solana, Avalanche, or the BNB Chain, users that had crypto assets locked on the Ethereum network needed a seamless way to move their tokens to other chains. That's when the blockchain bridge appeared to save the day.
How does a cross-chain bridge work?
The most common utility of a cross-chain bridge is the token transfer between native and destination chains.
Before blockchain bridges appeared, users needed to use centralized exchanges like Coinbase or Binance to use a particular crypto asset on a specific blockchain network. This process is more expensive and time-consuming. When using a centralized exchange, you first need to convert your tokens to a fiat currency and then use the fiat money to buy the supported token of the other blockchain.
Cross-chain bridges can swap cryptocurrencies without converting them to fiat, but they can also do much more. Smart contracts and NFTs can be transferred from one blockchain environment to another using an efficient cross-chain bridge.
A cross-chain bridge enables transfers between supported chains using wrapped tokens issued by the bridge provider platform.
The value of one token from a particular blockchain network can be contained inside another using a wrapped token. Wrapped tokens are frequently based on the Ethereum network's ERC-20 technical specification.
For example, you can move your BTC tokens from Bitcoin to the Ethereum network by sending them to a cross-chain bridge. Your BTC tokens will be locked in a smart contract that will give you access to wrapped Bitcoin (wBTC) that can be used on the Ethereum blockchain. Whenever you wish to reverse the conversion process, the wrapped Bitcoin will be burned, and you will receive back the initial cryptocurrency.
Another method is to use liquidity pools. A cross-chain bridge provider uses a liquidity pool to keep an inventory of different coins in pools that may be traded for one another.
The importance of cross-chain bridges
It's all about cross-chain interoperability! One of the barriers hindering the widespread adoption of cryptocurrencies has always been considered to be the lack of interoperability between different blockchains. Cross-chain bridges are the proposed solution for smooth interaction among various blockchain networks.
A cross-chain swap can also help to lower gas fees and provide a better user experience for crypto investors. Cross-chain bridges enable users to benefit from the best key attributes of two distinct blockchains, including better utility in the form of DApps and cheaper transaction fees with higher network throughput.
The best cross-chain bridges
Now that we know what cross-chain bridges are and how they work, let's check some of the best cross-chain bridges in the crypto sphere:
The Binance Bridge is an Ethereum-BNB Smart Chain Bridge associated with the BNB Chain project ( formerly known as Binance Smart Chain.)
The Binance Bridge supports various blockchains such as the Solana network, Ethereum, BNB Chain, and Tron. There are no transaction costs as the bridge charges zero fees. Users are only required to pay the gas fees on the destination chain and the origin chain.
Copyright © Binance Bridge
Multichain Bridge (Fantom AnySwap)
Multichain Bridge, previously known as Fantom AnySwap, is a cross-chain router protocol that enables the flow of data and digital assets across several networks.
The bridge integrates with a number of different blockchain networks, including Arbitrum, Astar Network, Avalanche, BNB Chain, Bitcoin, Blocknet, Boba Network, Celo, Clover, ColossusXT, Optimism, Polygon, REI, Shiden Network, Syscoin NEVM, Telos, Terra, and Velas. No other bridge supports as many token types as Multichain.
Users can transfer native assets from one blockchain network to another using the Multichain Bridge.
Copyright © Multichain Bridge
Portal Token Bridge (Wormhole)
Portal Token Bridge, also known as Wormhole, is one of the most popular cross-chain bridges in the market. It's a decentralized bridge that was initially built on the Solana blockchain for bi-directional cryptocurrency transfers between Solana and Ethereum.
Since then, it has expanded to connect multiple chains, including Solana, Ethereum, BSC, Polygon, Terra, Avalanche, and Oasis, which account for 88% of the DeFi industry.
The Portal Token Bridge uses unique validator nodes called Guardians. They keep an eye on what happens on the bridge and verify user requests.
Copyright © Portal Token Bridge
The Avalanche Bridge is a cross-chain bi-directional bridge that connects the Avalanche and Ethereum networks, enabling seamless token transfers between them. The Avax bridge took the role of the Avalanche-Ethereum Bridge, or AEB, and served as an excellent springboard for Avalanche's development.
The bridge enables two-way transfers of both crypto tokens and NFTs and makes use of ChainSafe's ChainBridge. Users can deposit and lock their assets in the ChainBridge Smart Contract if they want to start a cross-chain swap and use ERC-20 tokens in decentralized applications on Avalanche.
To bridge tokens on Avalanche will take only a couple od seconds, according to the available documentation.
The bridge's protocol uses relayers to secure transactions. These Relayers (Protofire, Hashquark, POA Network, and Avascan) vote to accept or reject the proposed asset swap after comparing it to Avalanche's data. Avalanche is one of the industry's most secure crypto bridges thanks to this additional voting procedure.
Copyright © Avalanche Bridge
Users can instantly move ERC tokens and NFTs to the Polygon sidechain using the Polygon Bridge. The Plasma Bridge and the Proof of Stake (PoS) Bridge are the two main bridges on Polygon. Both can connect assets from Polygon to Ethereum (and vice versa), but they use various security measures.
The PoS Bridge uses the Proof of Stake (PoS) consensus mechanism to protect its network. Most ERC tokens and Ether (ETH) can be transferred using this system. For developers that require more security, there is the Plasma Bridge. It enables the transfer of MATIC, ETH, ERC-20, and ERC-721 tokens and scales with Ethereum Plasma.
The Polygon Bridge's low gas fees are one of its key advantages. Since there are no third-party protocols involved, transactions also process faster. Users will incur bridge fees, though they will be significantly lower than if they used the Mainnet.
Copyright © Polygon Bridge
Hacks of popular cross-chain bridges
Cross-chain bridges are not entirely risk-free. Decentralized bridges manage the bridging of assets using oracles and smart contracts in a trustless manner. Smart contracts, however, can have flaws.
While the technology is still being tested and developed, it is possible to experience security risks and potential threats.
Let's check some of the most memorable cross-chain bridge hacks of the recent past:
Ronin Bridge hack
The largest DeFi (decentralized finance) exploit ever committed may have been the Ronin Bridge attack. The popular play-to-earn (P2E) game Axie Infinity's ETH sidechain, which was created for it, was compromised in late March of this year.
Five validator nodes were compromised due to the hackers gaining access via the validator nodes' private keys. The total funds stolen by the attackers were worth over $600 million at the time (over 173,600ETH and 25.5 million USDC.)
The Wormhole Bridge experienced the second-largest cross-chain bridge hack in February 2022, one month before the Ronin incident.
Wormhole was a decentralized protocol that connected to other networks. The hacker bypassed the protocol's verification process, resulting in the loss of 120,000 Wormhole Ethereum (wETH), close to $325 million at the time.
The hacker used a fake signature for a transaction that allowed them to mint 120,000 wETH without first entering an equivalent amount. Then, this was traded for almost $325 million in Ethereum. It's interesting to note that the money is still in the attackers' wallets today.
Copyright © Wormhole Bridge
Harmony Bridge hack
Another cross-chain bridge attack happened in June this year when the blockchain bridge between Harmony and Ethereum was exploited multiple times.
Security experts found three attack addresses and twelve attack transactions. The main suspect behind the attack was found to be the Lazarus Group, a renowned North Korean hacker group.
The organization gained access to the protocol's security system by using the login information of Harmony employees in the Asia Pacific area. When they had gained access, the hackers used automatic laundering tools to transfer the stolen assets. The protocol lost around $100 million worth of crypto assets.
Copyright © Wormhole Bridge
Nomad Bridge hack
In early August, Nomad Token Bridge experienced a security flaw that made it possible for the attackers to gradually siphon off a significant amount of the protocol's assets through a long string of transactions.
More than $190 million was taken off the bridge, with only $651.54 left in the protocol's wallet. At first, the project owners told reporters that part of the money was taken out by "white hat friends" who did it to protect it. However, only $9 million of the $190.7 million had been refunded after 24 hours. The incident, which was unlike prior blockchain bridge hacks, resulted in hundreds of addresses gaining tokens from the bridge in what is best described as a free for all.
Copyright © Nomad Bridge
No one can deny how vital cross-chain bridges are when it comes to developing an interoperable and fully decentralized blockchain space. However, as this year's hacks prove, we should remember that they also come with possible risks and vulnerabilities.
We're confident that the technology will evolve and reach a higher level of fine-tuning and security that will remove any possible threats from these new chains.
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