If you wish to move a token from one blockchain to the other, you would require a blockchain bridge to do the work! It is a way or a mode for the assets to travel. A tool which seamlessly allows you to port the assets from one blockchain to the other. They solve one of the major purposes of the lack of interoperability. Bridges open up new markets and work towards a flawless multi-chain future of cryptocurrencies.
Blockchain bridges make interoperability possible and the entire process smooth.The transaction fees incurred in most of the bridges is extremely low!Blockchain ecosystems have seen a boost due to the presence of blockchain bridges.Many renowned names like Coinbase have stepped into the launch of the blockchain bridges for enhancing cross-chain transfers for easy futures.
1. What are blockchain bridges?
As we all know that blockchain assets are not often compatible with one another, therefore, these bridges create synthetic derivatives which represent an asset from another blockchain. For instance, if you utilise these bridges to send one Solana to an Ethereum wallet, the wallet receives a token which has been wrapped by the bridge , converted into a token based on the targeted blockchain. In this way,the Ethereum wallet will get a “bridge” version of Solana which has been converted to an ERC-20 token. ERC-20 is a generic token standard for fungible tokens on the Ethereum blockchain.
2. How does a blockchain bridge work?
The most prominent use case of these bridges is the transfer of tokens, however, they perform other fulfilling tasks such as converting smart contracts and transmitting information. For example,
- Bitcoin and Ethereum are the two biggest digital currencies having different rules and procedures.
- Bitcoin buyers can easily shift their funds to Ethereum via blockchain bridge and could do anything with them which they couldn’t do on bitcoin blockchain.
- This might include making low-fee payments or buying Ethereum tokens.
- Through bridges, you get permission to access an equivalent quantity of ETH while working on the quantity of BTC you wish to send to the smart contract.
- Whenever ETH is transformed into BTC, the remainder of the ETH is burnt off and we get an equivalent quantity of BTC within the bank account.
- The entire move will incur transaction fees and expose you to price volatility if you do not use a blockchain bridge.
- To sum it up, the amount of BTC you wish to port gets locked up in a smart contract, giving an equivalent token on the destination blockchain.
- A “wrapped” token is a tokenized version of the other cryptocurrency.
- It is pegged to the value of the currency it represents and could be redeemed for its unwrapped version at any time.
3. Types of blockchain bridges
- Custodial Vs non-custodial bridges
Custodial or centralized bridges require the users to place their trust in a central entity to properly operate the system without any glitch in safety.
Non-custodial or decentralized bridges work in a decentralized manner, by relying on smart contracts to manage the crypto locking and minting procedures. It removes the need to trust a bridge operator.
- Wrapped and sidechain bridges
Wrapped bridges enable crypto interoperability like porting Bitcoins to Ethereum network through wrapping the BTC to Wrapped BTC, an ERC-20 token compatible with Ethereum network.
Sidechain bridges connect the blockchain parent blockchain to its child sidechain, allowing interoperability between the two.
4. Blockchain bridges: what is their role?
As the blockchain space evolved, one of the most prominent limitations has been the lack of capability of different blockchains to work together. Each has its own rules, tokens, procedures and smart contracts.
- Blockchain bridges are a medium to bring the different crypto ecosystems together on one platform by allowing the cross-chain transfers among the blockchains.
- An interconnected chain of blockchains could allow tokens and data to be transferred smoothly and flawlessly.
- Cross-chain transfers are the major use cases of the bridges.
- They allow the transfer of a token from one blockchain to another blockchain, thus ensuring the easy way to work with different types of tokens and blockchains in one go!
They are a crucial part of an interoperable future of the blockchain industry!
5. Benefits of blockchain bridges
These are some of the main benefits of the blockchain bridges:
- The ability to improve interoperability across the blockchains
- They allow the exchange of tokens, assets and data among blockchains.
- They also work on improving scalability to handle a larger number of transactions and improving efficiency.
For instance, the Ethereum-Polygon bridge is a decentralized bridge which acts as a scaling solution to the ethereum network. In return, the users could benefit from faster transactions and decrease the transaction costs.
They are very critical to the industry’s future and its success!
6. The biggest blockchain bridge
The best and the biggest blockchain bridges listed in the year 2023 are mentioned below:
- A very user friendly bridge with millions of users
- It allows fast transfer of assets and offers staking as well
- It supports transfers between EVM and non-EVM networks
- It is a bridge supporting ERC-721 tokens (NFTs)
- It helps in NFT wrapping and bridging and supports popular networks like Ethereum, Solana, BNB chain, Cronos etc.
- Polygon Bridge
- It has an accessible user interface and enables official access to Polygon zkEVM.
These bridges are getting popular owing to their easy functionality and user adaptability.
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7. Blockchain bridges: What are the risks involved?
There are some limitations attached to the Blockchain bridges like:
- Attackers might exploit the vulnerabilities of some blockchain bridges’ smart contracts if they have not been secured properly. Therefore, smart contracts need to be well protected and sealed.
- Transaction rate bottlenecks could be another limitation! A single chain throughout capacity bottleneck could affect large scale blockchain interoperability.
- They can also expose the underlying protocols to risks connected to the lack of authenticity.
However, with good research, such risks could be alleviated.
8. Final thoughts
The evolution of the blockchain industry has been catalysed by various innovations. The number of tokens have grown exponentially. With different rules and protocols, they need a way to stay interconnected. Blockchain bridges solve this purpose smoothly! They are cohesive and interoperable in nature. Thus, allowing scalability and efficiency in the blockchain world.
Blockchain bridges are important to facilitate communication and movement of assets between one network and the other , otherwise, each blockchain would remain in its own island, without any outside interaction.
Yes, if deployed with care, these bridges could do wonders in the blockchain world.
Yes, to facilitate cross chain transfers, they are very important. They could be called the future of the blockchain world.
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