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What Are Blockchain Bridges?

What Are Blockchain Bridges?

If you wish to move tokens from one blockchain to another, you’ll most likely require a blockchain bridge to do it. Let’s read about what are blockchain bridges in this blog.

What is a blockchain bridge?

A protocol that connects two blockchains in order to allow communication between them is known as a blockchain bridge. A blockchain bridge enables you to participate in DeFi activities on the Ethereum network if you already own bitcoin but want to do so without selling it. In order to achieve interoperability within the blockchain ecosystem, blockchain bridges are essential.

Token transfers, smart contracts, data sharing, and other feedback and requirements across two independent platforms are all feasible with blockchain bridges.

These blockchains utilise distinct currencies and have different regulations; the bridge operates as a neutral zone, allowing users to transfer between them seamlessly. For most of us, having access to many blockchains on the same network improves our crypto experience significantly.

Despite the fact that the two systems serve different purposes, this concept is very similar to Layer 2 solutions. Layer 2 is built on top of an existing blockchain, thus while it improves speed, interoperability remains an issue. Cross-chain bridges are also distinct entities that are not connected to any blockchain.

Let’s look at an Example :

You are a US citizen who wants to travel to India. You have USD, but you need INR to make purchases. Using a currency exchange will cost you a little fee to convert your USD to INR.

But what if you want to do the same thing using a different blockchain? This is where blockchain bridges may help.

Blockchain bridges: How do they operate?

Transferring tokens is the most frequent application for a blockchain bridge. Consider you wish to send some of your bitcoin (BTC) to the Ethereum network. Sell your bitcoins as one option, and then buy ether instead (ETH). You would be subject to price volatility and transaction costs, though.

Using a blockchain bridge, you can also achieve this goal without selling your cryptocurrency. When you bridge 1 BTC to an Ethereum wallet, a blockchain bridge contract secures your BTC and generates an equal amount of Wrapped BTC (WBTC), an ERC20 token that is compatible with the Ethereum network.

The amount of BTC to be moved is secured in a smart contract, and the corresponding tokens are issued or minted on the destination blockchain network. A tokenized cryptocurrency is referred to as a wrapped token. It is connected to the asset’s value and can usually be redeemed (unwrapped) at any moment.

Why do we require bridges?

Every blockchain has limits. Rollups have been essential for Ethereum to scale and keep up with demand. Alternatively, L1s such as Solana and Avalanche are designed differently to increase throughput at the expense of decentralisation.

All blockchains, however, evolve in isolated contexts and have unique rules and consensus procedures. This implies they can’t communicate natively, and tokens can’t travel freely between blockchains.

Bridges connect blockchains and enable the exchange of data and tokens between them.

Bridges allow:

  • the cross-chain transmission of resources and data
  • dapps to gain access to the benefits of other blockchains, hence enhancing their capabilities (as protocols now have more design space for innovation).
  • users to gain access to new platforms and utilise the advantages of various chains.
  • Working together, developers from various blockchain ecosystems will create new user-facing platforms.

Type Of Blockchain Bridges

Bridges come in a variety of styles and levels of complexity. Bridges can be divided into two groups: trusted bridges and trustless bridges.

Trusted BridgesTrustless Bridges
Trusted bridges rely on a centralised system or entity to function.Algorithms and smart contracts are used to operate trustless bridges.
They have trust presumptions on the handling of money and the bridge’s security. Most users rely on the operator of the bridge’s reputation.They are trustless, meaning that the bridge’s security and that of the underlying blockchain are identical.
Users must relinquish control of their cryptocurrency assets.Trustless bridges give customers the ability to maintain control over their money through smart contracts.

The Risks of blockchain bridges

Bridge construction is still in the planning stages. It’s likely that the ideal bridge design is still unknown. Any interaction with a bridge is dangerous:

Technology Risk: Software failure, bad coding, human errors, spam, and malicious attacks are all potential sources of user interruption.

Smart contract risk: Refers to the chance of a programming error resulting in the loss of user funds.

Furthermore, because trusted bridges include new trust assumptions, they introduce new risks, such as

Custodial Risk: Bridge operators may combine to steal money from their consumers.

Censorship Risk: Bridge operators might theoretically block users from moving assets across the bridge.

Use cases for bridges

The following are some instances in which a bridge could be useful:

Dapps on different blockchains

If you’ve been lending USDT with Aave on Ethereum Mainnet, however the interest rate for lending USDT with Aave on Polygon is greater.

Reduced transaction fees

Assume you have ETH on Ethereum Mainnet but wish to explore various dapps with lower transaction fees. Lower transaction fees are possible by bridging your ETH from the Mainnet to an Ethereum L2 rollup.

Investigate blockchain ecosystems

If you have ETH on Ethereum Mainnet and want to try out an alt L1’s native dapps. To transfer your ETH from Ethereum Mainnet to the alt L1, you can use a bridge.

Choosing a Bridge

Here are some of the most popular blockchain bridges for transferring cryptocurrency.

Binance Bridge: This decentralised bridge has one of the most diverse collections of traded coins. It supports popular blockchains including Ethereum, Solana, and TRON, among others.

cBridge: If you don’t want to use Binance’s main bridge, you can access this solution straight from it. You can interact with a multitude of blockchains and cryptocurrencies, just like with any other trustless bridge. One minor quibble with cBridge is that you must first link a wallet.

AnySwap: This platform is well-known for having services other than cryptocurrency transmission. You can see all of your balances across different types of coins after you log in to a wallet. Balances can also be easily transferred from one location to another. However, there are other blockchains where you can only transfer from and to a specific destination.

Last thoughts

Because decentralisation has always been a major aspect of blockchain, it takes precedence over other operational advancements such as scalability.

Developers are naturally wary of major modifications, fearing that they would deviate from decentralising principles. However, as evidenced by the blockchain bridges they’ve built, they’ve moved past that mindset. We may be making progress toward a more inventive and popular crypto economy, but any advancement is preferable to the current state of affairs.

Thank you for taking the time to read this! I hope you enjoyed our article and we have provided you with some information that will be useful to you in the future. Read more articles on Behindyourgoals.

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