Abstract

Blockchain bridge is a protocol that connects two blockchains and allows them to interact. To participate in DeFi activities on the Ethereum network, users only need to hold Bitcoin and do not need to sell it through the blockchain bridge. Blockchain bridges are fundamental to achieving interoperability in the blockchain space.

Introduction

If you want to understand the blockchain bridge, you first need to understand the concept of blockchain. Mainstream blockchain ecosystems include Bitcoin, Ethereum, and BNB smart chains, all of which follow their own consensus protocols, programming languages, and system rules.

The blockchain bridge protocol can connect two economically and technically independent blockchains and allow them to interact. The bridge protocol functions similarly to a real-life cross-island bridge connection, with the “islands” referring to mutually independent blockchain ecosystems.

Therefore, the blockchain bridge achieves what is called "interoperability", that is, the Digital assets and data are able to interact with another blockchain. Interoperability is a cornerstone of the Internet, meaning machines around the world can communicate with each other using the same set of open protocols. There are many unique protocols in the blockchain field. If you want to facilitate the exchange of similar data and value, a blockchain bridge is essential.

Why is a blockchain bridge needed?

As the blockchain space develops and expands, one of the major limitations is the lack of collaborative operation between different blockchains. ability. Each blockchain has its own rules, tokens, protocols, and smart contracts. Blockchain bridges help break down these silos and bring isolated cryptocurrency ecosystems together. The interconnected blockchain network allows tokens and data to be exchanged smoothly within it.

In addition to realizing cross-chain transfers, blockchain bridges can also play other beneficial roles. Through blockchain bridges, users can access new protocols on other chains, while developers from different blockchain communities can collaborate. In other words, blockchain bridges are a key element for the future interoperability of the blockchain industry.

How does the blockchain bridge work?

The most common use case of blockchain bridge is token transfer. For example, imagine transferring Bitcoin (BTC) to the Ethereum network. One way is to sell BTC and buy Ethereum (ETH). However, this incurs transaction fees and exposes you to the risk of price fluctuations.

Another way to achieve your goal without selling cryptocurrency is to use a blockchain bridge. After bridging 1 BTC to an Ethereum wallet, the blockchain bridge contract locks the BTC and creates an equivalent value of wrapped Bitcoin (WBTC), an ERC20 token compatible with the Ethereum network. The amount of BTC to be transferred is locked in a smart contract, and equivalent tokens are issued or minted in the target blockchain network. A wrapped token is a tokenized version of another cryptocurrency. It anchors the value of a specific asset and usually supports the redemption (unpackaging) of the anchored asset at any time.

For users, this process requires several steps. Take using Binance Bridge as an example. First, select the chain you want to bridge and determine the amount. Then, deposit cryptocurrencies to the address generated by Binance Bridge. After sending cryptocurrency to this address within the time limit, Binance Bridge will send you an equivalent value of wrapped tokens in another blockchain. To exchange your funds, simply reverse the process.

What types of blockchain bridges are there?

Blockchain bridges can be classified according to function, mechanism and degree of centralization.

Managed and unmanaged bridging

By general categories, blockchain bridges are divided into two categories: custodial (centralized) and non-custodial (decentralized).

Managed bridging requires users to trust a central entity to operate the system correctly and securely. Users should conduct extensive research to ensure that the entity is trustworthy.

The non-custodial bridge operates in a decentralized manner, relying on smart contracts to manage the cryptocurrency locking and minting process without the need for Trust the bridge operator. In this case, the security of the system is almost the same as the underlying code.

Blockchain bridge by function

Another classification method is based on the functions of blockchain bridges, such as packaged asset bridges and side-chain bridges.

Wrapped asset bridge enables cryptocurrency interoperability. For example, Bitcoin can be moved to the Ethereum network by wrapping it in Wrapped Bitcoin (WBTC), an ERC20 token that is compatible with the Ethereum network. Sidechain bridges connect the main blockchain and its sub-sidechains, enabling interoperability between the two. The reason why the connection is needed is that the main chain and the side chain may use different consensus mechanisms. For example, the xDai Bridge connects the Ethereum mainnet with Gnosis Chain (formerly the xDai blockchain), a stable payments sidechain based on Ethereum. xDai is secured by a group of validators that are not the same ones that maintain the Ethereum network. With the xDai bridge, value can be easily transferred between the two chains.

Dividing blockchain bridges by mechanism

Can be divided into one-way bridging and two-way bridging. One-way bridging means that users can only bridge assets to the target blockchain, but cannot return to the native blockchain. Bidirectional bridging bridges assets in both directions.

Advantages of Blockchain Bridge

The most significant advantage of the blockchain bridge is its ability to improve interoperability.
With the blockchain bridge, tokens, assets and data can be exchanged between different blockchains, including Layer 1 and Layer 2 protocols, as well as various side chains. For example, Bitcoin users holding WBTC can use the decentralized applications (DApp) and decentralized finance (DeFi) services of the Ethereum ecosystem. Interoperable blockchain is key to ensuring the industry’s future success.

Another advantage of blockchain bridges is improved scalability. Some blockchain bridges can process transactions in large quantities, thereby increasing efficiency. For example, the Ethereum-Polygon decentralized two-way bridge is a scaling solution for the Ethereum network. Users thus benefit from increased transaction speeds and reduced transaction costs.

Risks of blockchain bridge

Blockchain bridges have various limitations at the same time. Attackers have exploited smart contract vulnerabilities in some blockchain bridges to maliciously steal large amounts of cryptocurrency from cross-chain bridges.

Users using managed bridging also face hosting risks. In theory, a centralized entity behind a custodial bridge could steal user funds. If using hosted bridging, choose an established brand with a long track record.

Another potential technical limitation is the transaction rate bottleneck. The throughput capability bottleneck of a single chain will hinder the realization of large-scale blockchain interoperability.

While bridging can alleviate congestion on busy networks, moving assets to another chain does not solve scalability issues. After all, users don’t always access the same set of DApps and services. For example, some Ethereum DApps cannot be used on the Polygon bridge and scaling efficiency will be limited.

Finally, blockchain bridges may expose underlying protocols to risks related to trust differences. Blockchain bridges connect various blockchains, so the overall security strength of an internetwork is the strength of its weakest link.

What is the future prospect of blockchain bridge?

The Internet is an innovative system, in part because of its high degree of interoperability. Blockchain bridges play a vital role in improving the interoperability and widespread application of the blockchain industry. An important innovation in this technology, it allows users to exchange assets between multiple blockchain protocols. Blockchain bridges have experienced significant growth in the number of bridges, user volume, and total transaction volume.

As the Internet gradually develops towards Web3, the demand for blockchain bridges will grow accordingly. Various future innovations will bring greater scalability and efficiency to users and developers. Innovative solutions may also emerge to address the security risks associated with bridging. To create an open, decentralized blockchain space with interoperability, blockchain bridges are essential.

Summary

Continuous innovation drives the development of the blockchain industry . First there were pioneering protocols such as Bitcoin and Ethereum, and then various alternative Layer 1 and Layer 2 blockchains emerged in endlessly. The number of cryptocurrencies and tokens has also grown exponentially.

Due to independent rules and technical constraints, innovative products need a blockchain bridge to achieve interconnection. Blockchain ecosystems connected by bridges are tighter and more interoperable, making them better at improving scalability and efficiency. Cross-chain bridges have been subject to numerous attacks. Therefore, there is still a long way to go to improve the safety and robustness of bridge designs.