Explainer: What is a blockchain bridge? How does it work and why do we need them?

By 2022, Chainalysis, a Singapore-based research and analytics firm estimated that over $2 billion worth of digital assets have been stolen from blockchain bridges. This figure represents approximately 69 percent of all stolen crypto funds in the year. Bridges on the blockchain work in the same way as the ones we are familiar with. A blockchain bridge connects two blockchain ecosystems in the same way that a physical bridge connects two locations in the real world. Through the exchange of data and assets, bridges facilitate connectivity across blockchains. But what are blockchain bridges and how does it work? Let’s take a tour of them.

What are blockchain bridges?

A tool created to solve the problem of interoperability between blockchains is a blockchain bridge, sometimes referred to as a network bridge or a cross-chain bridge. Bridges are now an essential part of the blockchain industry since, as it stands now, blockchains cannot communicate with each other and operate in silos.

For example, users cannot spend Ether (ETH) on the Ethereum blockchain or Bitcoin (BTC) on the Ethereum blockchain. Therefore, if user X wants to pay another user Y for something, but Ethel only accepts ETH, X gets a problem. Y cannot receive BTC from him directly. BTC cannot be transferred directly to Ethel, but he can take further steps to buy ETH or exchange some of his BTC for ETH. Unlike fiat currencies and credit cards, which can be used with a variety of providers, this can be considered a significant disadvantage.

Why do we need bridges?

Every blockchain has its limitations. Ethereum needs rollups to scale and meet demand. Avalanche and Solana L1s, on the other hand, are built differently to allow better throughput at the expense of decentralization.

However, all blockchains have unique rules and consensus methods and develop in closed contexts. This prevents them from interacting naturally and prevents tokens from moving freely between blockchains. There are bridges that connect blockchains, enabling the exchange of data and tokens between them.

According to Ethereum’s official blog on bridges, it enables the transfer of assets and information across chains and dApps (decentralized applications) to access the strengths of different blockchains and thus improve their capabilities (as protocols now have more design space for innovation). In addition, users can access new platforms and take advantage of the benefits of different chains. Also, developers from different blockchain ecosystems collaborate and build new platforms for users.

Types of bridges

Reliable bridges

Faithless bridges

Trusted bridges rely on a centralized system or entity to function.

Algorithms and smart contracts are used to operate trustless bridges.

They have trust conditions regarding money handling and the safety of the bridge. Most users trust the operator of the bridge’s reputation.

They are trustless, meaning that the security of the bridge and the underlying blockchain are identical.

Users must relinquish control over crypto assets.

Trustless bridges give customers the ability to maintain control over their money through smart contracts.

How safe are these bridges?

There can be fundamental or technical flaws in both trusted and untrusted techniques. To be more precise, the centralized function of a trusted bridge has a fundamental weakness, while trustless bridges are susceptible to vulnerabilities that come from the program and the underlying code. Simply put, if the smart contract has a flaw, it’s almost guaranteed that those with ulterior motives will try to exploit it.

Both trusted and trustless platforms have design flaws that compromise the blockchain bridge’s security in different ways.

Additionally, hackers are becoming more skilled as the industry’s value and user base continue to grow. Traditional hacks such as phishing and social engineering have been modified to target both centralized and decentralized protocols in the Web3 narrative.

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