What Are Blockchain Bridges and How Do They Work?

blockchain bridge

Currently, in the crypto market, there are more than 100 public blockchains in operation. As the number of blockchain protocols increases, so does the need to move assets across chains. To meet this need, we need blockchain bridges. So what are blockchain bridges and how do they work? Let’s find out details with CoinMinutes through the article below.

What Are Blockchain Bridges?

Blockchain bridges are tools that allow you to transfer digital assets from one blockchain to another, solving one of the main problems in blockchains, which is the lack of interoperability. Since blockchain assets are often incompatible with each other, these bridges create synthetic derivatives representing an asset from another blockchain to facilitate the transaction process.

Simply put, just like a physical bridge connects two physical locations, a blockchain bridge connects two blockchain ecosystems together. Bridge facilitates communication between blockchains through the transfer of information and assets.

The Significance of Bridges in the Cryptocurrency Ecosystem

All blockchains have their limitations. If Ethereum wants to scale and keep up with demand, rollups are needed. Additionally, Layer-1s such as Solana or Avalanche are designed differently, to enable higher throughput at a lower cost.

However, all blockchains develop in unique environments and have different rules and consensus mechanisms. This means they cannot communicate naturally, and tokens cannot move freely between blockchains.

Blockchain Bridge was born to solve the above problem, it connects blockchains, allowing the transfer of information and tokens between them.

Bridge allows:

  • Cross-chain transfer of assets and information.
  • Dapps tap into the strengths of different blockchains – thus enhancing their capabilities.
  • Users access new platforms and avail the benefits of different chains.
  • Developers from different blockchain ecosystems can collaborate and build new platforms for users.

How Do Blockchain Bridges Work?

A bridge can be thought of as a simple exchange of information between blockchains. In other words, the main function of the bridge is to enable the two-way exchange of information between blockchain A and blockchain B, through a protocol that allows this connection. Of course, this is an easy way to see how a bridge works, but the basic idea is the same, and having it very clearly will help you understand exactly how this exchange of information takes place.

In fact, the way Blockchain Bridge works includes the following basic steps:

  • The bridge lies between chains A and B, providing the basic structure for its functioning.
  • If you want to transfer tokens from A to B, you go to the bridge, indicate the number of tokens you want to exchange at A and provide the destination address at B.
  • You make a transaction in A and the bridge blocks this balance in a vault, then in B the correct amount of tokens is minted and sent to the address in B that you provided.
  • The tokens in A are blocked to secure the tokens in B, and you can only recover them by performing the reverse process.

For example, Bitcoin and Ethereum are the two largest cryptocurrency networks and have very different rules and protocols. Through a blockchain bridge, bitcoin users can transfer their funds to Ethereum and do with them what they cannot do on the Bitcoin Blockchain. That could include purchasing different Ethereum tokens or paying with low fees.

Types of Blockchain Bridges

Because the number of Crypto Bridges is very large and the way they operate is very diverse, there are many ways to classify them. Usually, they are divided into the following types:

One-way bridge

One-way bridges only allow you to send assets to another blockchain, but not back to its parent blockchain. For example, Wrapped Bitcoin allows you to transfer Bitcoin to Ethereum as an ERC-20 token, but you cannot send ETH back to the Bitcoin blockchain.

Two-way bridge

The two-way bridge allows you to trade assets freely between blockchains. You can deposit ETH into the Solana blockchain and vice versa, you can transfer SOL to the Ethereum blockchain.

Trusted bridge (centralized)

If a bridge is custodial, it means that only one person or company manages and controls the assets. For example, All Bitcoin is managed by BitGo, a centralized digital asset-holding trust.

Trustless bridge (decentralized)

A trustless or decentralized bridge operates on the blockchain using smart contracts and algorithms, so users remain in control of their assets.

Pros and Cons of Bridges in Cryptocurrency

Pros

  • Compatibility between different Blockchains: Cross-chain allows different Blockchains to work with each other effectively, opening up opportunities for more complex applications, and overcoming the limitations of a single Blockchain.
  • Increased safety and security: Interactions between Blockchains often need better control and security to avoid risks and security vulnerabilities. Cross-chain provides security and control mechanisms that increase trust and safety for users.
  • Increased scalability: Cross-chain allows Blockchains to scale and handle larger transaction volumes using cross-platform solutions.
  • Reduced costs and transaction times: Cross-chain helps reduce costs and transaction times by allowing exchanges between Blockchains more quickly and efficiently.

Cons

  • Too many bridges: Having too many crypto bridges causes liquidity to be fragmented and makes it difficult for new users to always have to search and learn how to use many different bridges.
  • Not yet safe: Recent continuous hacks have made many users concerned about the security of Bridges, this is a warning about the immaturity of bridges at the present time.
  • Poor user experience: Long waiting time, limit on the number of assets that can be transferred, limit on asset withdrawal, etc. Bridge projects need to improve and enhance the product further to solve these problems and the experience the user is having right now.

What Are the Biggest Blockchain Bridges?

Chain Specific Bridge

Chain Specific Bridges are crypto bridges that connect two specific chains, supporting users to use basic features to bring assets from the source chain to the chain that needs to be converted. These bridges are often developed by the network’s foundation team.

The highlight of these bridges is that they are less complicated, easy to use, and can be created quickly to serve users’ asset conversion needs. However, these bridges have few features, are not easy to expand, and do not have consensus features with chains other than the two original chains.

EVM Blockchain Bridge

EVM blockchains are blockchains compatible with the Ethereum Virtual Machine, which means that smart contracts or dApps on the Ethereum ecosystem can run on other EVM blockchains.

Some EVM blockchains include Binance Smart Chain, Polygon, Fantom, Celo, Avax C-chain,…

Layer 2 Bridge

The Layer 2 expansion solution was developed to transfer a huge volume of transactions from Layer 1 to other blockchains. To do this, a bridge with the highest security is needed. Layer 2 Bridge was born to realize this!

CEX Bridge

CEX Bridge is seen as users using a centralized exchange like Bridge to convert assets and withdraw to wallets to trade or experience the features of some products.

Are Blockchain Bridges Safe?

Blockchain Bridge is in the initial stages of development. Besides the advantages and benefits it brings, bridges also have certain risks:

  • Smart contract risk – the risk of errors in the code that could cause users to lose money.
  • Technology risks – software bugs, buggy code, human error, spam, and malicious attacks can disrupt user operations.

To be able to use the bridge in the safest and most effective way, you should note:

  • Need to understand the mechanism of the Bridge: Some bridges can directly send tokens from chain A to chain B, however, some bridges will issue tokens at chain B for you to trade.
  • Need to know how to find the Smart Contract of the token.

Conclusion

Above is a detailed article about Blockchain Bridge that CoinMinutes has compiled and brought to you. It can be seen that blockchain bridges offer huge market opportunities and a promising future for multi-chain interactions. Hopefully, this article has brought useful information to you, hope you soon find the right bridge.

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Chi Do
Chi Do
Chi Do is a content writer at CoinMinutes, responsible for creating most of the content on the website, including news related to Bitcoin (BTC), Ethereum (ETH), Blockchain, Decentralized Finance (DeFi), and more. With a keen interest in cryptocurrencies since the 2020s, Chi has acquired extensive experience and knowledge in this field. Chi holds a Bachelor's degree in communication from Academy of Journalism and Communication in Vietnam.

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