In this article, we answer the questions “what is a blockchain bridge?” and “how does a blockchain bridge work?”. Also, we look at the overall purpose of blockchain bridges and how they can vary between protocols. This include trusted, trustless, unidirectional, and bidirectional bridges. In addition, we explore the benefits and risks of using the different types of blockchain bridges. Finally, we look at some of the popular blockchain bridge projects in operation across the industry. This includes bridges on leading chains including Bitcoin, Ethereum, BNB Chain, and Avalanche.
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Definition of a Blockchain Bridge
As investors venture into the decentralized finance (DeFi) landscape, the need to use a blockchain bridge becomes increasingly commonplace. Akin to physical bridges that allow people to cross from one landmass to another, a blockchain bridge connects two different blockchain ecosystems. Furthermore, there are various ways a blockchain bridge can operate.
A blockchain bridge, sometimes known as a “cross-chain bridge”, allows the seamless transfer of assets and data between two distinct protocols. This could be between layer-1 and layer-2 networks or between two separate blockchain networks. Each blockchain project has its own defining parameters, often resulting in a lack of interoperability between other networks. This is where a blockchain bridge comes in.
Blockchain bridges can be trusted, trustless, unidirectional, or bidirectional (discussed later in the article). Blockchain bridges can also facilitate the transfer of various data sets and transactions. For example, this includes decentralized identities, smart contract calls, and off-chain information (i.e., market price or game score feeds).
Blockchain Infrastructure
For readers unfamiliar with the fundamental infrastructure of blockchain technology, this overview will help deepen your understanding of the need for blockchain bridges.
A blockchain network comprises a global community of computers (nodes) collaboratively managing, validating, and storing financial and data transactions. Each network uses a consensus model that allows all nodes in the network to agree that a transaction is valid before its confirmation. The original consensus algorithm, proof-of-work (PoW), although immensely secure, requires tremendous amounts of energy expenditure. Plus, there are concerns about the scalability of PoW. Therefore, as new blockchain networks emerge, so too are innovative consensus models that attempt to achieve the holy blockchain trinity of scalability, security, and decentralization.
In addition, many blockchains employ pieces of code to allow other developers to deploy tokens, smart contracts, and applications on top of a network. Further, each blockchain network has its own token standard and framework for development. As more projects emerge, DeFi users are keen to use assets from one network with another application on a different chain. Without a protocol that can achieve a common standard between the two projects, this wouldn’t be possible. Thus, to connect different siloed blockchain networks, developers created a bridge concept that would become the cornerstone of interoperability within the industry.
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Different Types of Blockchain Bridges
In the same way that different blockchain networks have unique defining parameters, so do blockchain bridges. One blockchain bridge is not compatible and interoperable with every asset and network in the industry. However, we may see this in the future with further development. In the meantime, there are several different types of blockchain bridges that cater to varying user demands.
Trusted
A trusted blockchain bridge is a protocol run by a centralized system, entity, or operator. The reason for the term “trusted” is due to the users giving up the custody of their funds and trusting the reputation of a centralized bridge. Trusted blockchain bridges typically have user-friendly interfaces, ideal for onboarding new people to crypto.
Trustless
On the other hand, a trustless blockchain bridge runs using smart contracts and algorithms on a blockchain network. As such, there is no risk of gatekeeping or the need for trusting central authorities with users’ assets. Instead, a trustless bridge is fully transparent using cryptography, mathematics, and computer science for transactional security. Plus, users have full control of their assets at all times.
Unidirectional
Another variable option when using a blockchain bridge is the direction of transactions. For example, a unidirectional blockchain bridge can allow the transfer of assets from network A to network B; however, assets cannot be converted back from network B to network A. As the name suggests, a unidirectional blockchain bridge only works in one-way conversions.
Bidirectional
Conversely, a bidirectional blockchain bridge allows users to seamlessly transfer data and assets to and from network A and network B. Ergo, bidirectional bridges are often more favorable than using two separate unidirectional bridges when making frequent transactions.
Why Use a Blockchain Bridge?
The blockchain industry boasts a global collaborative ethos, working together for social good. However, the industry is still young, with technological innovations emerging frequently and an immense scope for further development. Although more blockchain projects that emerge focus on interoperability, there is yet to be one truly interoperable standard throughout the industry. Thus, many blockchain projects are developed in isolated environments. That said, each blockchain network holds its own beneficial features for targeting demographics. Therefore, a popular solution to frictionless “chain-hopping” is a range of blockchain bridges that allow users the freedom to switch between networks with ease.
In addition, a blockchain bridge can benefit investors, developers, and the two blockchain networks in communication. This is because a bridge opens up avenues for increasing users, asset transfers, and development opportunities. To interact with a blockchain bridge, users must ideally be familiar with using a Web3 wallet. For readers who would like industry expert tuition on installing the leading Web3 wallet, MetaMask, see our Master DeFi in 2022 course. At Moralis Academy, students with no experience learn how to set up and navigate a MetaMask account with leading Ethereum DeFi applications. Alternatively, save our “Rust & Solana” article for later reading to learn about the developments on one of the leading blockchain networks!
Pros
There are several advantages to using a blockchain bridge. Primarily, a bridge enables the transfer of assets or information cross-chain or cross-network. This means users can interact and explore new blockchain ecosystems. For example, this allows investors who only have Bitcoin to interact with applications on the Ethereum network and vice versa. As such, users can leverage the best applications across different blockchain networks.
Also, using a bridge makes it easy to use assets from the main chain on a layer-2 network. Typically, layer-2 networks are faster and cheaper than their main hosting chain. Therefore, using a blockchain bridge can allow traders to enjoy lower transaction fees.
From a developer’s point of view, integrating a blockchain bridge into an application can be a valuable move. It allows one application to gain the advantages and utilities of multiple blockchains. Moreover, a blockchain bridge itself can be a new platform for developers to deploy forward-thinking dapps.
Cons
In a similar way to the Web3 industry being in the early stages of its evolution, so too is the development of blockchain bridges. Furthermore, there is a general agreement among the blockchain development community that the optimal blockchain bridge design has yet to be created. In turn, there are several risks involved with using a blockchain bridge. Moreover, the risks vary depending on the type of bridge one uses.
With a trusted blockchain bridge, the risk is primarily censorship that could prevent users from interacting with the protocol. Plus, there is a custodial risk of giving access to potentially malicious bridge operators desiring to steal funds. On the other hand, a trustless blockchain bridge also comes with risks. However, instead of risks with central authorities, bug or malware risks exist in the protocol code. Also, the blockchain hosting the bridge could be hacked. In addition, a trustless bridge means that if the user makes an error, their funds could be lost forever. Further, there is no customer service with DeFi.
Blockchain Bridge Projects
Now that we understand what a blockchain bridge is and how it works, let’s explore some existing blockchain bridge projects. As mentioned, there are many blockchain bridges available, allowing users to cross between the leading blockchain networks. Plus, each blockchain bridge operates slightly differently. As a result, the transfer times for each bridge vary.
For example, the bridge from Binance is a bidirectional blockchain bridge connecting the main Binance chain to the leading smart contract chain, Ethereum. Moreover, the Binance bridge uses aspects of its Ethereum-compatible smart contract chain, BNB Smart Chain (BSC), to wrap token assets. Furthermore, the Binance bridge allows users to transfer assets from the Binance ecosystem to the Ethereum ecosystem. Plus, the bridge allows users to use Ethereum assets on BSC using the BEP-20 token standard.
Another popular bridge project is Avalanche Bridge. The two-way Avalanche Bridge allows users on the Avalanche network to seamlessly transfer assets to and from the Ethereum network. Moreover, Avalanche Bridge holds ERC-20 and ERC-721 functionality, meaning users can transfer cryptocurrencies and NFTs. In June 2022, the Avalanche team announced an update to its bridge service. Now, users can use Avalanche Bridge to transfer assets to and from the Bitcoin blockchain alongside Ethereum.
Another 2022 blockchain bridge development is Plenty Bridge (previously known as “Wrap Protocol”). As a trustless protocol, Plenty Bridge is a decentralized blockchain bridge between Ethereum and Tezos. In addition, Plenty Bridge offers transfers to Ethereum’s leading layer-2 solution, Polygon, and BNB Smart Chain (BSC). Accordingly, users can transfer USDC, DAI, USDT, BUSD, WBTC, WETH, LINK, or MATIC to the Tezos blockchain and back with ease. Prior to a protocol update, the transfer time between chains was around one hour. However, users can now transfer assets between networks in just five minutes!
Exploring What is a Blockchain Bridge – Summary
If someone asks you, “what is a blockchain bridge?”, you can now give a comprehensive answer. Fundamentally, a blockchain bridge is a protocol that allows the transfer of assets or information between one blockchain network to another. This could be between two separate chains or between layer-1 and layer-2 networks. Moreover, there are several different types of blockchain bridges. These are trusted, trustless, unidirectional, and bidirectional bridges, each catering to different user demands. Overall, a blockchain bridge is a gateway for users to explore new blockchain ecosystems. Also, a bridge application could be a development landscape for further innovation around communication between two networks.
Using a bridge has its advantages. For example, it allows users with assets on one chain to explore and interact with applications on another chain. In addition, using a blockchain bridge to transfer assets to a layer-2 network typically saves on transaction fees. On the other hand, some risks come with using a bridge. Using a trusted bridge requires giving up custody of funds during the process. Conversely, using a trustless bridge holds the risk of a smart contract failure or bug in the code. Nevertheless, with open-source protocols and rigorous auditing, many experienced DeFi users are comfortable and confident interacting with blockchain bridges. Make sure to do your own research before interacting with any new project!
Expand your blockchain knowledge by browsing our blog, full of free educational content! For example, why not check out our “How to Invest During a Crypto Bear Market” article or our “Understanding Crypto Crashes” article next? Or, why not learn some of the most in-demand skills with our NFT and metaverse gaming development community? Check out NFTCoders for the best place to learn NFT and metaverse development today!
