What are bridges?
Blockchain bridges function similarly to physical bridges in the real world. Just as a physical bridge connects two physical locations, a blockchain bridge links two blockchain ecosystems. These bridges facilitate communication between different blockchains by enabling the transfer of information and assets.
For example, if you are from the USA and planning a trip to Europe, you might need to exchange your USD for EUR. To do this, you can use a currency exchange for a small fee. However, if you want to exchange one cryptocurrency for another on a different blockchain, you need a mechanism to move your assets from one blockchain to another. Bridges enable such transactions to take place.
For instance, if you want to exchange ETH on Ethereum Mainnet for ETH on BNB Chain, a bridge makes this possible. BNB Chain has a native bridge that can transfer ETH from Mainnet onto this blockchain, similar to the way a currency exchange facilitates the exchange of different currencies.
Why do we need bridges?
Each blockchain has its own limitations. In the case of Ethereum, the blockchain uses rollups to improve scalability while Lauer 1 projects such as Solana and Avalanche prioritize high throughput at the expense of decentralization. However, because each blockchain develops in its own isolated environment with its own rules and consensus mechanisms, they cannot natively communicate with each other and tokens cannot move freely between them. To overcome this issue, bridges have been created to connect blockchains and enable the transfer of data and tokens between them.
Bridges facilitation
Bridge projects facilitate communication and collaboration of blockchains in many ways regarding which here are some aspects that they cover:
1. the transfer of assets and information between different blockchains.
2. dApps to utilize the unique features of different blockchains resulting in improved capabilities and increased potential for innovation.
3. users benefit from a wider range of platforms and take advantage of the benefits offered by different blockchains.
4. collaboration between developers from various blockchain ecosystems leading to the creation of new innovative platforms and applications for users.
Bridge use cases
For the majority of crypto users, use cases of bridge protocols might seem to be only the transfer of tokens between blockchains. However, there might still be some features that you might have never been aware of. Here, there are a few reasons for using bridges that you must consider if you are looking for the best ways to collaborate with them:
1- Reduced Transaction Fees:
Suppose you hold ETH on Ethereum Mainnet but desire lower transaction fees to experiment with different dapps. In this case, you can bridge your ETH from the Mainnet to a BNB Chain and benefit from lower transaction fees.
2- Access to dApps on Different Blockchains:
Suppose you have been utilizing Aave on Ethereum mainnet to lend USDT, but the interest rate for lending USDT on Aave using Polygon is higher. By bridging your assets from the Ethereum mainnet to Polygon, you can have access to and benefit from the different features offered by the Aave dApp on Polygon.
3- Exploration of Blockchain Ecosystems:
Suppose you possess ETH on the Ethereum mainnet and want to explore the native dapps of an alternative Layer 1 protocol. In that case, you can use a bridge to transfer your ETH from Ethereum mainnet to the alternate Layer 1 protocol and experiment with its ecosystem.
Own native crypto assets
Suppose you have funds on Ethereum mainnet but want to own native Bitcoin (BTC). In this case, you can purchase Wrapped Bitcoin (WBTC), which is an ERC-20 token native to the Ethereum network, to gain exposure to BTC on Ethereum. However, WBTC is not the original asset on the Bitcoin blockchain, so to own a native BTC, you would need to use a bridge to transfer your assets from Ethereum to Bitcoin. Such a bridge will easily convert your WBTC into a native BTC. Conversely, if you have BTC and want to use it in Ethereum DeFi protocols, you would need to bridge from BTC to WBTC to use it as an asset on Ethereum.
What types of blockchain bridges are there?
Blockchain bridges can be classified based on their roles, mechanisms, and levels of decentralization:
- Custodial vs. non-custodial bridges
One way to categorize blockchain bridges is to divide them into two types: custodial (centralized) and non-custodial (decentralized). In the case of custodial bridges, users need to trust a central entity to manage the system properly and securely. It is important for users to thoroughly investigate the entity’s reliability before using the bridge. On the other hand, non-custodial bridges operate in a decentralized manner, relying on smart contracts to handle the locking and minting of cryptocurrency. The need to trust a bridge operator is eliminated. The security of the system is dependent on the underlying code.
Benefits of blockchain bridges
Blockchain bridges provide significant advantages, particularly in improving interoperability and scalability. They allow the transfer of tokens, assets, and data across different blockchains, including between layer 1 and layer 2 protocols or various sidechains. Using blockchain bridges, such as WBTC, enables bitcoin users to access decentralized applications and DeFi services available in the Ethereum ecosystem. The interoperability of the blockchain industry is crucial for its future success.
Furthermore, blockchain bridges can improve scalability by facilitating a large number of transactions, which leads to increased efficiency. For instance, the Ethereum-Polygon Bridge is a decentralized two-way bridge that works as a scaling solution for the Ethereum network. The bridge enables faster transactions and lower transaction costs for users.
Risks of blockchain bridges
Blockchain bridges come with certain limitations that need to be considered. One major drawback is the potential exploitation of vulnerabilities in smart contracts used by some blockchain bridges. This issue has resulted in the loss of significant amounts of cryptocurrency by malicious actors through cross-chain bridges.
Moreover, custodial bridges pose a risk to users as the centralized entity behind them could misappropriate their funds. It’s recommended to use reputable and well-established brands with a proven track record when opting for custodial bridges.
Another limitation that could affect scalability is transaction rate bottlenecks. A single chain’s limited throughput capacity can hinder large-scale blockchain interoperability.
While blockchain bridges can help alleviate congestion on a busy network, they may not be a permanent solution to scalability issues. This is because users may not always have access to the same range of dApps and services when they move assets to another chain. For instance, some Ethereum dapps are not available on the Polygon Bridge, which limits its scaling potential.
Lastly, blockchain bridges may expose the underlying protocols to risks related to trust disparities. Since blockchain bridges connect various blockchains, the overall security of interconnected networks is only as strong as the weakest link.
What is the future of blockchain bridges?
The high interoperability of the internet has been instrumental in its revolutionary impact. Similarly, blockchain bridges play a crucial role in enhancing the interoperability of the blockchain industry and facilitating its mass adoption. They have brought about significant innovations, enabling users to exchange assets across multiple blockchain protocols. As the internet transitions towards Web3, the demand for blockchain bridges is expected to rise. Innovations that provide greater scalability and efficiency to users and developers may emerge in the future. There may also be novel solutions to mitigate the security risks associated with bridges. In summary, blockchain bridges are essential in constructing an open, decentralized, and interoperable blockchain ecosystem that fosters innovation and growth.
What is the Bridge Oracle’s “Token Bridge” Platform?
As mentioned above, there are various types of bridge protocols that are implemented among different blockchains which are meant for transferring data or assets between blockchains. Among all, there is one type of bridge that is specified for transferring tokens from one blockchain to another and Bridge Oracle’s Token Bridge platform is one of the most notable bridge platforms in this category which provides users and customers with fast and cheap transferring processes.
Being categorized as a non-custodial bridge, Bridge Oracle’s Token Bridge is also claimed to be one of the cheapest token transfer service providers among all through which users can easily transfer their tokens from one chain to another with only a small amount of fee payment in BNB as the network fee.
It is worth mentioning that the Token Bridge platform is highly secured with the most up-to-date protocols and has claimed the auditory certificate from Certik as well.
For more information, you can visit Bridge Oracle’s page on CoinMarketCap to access further links and details.
