Summary

Bridge blockchain is a protocol that connects two blockchains to enable interoperability between them. If you own bitcoins but want to participate in DeFi activities on the Ethereum network, blockchain bridges allow you to do so without selling bitcoins. Blockchain bridges are important in achieving interoperability in the blockchain field.

Introduction

To understand blockchain bridges, you have to understand blockchain first. Bitcoin, Ethereum, and BNB Smart Chain are some of the major blockchain ecosystems. They all rely on various consensus protocols, programming languages, and system rules.

Bridge blockchain is a protocol that connects two blockchains that are economically and technologically different to enable interaction between them. This protocol functions like a physical bridge that connects one island to another. The islands are like different blockchain ecosystems.

Therefore, blockchain bridges enable interoperability. This means that digital assets and data hosted in one blockchain can interact with other blockchains. Interoperability is a cornerstone of the internet: Machines around the world use the same set of open protocols to communicate with each other. In the blockchain field which has many unique protocols, blockchain bridges are important in enabling easy exchange of data and value.

Why do we need a blockchain bridge?

As the blockchain field develops and expands, one of the most significant limitations is the lack of capacity for different blockchains to work together. Each blockchain has its own rules, tokens, protocols and smart contracts. Bridge blockchain helps break through these boundaries and unites isolated crypto ecosystems. An interconnected blockchain network can allow tokens and data to be exchanged seamlessly.

Apart from enabling cross-chain transfers, blockchain bridges provide other benefits. Blockchain bridges allow users to access new protocols on other chains and enable developers from different blockchain communities to collaborate. In other words, blockchain bridges are an important component of the future of the interoperable blockchain industry.

How do blockchain bridges work?

The most common use for blockchain bridges is token transfer. For example, you want to transfer bitcoin (BTC) to the Ethereum network. One way is to sell BTC, then buy ether (ETH). However, this action will incur transaction costs and expose you to price volatility.

Alternatively, you can achieve this goal by using a blockchain bridge without selling crypto. When you bridge 1 BTC to an Ethereum wallet, the blockchain bridge contract will lock your BTC and create an equivalent amount of Wrapped BTC (WBTC), which is an ERC20 token compatible with the Ethereum network. The amount of BTC to be transferred will be locked in a smart contract and an equivalent number of tokens on the destination blockchain network will be issued or minted. Wrapped tokens are tokenized versions of other cryptocurrencies. The benchmark is the value of the asset it represents and can usually be redeemed for the associated asset (unwrapping) at any time.

From a user's perspective, this process requires several steps. For example, to use Binance Bridge, you must first select the desired chain as a bridging origin, and then determine the amount. Then, you will deposit the crypto to the address generated by Binance Bridge. Once crypto has been sent to the address during that time period, Binance Bridge will send an equivalent amount of wrapped tokens to you on another blockchain. If you want to convert funds back, simply go through the reverse process.

What types of blockchain bridges are available?

Blockchain bridges can be categorized based on function, mechanism, and level of centralization.

Custodial vs. custodial bridges non-custodial

One common categorization is to divide blockchain bridges into two types: custodial (centralized) and noncustodial (decentralized).

Custodial bridges require users to trust a central entity to operate the system properly and securely. Users should conduct extensive research to ensure that these entities are trustworthy.

Noncustodial bridges operate in a decentralized manner by relying on smart contracts to manage the crypto locking and minting process, so users do not need to trust the bridge operator. In this case, the security of the system is only as good as the underlying code.

Blockchain bridge by function

Another classification is based on the blockchain bridge function. Some examples are wrapped asset bridges and sidechain bridges.

Bridge wrapped assets enable crypto interoperability. For example, moving bitcoin to the Ethereum network by wrapping BTC into Wrapped BTC (WBTC), which is an ERC20 token that is compatible with the Ethereum network. A sidechain bridge connects a parent blockchain with its child sidechains, enabling interoperability between the two. This bridge is necessary because the parent and sidechains may have different consensus mechanisms. One example is the xDai Bridge which connects the Ethereum mainnet with Gnosis Chain (formerly the xDai blockchain), which is an Ethereum-based stable payments sidechain. xDai is secured by a different set of validators than the validators that manage the Ethereum network. xDai Bridge enables easy transfer of value between the two chains.

Bridge blockchain based on mechanism

There are one-way bridges and two-way bridges. A unidirectional bridge means that users can only bridge assets to one destination blockchain, but not back to the original blockchain. Bidirectional bridges allow bridging of assets from both directions.

Benefits of blockchain bridges

The most important benefit of blockchain bridges is the ability to increase interoperability.
These bridges enable the exchange of tokens, assets and data across multiple blockchains, both between  layer 1 and layer 2 protocols as well as various sidechains. For example, WBTC allows bitcoin users to explore decentralized applications (dapps) and DeFi services from the Ethereum ecosystem. A blockchain sector with interoperability is critical to the future success of this industry.

Another advantage of blockchain bridges is to increase scalability. Some blockchain bridges can handle a large number of transactions, increasing efficiency. For example, the Ethereum-Polygon Bridge is a decentralized two-way bridge that serves as a scaling solution for the Ethereum network. As a result, users benefit from faster transactions and lower transaction fees.

Blockchain bridge risks

At the same time, blockchain bridges have some limitations. Attackers have exploited smart contract vulnerabilities of several blockchain bridges. A large amount of crypto has been misused by criminals from cross-chain bridges.

Custodial bridges can leave users vulnerable to custodial risks. Theoretically, the centralized entity behind the custodial bridge could steal user funds. When using a custodial bridge, choose an established brand with a long-term track record.

Another potential technical limitation is transaction rate bottlenecks. A single chain throughput capacity bottleneck can hinder large-scale blockchain interoperability.

A bridge can reduce congestion on a busy network, but moving assets to another chain does not solve the scalability problem because users do not always have access to the same set of dapps and services. For example, some Ethereum dapps are not available on Polygon Bridge which limits their scaling effectiveness.

Lastly, blockchain bridges can make the underlying protocol vulnerable to risks related to differences in trust. Because blockchain bridges connect multiple blockchains, the overall security of an interconnected network will depend on its weakest connection.

What is the future of blockchain bridges?

The Internet is a revolutionary system, one of which is because of its high interoperability. Blockchain bridges are important in increasing interoperability and mass adoption of the blockchain industry. Bridges have given rise to several important innovations that allow users to exchange assets between different blockchain protocols. Blockchain bridges have grown significantly in terms of the number of bridges, users, and total transaction volume.

The need for blockchain bridges is likely to continue to increase as the internet moves towards Web3. Future innovations could provide greater scalability and efficiency for users and developers. There may be innovative solutions to address the security risks associated with bridges. Blockchain bridges are an integral part of building an interoperable, open and decentralized blockchain field.

Closing

The development of the blockchain industry is driven by constant innovation. There are pioneering protocols such as the Bitcoin and Ethereum networks followed by a number of alternative layer 1 and layer 2 blockchains. The number of crypto coins and tokens has grown significantly.

Separate rules and technologies require blockchain bridges to connect to each other. Bridge-linked blockchain ecosystems will experience increased cohesion and interoperability, opening up opportunities for better scalability and efficiency. With numerous attacks on cross-chain bridges, the search for more secure and robust bridge designs continues.