Blockchain bridges are systems that enable interoperability between different blockchain networks, allowing assets and information to be transferred between them. Over time, several different kinds of bridges have been developed, each with its own method of working and benefits. Here’s a look at some of the most common types of blockchain bridges and how they work.
What are blockchain bridges and why do we use them?
A blockchain bridge is a connection between two separate blockchain networks that allow them to interact with each other. This can be useful for several reasons, such as allowing assets or data to be transferred between the two networks, enabling cross-chain communication and allowing users of one network to access the features and capabilities of the other.
The primary reason for using blockchain bridges are:
They enable the transfer of assets between multiple blockchains.
Facilitate the development of Decentralised Applications or dApps.
Increase the liquidity of the assets.
Enhance blockchain security.The types of blockchain bridges
There are multiple types of blockchain bridges, including unidirectional bridges, bidirectional bridges, federated bridges, also known as trusted bridges, sidechain bridges, and cross-chain bridges. Here’s how each of these bridges works.
Unidirectional and bidirectional bridges
Unidirectional bridges allow for a one-way transfer of assets, while bidirectional bridges allow the free transfer of assets between two blockchains. Wrapped Bitcoin is an example of a unidirectional bridge. You can use your Bitcoin to create tokens (WBTC) that are pegged to the value of ETH. However, it does not work the other way around. On the other hand, unidirectional bridges like Wormhole, allow to you transfer tokens between Solana and other top DeFi protocols.
Federated or trusted bridges
Federated bridges are blockchain bridges that are controlled by a group of trusted organisations or individuals, known as a federation. The federation is responsible for facilitating the transfer of assets between the two networks and ensures that the transfer is secure and compliant with relevant regulations.
An example of a federated bridge is the Ripple Network, which uses a network of trusted validators to facilitate the transfer of assets between different payment networks. The Ripple Network is used by banks and financial institutions to transfer money and other assets around the world and is designed to be faster and cheaper than traditional payment methods.
Sidechain bridges
Sidechain bridges allow assets to be transferred between two separate blockchain networks, without the need for a third party. This is achieved by connecting the two networks through a sidechain, which is a separate blockchain that works parallel to the main chains.
An example of a sidechain bridge is the Bitcoin-Ethereum Bridge, which allows users to transfer Bitcoin and other assets from the Bitcoin blockchain to the Ethereum blockchain and vice versa. The bridge is implemented using a sidechain called WBTC (Wrapped Bitcoin), which is a token on the Ethereum blockchain that is backed by Bitcoin on the Bitcoin blockchain. Basically, Wrapped Bitcoin is a one-way sidechain bridge.
Cross-chain bridges
Cross-chain bridges enable the transfer of assets between two different blockchain networks, but unlike sidechain bridges, they do not require a separate sidechain to facilitate the transfer. Instead, they use smart contracts and other techniques to enable the transfer of assets directly between the two networks.
An example of a cross-chain bridge is the Cosmos Network, which uses a system of interchain communication (ICC) to enable the transfer of assets between different blockchain networks. The Cosmos Network uses a proof-of-stake (PoS) consensus algorithm and allows users to build customised blockchain applications that can interact with other blockchain networks.
Another example is the Polkadot Network, which uses a system of relay chains to enable the transfer of assets between different blockchain networks. The Polkadot Network uses a shared security model, which allows users to benefit from the security of the entire network rather than just their own chain.
Disadvantages of using blockchain bridges
Like any technology, blockchain bridges have their own set of advantages and disadvantages. Some of the potential disadvantages of using blockchain bridges include:
Complexity
Blockchain bridges can be complex to implement and maintain, especially if they involve multiple blockchain networks with different technical architectures and protocols. This can make it difficult for developers to build and deploy applications that use blockchain bridges.
Limited Supply
Blockchain bridges may not be widely adopted, especially if they are new or not well-known. This can limit their usefulness and make it difficult for users to take advantage of the benefits they offer.
Centralisation
Some types of blockchain bridges, such as federated bridges, rely on a central authority or federation to facilitate the transfer of assets between the two networks. This can introduce centralisation into the system and may not be suitable for users who value decentralisation.
Regulation
Blockchain bridges may be subject to regulatory oversight, especially if they involve the transfer of assets or involve sensitive information. This can add complexity and compliance costs for users and may limit the adoption of blockchain bridges in some cases.
Security Concerns
Blockchain bridges can be vulnerable to security risks, especially if they involve the transfer of assets between different blockchain networks. Hackers or other malicious actors may try to exploit vulnerabilities in the system to steal assets or disrupt the transfer of assets. In fact, this year alone has seen 4 substantial hacks on blockchain bridges, including the $375 million Wormhole attack in Feb, the $624 million Ronin Bridge exploit in March, the $190 million Nomad hack in Aug, and finally the $160 million Wintermute attack in Sept.
Conclusion
Blockchain networks are usually developed in isolation. Therefore, while blockchain bridges can be useful for enabling interoperability between different blockchain networks, these systems are still in their nascent stages. However, over the next few years, we should see a lot of development of blockchain applications, allowing for quick, convenient and secure transfer of assets between the different blockchain networks.
