What is a blockchain bridge?
A bridge is a way of moving cryptoassets and data across blockchains. It can be a one way bridge e.g the Wrapped Bitcoin (WBTC) bridge which allows you to send your bitcoin to Ethereum but not ether to Bitcoin, or a two way/bidirectional bridge e.g the Ethereum-Polygon bridge which allows any assets to move freely between these chains.
More recently, the term is used to apply to any movement of cryptoassets across blockchains - however there are a number of implementations which allow assets to move between chains e.g atomic swaps, DEXs, CEXs .?
Bridges are required since there are thousands of blockchains but they are not all connected in such a way that assets and information can seamlessly move between them. Therefore as applications and use cases develop on different blockchains it is becoming ever more important for assets and data to need to move between them. This could be being able to port over your bitcoin to be used in a DeFi app on Ethereum, sending some ERC20 tokens to Polygon to use a play-to-earn game with lower fees, or wrapping your ether to make use of a new market on Solana.
Making use of Bridges helps to provide this interoperability.?
How are Bridges Implemented?
There are a number of technical implementations for bridges however at a high level they generally require cryptoassets to be locked up on one chain and a representation of them to be created on the other chain. This can be done in a centralised manner where the assets are held in custody and the representations are created by a trusted intermediary, or via smart contracts and multi-signature wallets to enable a decentralised/hybrid process.
I explore the different types of wrapping in https://www.dhirubhai.net/pulse/how-does-cryptocurrency-move-across-blockchains-part-1-tara-annison/ and how Wrapped Bitcoin (WBTC) works in more depth in https://tara-annison.medium.com/a-walkthrough-of-wrapping-btc-to-wbtc-part-2-ff11493bdcc6
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How Much Value is Within Bridges?
There is currently over $10billion locked in via bridges with the Wrapped Bitcoin (WBTC) bridge being the most valuable, followed by the Multichain network which supports movement across 56 different protocols in a non-custodial fashion.?
The Risk of Using Bridges
With this much value moving between blockchains through bridges it may come as no surprise that illicit actors are targeting them.?
At the start of this year there was an $80m bridge theft of the Qubit bridge between Ethereum and Binance Smart Chain. But this was quickly dwarfed by the theft of $320m from Solana’s Wormhole bridge in February. Then in April, the Ronin bridge saw $600m stolen through a cleverly executed phishing attack and just a few months later the Horizon bridge was compromised for $100m with North Korea’s Lazarus group being attributed as the criminal masterminds to this as well as the earlier Ronin bridge hack.?
In line with this, bridge hacks have already surpassed $1billion for the year and many within the cryptosphere are questioning whether they are inherently risky. This includes Ethereum co-creator Vitalik Buterin who wrote a long blog post in January warning of the risks:
“The fundamental security limits of bridges are actually a key reason why…I am pessimistic about cross-chain applications” (Full post here )
However there’s also an argument (that I made in a recent Blockworks interview ) that bridges are an important part of the multi-chain world we’re living in and the recent spate of attacks has been due to bridges holding high volumes of funds which make them a honeypot for hackers. This is coupled with much of the technology being nascent and so there will, as there always is, a period of it being battle tested before it’s improved and strengthened.?
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2 年I do enjoy your posts Tara??
Diehard blockchain believer | Builder | web 2.0 | web 3.0 | I solve real world problems
2 年What I understand so far is, The wallet exist, but not the cryptocurrency/coins/tokens. The ledger note downs information about who owns how much and the wallet is to store my crypto account address(private and Public keys) via which I make transaction of ownership of tokens which in turn be noted on ledger. But, somewhere in the recent Solano hack, I had read that, the Private keys were stolen on the bridge and using those private keys, the ownership of coins/cryptocurrency transfer was made there by stealing it. does that mean wallet was being transferred on the bridge? It still not clear to me.
Technology Innovator & Business Builder | Expert in Transforming Ideas into Scalable Models | Proven Track Record in Launching & Growing Tech-Driven Ventures
2 年There is no way a blockchain network can forget an asset and so there is no way to move an asset from one network to another... Well there is also no way to move an asset from one wallet to another as wallets don't really exist at all. What is usually called portability is in fact the process to create duplicate assets in other networks. Imagine we people were digital assets... Then if I want to go from a city to another (the Blockchain way), a clone of me is to be created in the other city and I am sent to a dark room to be imprisoned "forever" as the room keys have been thrown away (at least temporary)... So when I return to the first city... a new clone is to be created in there, but don't worry, the original me and the first clone are prisoners forever in those so called dark rooms... Sounds stupid?... Almost everything in Blockchain is in fact some kind of a nonsense or half a lie just to keep the failed technology on stage. To protect value over Internet, we need secure transfer technologies, not global ledgers.
Carlos Martins
Data as a Public Service
2 年Good summary. Elliptic is a reputation in blockchain security.