Different blockchains cannot natively communicate with one another: coins on the Bitcoin blockchain do not automatically appear on Ethereum. A cross-chain bridge is a tool for transferring assets or messages from one chain to another. It is convenient, but also one of the areas where things go wrong most often in the crypto industry.

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📌 Lock and mint

The most common cross-chain method is “lock and mint”: users send their assets to a bridge contract on the source chain to be locked, and the bridge mints an equivalent amount of wrapped assets on the destination chain. To transfer them back, the process works in reverse: the wrapped assets on the destination chain are burned, and the assets locked on the source chain are released.

WBTC on Ethereum is one example: each WBTC is backed by one bitcoin held by a custodian. It lets bitcoin be used in Ethereum DeFi applications, but holders also have to trust the custodian.

📌 Liquidity on both sides

Another type of cross-chain solution doesn’t mint wrapped assets. Instead, it places a liquidity pool on each of the two chains: users deposit on the source chain and withdraw native tokens from the pool on the destination chain. This gives users native tokens, but when pool depth is limited, large cross-chain transfers can incur significant slippage.

📌 How does a bridge know you locked your tokens?

Whatever the method, the bridge needs to confirm that the operation really took place on the source chain. Common approaches include confirmation by a multisig or validator committee, running a light client for the source chain on the destination chain to verify the transaction, or using zero-knowledge proofs to prove the source chain’s state.

The more verification relies on a small number of signers, the more concentrated the trust: if those signers’ private keys are stolen or the contract’s verification logic has a vulnerability, an attacker may be able to “prove” a lockup that never happened and withdraw the bridge’s assets.

📌 Risks and things to keep in mind

Bridge contracts often hold large amounts of assets, making them a prime target for attackers. According to Chainalysis, as of August 2022, about 69% of the crypto assets stolen that year had been taken in cross-chain bridge attacks.

The value of wrapped assets depends on the bridge itself. If something goes wrong with the assets locked on the source chain, wrapped tokens on the destination chain may lose their peg. So it’s worth getting into the habit of checking the official link before bridging, testing with a small amount first when transferring a large sum, and paying attention to which bridge issued the version you receive.

📌 Summary

Cross-chain bridges solve the problem of moving tokens between different chains, but each bridge transfer adds another layer of trust. When you need to bridge, choose a well-established solution and transfer in batches. Be skeptical of claims of high returns.

What do you think about this? Feel free to discuss in the comments.