One of the most basic capabilities considered necessary for the crypto industry is creating a solution for the interaction of different blockchains with each other. Blockchain bridges are software designed to transfer tokens from one blockchain to another. In addition to explaining the blockchain bridge, we will discuss its function, advantages, and categories in this article.
In the past, one of the biggest problems with blockchain was the lack of a way to communicate with each other. Although these blockchains are fluid and somewhat efficient as individual entities, each blockchain was confined to its domain. In other words, despite their in-network efficiency, these tools had nothing to do with each other. This caused high transaction costs and congestion in the network.
In this way, after realizing this defect, the developers sought to create a solution: The issue that caused the creation of blockchain bridges. These bridges solve this problem by enabling a solution for token transfer, smart contracts and data exchange, and other feedback and instructions between two independent platforms.
Each blockchain supports different cryptocurrencies and operates according to different rules. As a neutral environment, the bridge allows users to switch between other blockchains easily. In this way, access to multiple blockchains through a network called a bridge expanded the used space of digital currencies.
As mentioned, blockchain bridges are created to transfer tokens from one blockchain to another. Using this software, users can perform the process of issuing and transferring tickets simultaneously. In this way, when a user decides to move their cryptocurrencies between two networks, the bridge selects them on the leading network and transmits them to the network of their choice. For example, if you have Bitcoin but want to convert it to another cryptocurrency like Ethereum, you can do it through a bridge.
Differences and similarities of blockchain bridge and layer two solutions
The concept of the blockchain bridge is very similar to layer two solutions. Of course, these two systems pursue different goals. Layer 2 is built on top of an existing blockchain. Therefore, although it improves network performance speed, the lack of interoperability with other blockchains remains the main problem. On the other hand, chain bridges are independent entities that do not belong to any blockchain.
How do blockchain bridges work?
Blockchain bridges can do many exciting things, like connecting intelligent contracts and sending data, But the most common action they are made for is transferring cryptocurrency between blockchains. For example, Bitcoin and Ethereum are two large cryptocurrency networks with very different rules and protocols. Through the blockchain bridge, Bitcoin users can transfer their digital currency to Ethereum, An action that could not be done without these solutions.
In other words, if you have Bitcoin and want to transfer some of it to Ethereum, the blockchain bridge will hold your coins and create Ethereum equivalents for you. No cryptocurrencies are shared anywhere; the amount of Bitcoin you want to transfer is locked into a smart contract, and you get access to an equal amount of ETH in return. When you want to convert Ethereum back to Bitcoin, the Ethereum you had or whatever is left of it will be burned, and an equal amount of Bitcoin will be returned to your wallet.
Blockchain bridges based on trust and untrusted bridges
In addition to the advantages they create for users, blockchain bridges also have disadvantages. One of the negative points of blockchain bridges is centralization. It means that if users want to convert their coins to other digital currencies, they have to give up their control over their assets and hand them over to someone else. Bridges takes Bitcoins and provide Ethereum to the user after placing them in a 20-ERC contract.
Therefore, using trust-based or centralized bridges is a fast and economical option when transferring a large amount of cryptocurrency. Still, the set of trusted bridges is relatively tiny. Investing in lesser-known areas can increase risks.
Decentralized or trustless blockchain bridges are designed to make users feel more secure when transferring their coins. These solutions work like a real blockchain with separate networks to validate transactions.
What are the types of blockchain bridges?
Binance Bridge: This decentralized bridge offers one of the most extensive lists of tradable cryptocurrencies. This bridge supports popular blockchains such as Ethereum, Solana, Tron, etc.
Cambridge: If you don’t want to use its main bridge, you can access this solution directly from Binance. As with any trustless bridge, there are different types of blockchains and cryptocurrencies that you can interact with. One minor issue with cBridge is that you need to connect a wallet to it before you can do anything.
AnySwap Bridge: This platform has become popular because of its features beyond cryptocurrency transfer. After connecting to the wallet, you can see all your balance in different coins. You can also freely transfer inventory from one location to another. However, there are specific blockchains you need to use another bridge if you want to move to them.
Terra Bridge: This bridge supports Ethereum, Binance Smart Chain, Harmony, Secret, Injective, Cosmas, Polygon, Solana, Avalanche, Phantom, Moonbeam, and Osmosis networks.
Arbitrum Bridge: Arbitrum Bridge was launched as an Ethereum layer two scaling solution, meaning it seeks to make transactions on the Ethereum main chain faster and cheaper. In Arbitrum, users can interact with decentralized applications (DApps) and smart contracts in the same way as used in the Ethereum network. Arbitrum is built on the Ethereum blockchain and uses its security. Its purpose as a scalability solution is to solve the high cost of transactions in Ethereum and increase transaction speed.
Polygon Bridge: Polygon Bridge is a way to speed up the transfer of ERC20 and NFT tokens to the Polygon sidechain. In this method, two bridges with different security conditions, the Proof of Stake (PoS) bridge and the Plasma bridge, are used to transfer assets from Ethereum to Polygon and vice versa. PoS Bridge uses the Proof of Stake (PoS) consensus algorithm to secure its network. The PoS bridge transfers Ether, and most ERC-20 tokens, and ordinary users can easily use this method. However, developers who need more security should use Plasma Bridge to transfer assets. This bridge supports the transfer of MATIC, ERC-20, and ERC-721 tokens.
What are the most significant blockchain bridges?
As of March 2022, $21.8 billion in digital currency was locked in blockchain bridges, according to a report by DiFiLama. The most giant blockchain bridge is Wrapped in Bitcoin. This token was created to act as a bridge to channel the enormous liquidity in Bitcoin to the Ethereum ecosystem, especially decentralized exchanges. By buying the WBTC token and having Bitcoin, you can use all the Ethereum network’s benefits without the need to buy Ether (ETH). Wrapped Bitcoin accounts for almost half of Paul’s market cap, with a total value of $10.2 billion.
Also, according to the information provided by this website, the Multichain bridge is the largest inter-chain bridge, with about $7 billion TVL.
According to Dune Analytics, the Avalanche bridge is the largest Ethereum bridge with around $6 billion TVL, followed by Polygon with $5 billion TVL and Fantom Anyswap bridge with $4.2 billion TVL.
I have frequently asked questions about blockchain bridges.
How do blockchain bridges work?
Blockchain bridges can communicate between smart contracts and send data, but the most common action they are built for is transferring cryptocurrency between blockchains.
What are the types of blockchain bridges?
Binance, cBridge, AnySwap, Terra, and…
The difference between blockchain bridge and layer two solutions
Layer 2 is built on top of an existing blockchain, but chain bridges are independent entities that do not belong to any blockchain.
The difference between trusted and untrusted blockchain bridges
To transfer cryptocurrency through trust-based bridges, the control of users’ assets is taken out of their hands and placed inside a smart contract, but decentralized bridges are based on individuals. In this way, when an accident happens, all the responsibilities will be on the person himself.
Best blockchain bridges definition
What about ver 2.0 ?