A bridge (translated “bridge between blockchains”) is a technology that enables communication and transfer of assets or data between two different and usually incompatible blockchains. Think of it as a physical bridge connecting two islands: without a bridge, people on one island can’t get to the other. Similarly, without bridges, assets and information on a blockchain would remain isolated on that blockchain.
Why we need bridges between blockchains
The blockchain ecosystem is vast and diverse, with numerous networks (such as Ethereum, Bitcoin, Solana, Polygon, Avalanche) operating independently. Each has its own rules, consensus mechanisms and technical standards. This “fragmentation” creates a number of challenges:
- Isolation: digital assets (cryptocurrencies, NFTs) created on one blockchain cannot be used directly on another. For example, an ERC-20 token (on Ethereum) cannot be used natively on the Solana network.
- Scalability and cost: Some popular blockchains (like Ethereum) can become congested, leading to high fees and slow transaction times. Bridges allow assets to be moved to faster and cheaper networks.
- Interoperability: For decentralized applications (dApps ) and the whole Web3 vision to thrive, blockchains need to be able to communicate and collaborate.
How a bridge works
The basic mechanism of a bridge involves either “wrapping” (wrapping) or “locking” (locking) the original assets on the source blockchain, or creating (minting) an equivalent representation of them on the destination blockchain.
Here is a common example (lock-and-mint method):
- Transaction Initiation: the first step is that a user decides to transfer an asset, e.g., move 1 ETH (Ethereum) from the Ethereum network to the Polygon network.
- Asset blocking: the user sends 1 ETH to a smart contract on the Ethereum blockchain, and that amount is blocked (temporarily unavailable).
- Proof and mining: The smart contract on Ethereum sends a proof (proof) to the bridge. The bridge, based on this proof, “mints” (creates) 1 wETH (wrapped ETH) on the Polygon network, which is immediately sent to the user’s wallet.
- Asset utilization: the user can now use the wETH on Polygon for faster and cheaper transactions.
- Rollback: When the user wants to move 1 wETH back to Ethereum, the process is reversed: the wETH is burned on Polygon, and the blocked ETH is unlocked and returned to the user on Ethereum.
Bridge types
There are different types of bridges, each with their own mechanisms and levels of decentralization and security:
- Centralized (custodial) bridges: these rely on a trusted third-party entity (a “custodian”) that owns and manages the blocked assets. They are faster, but introduce a central point of failure and trust risk.
- Decentralized (non-custodial) bridges: These use smart contracts and networks of validators (oracles) to automate and secure the process, eliminating the need for a trusted party. They are considered more secure and more aligned with the blockchain ethos.
- Liquidity-based bridges: use liquidity pools on both blockchains, allowing instantaneous asset swaps.
- Atomic Swaps: A method that allows cryptocurrencies to be exchanged directly between different blockchains without intermediaries through HTLC smart contracts.
Risks and challenges in blockchain ecosystems
While bridges are essential for interoperability, they are also one of the most vulnerable components of the blockchain ecosystem. Key risks include:
- Smart contract vulnerabilities: bugs in smart contract code can be exploited by hackers.
- Centralized attacks: Centralized bridges can be attractive targets for cyberattacks because they hold valuable assets.
- Problems with oracles/validators: If the network of oracles or validators is compromised, the integrity of the bridge may be affected.
- Liquidity shortfalls: Some bridges can run out of liquidity on one side, making transfers difficult.
Despite the risks, blockchain bridges are a crucial component for developing a truly interconnected and scalable Web3 ecosystem, enabling the fluidity of assets and innovation across diverse networks.