Feb 13, 2022
Cross-Chain — The next trend of Blockchain
What is Cross-chain Bridge? MochiLab will explain in detail how it works in this article.
Recently, the cryptocurrency community has witnessed the explosion and development of many ecosystems such as Solana, Fanton, BSC… Each ecosystem has its own advantages and disadvantages as well. Most current Blockchains have a separate design and cannot interact with each other. To address this problem, Cross-chain Bridge appeared. So what is Cross-chain Bridge? MochiLab will explain in detail how it works in this article.
The definition of Cross-Chain Bridge
Cross-chain Bridge allows the transfer of crypto assets, tokens or data from one Blockchain to another. It helps circulate assets between chains without being isolated like before.
We can think of every blockchain as a country. And each of these countries will have different laws and people must obey the laws of that country. Almost every country has its own currency standard and it is very difficult for us to use the currency of one country in other countries.
In terms of Blockchain, each blockchain has a different infrastructure and rules. In order to ensure security, nodes must comply with Blockchain’s rules when verifying transactions on chains. Each blockchain has its own token standard.
Cross-chain trend is inevitable of Blockchain
In real life, the role of trade is important and it is true for blockchain. Especially currently when Blockchains have been developed to a certain extent, each of them owns a certain amount of assets and users, not only the dominance of Bitcoin and Ethereum as before.
The user’s need to participate in finding new opportunities is always high. They will never want their assets to be tied to a single chain again, at this point the importance of cross-chain bridge is important. For example, if we want to transfer assets from BSC to Solana, we will not need to go through many steps from transferring assets from BSC to Binance and then to FTX and deposit to Solana. Now, when there is a bridge, just by a transaction, the asset is already present on the other side of the chain immediately.
Or somehow, there are some Aggregator-type projects that help users deposit tokens in this chain, but farm actions are on another chain. From there, it helps optimize profits and bring more potential that is waiting to be discovered when Cross-chain bridge connects 2 or more chains together.
How Cross-chain bridge works
Currently, there are many Cross-chain bridge projects that both serve the needs of asset rotation for users and help users have more optimal options because not all cross-chain projects fully meet the needs of all users.
Although the number of Cross-chain bridges is quite a lot, in general, projects are applying a model called lock-mint-burn
The operation principle of the lock-mint-burn model:
1. Users deposit tokens into the bridge on chain A (this amount of tokens will be locked in the bridge).
2. When receiving the asset, the bridge will “mint” a corresponding amount of wrapped tokens (wrapped tokens will have a 1:1 mapping ratio with the amount of tokens locked on chain A) on chain B to the desired wallet address.
3. When users need to withdraw assets back to chain A, users send back the wrapped token to the bridge.
4. That wrapped token will be “burned” and the bridge will unlock the token on chain A for users.
The principle is quite simple, but when applied to bridge development, there are many different designs, each of them has its own pros and cons, and we will learn about different types of Cross-chain bridges below.
Types of Cross-chain bridge
Although there are many different designs, in general, we can divide Cross-chain bridges into two main types: Centralized Cross-chain bridge and Decentralized Cross-chain bridge.
1) Centralized Cross-chain bridge
Centralized Cross-chain Bridge requires users to trust third parties. These parties will play a role as brokers between chains, they receive assets from users in one chain and mint wrapped tokens in another.
For example, before there was no bridge to transfer money from Ethereum to Tronlink, we often had to put it on Binance and then transfer the token to Tron from Binance, the most popular token was USDT. Now, Binance acts as a bridge but a centralized bridge.
- Advantages: Simple, convenient and suitable for new users.
- Disadvantages: Users are dependent on third parties, they have full rights to use the sender’s assets.
Although the possibility of users’ asset scams is very low when it comes to a well-known party like Binance, due to the reputational damage and users will be greater with what they get, but there are still many other problems related to Centralized Bridge.
2) Decentralized Cross-chain bridge
Decentralized Cross-chain Bridge no longer requires users to trust third parties.
Basically, Decentralized Cross-chain Bridge is a pool containing assets managed by a group of validators. The larger the number of validators, the more decentralized the bridge. The user deposits assets from this chain into the pool, the validators verify the transaction and the pool will mint wrapped tokens in another chain. The environment of these validators can also be considered as a blockchain. It also has mechanisms for authentication, consensus, event listening, etc. A peer-to-peer network and transactions must be approved by a minimum number of validators in order to allow mint wrapped tokens to be on another chain.
- Advantages: Transparent because everything is verifiable on-chain.
- Disadvantages: Decentralized Cross-chain Bridge doesn’t guarantee safety when current bridge models still have many potential risks. Decentralized Cross-chain Bridge’s asset pool is a good prey for attacks. That Poly Network with a hack causing $611 million in damage is a prime example of a cross-chain project being attacked.
Besides, the biggest difference between Decentralized Bridges and Centralized bridges lies in how validators are motivated to ensure the accuracy of the bridge. In other words, how to keep validators working properly and prevent bad behavior when verifying transactions.
Some of the impressive Decentralized cross-chain bridge projects
Here we will divide Decentralized Cross-chain bridges into three categories based on the level of security increasing: Somewhat centralized, Decentralized, Untrusted.
1. Somewhat centralized bridge
This model will have a small group of validators controlling “mint” and “burn” wrapped tokens through a multisig mechanism (by the majority of consensus, the transaction is approved). The validators will usually be verified accounts (KYC) and know each other in real life.
This model helps prevent bad behavior by identifying validators in advance, however this doesn’t guarantee that validators will not be “Rug-Pull”. Only a few projects are applying this model such as Terra bridge, Chainswap and most of them have plans to decentralize more in the future.
2. Decentralized bridge
These bridges are developed on the Proof of Stake network and allow everyone to be a validator. This PoS network can be available or newly built for cross-chain exchange.
Decentralized bridges often apply the staking & slashing model, this model helps validators receive incentives when verifying transactions, otherwise their staked assets will be lost if they have bad behavior
Some outstanding projects:
Development on available PoS network: Matic PoS bridge (Polygon), deBridge,
Anyswap
Thorchain
Peggy,…
Newly built from the start: Axelar.
3. Untrusted bridge
These bridges are directly connected between chains. Thẻir core is the bridge’s compatibility with the network, the untrusted bridge plays as a part of the network, and it inherits the security of the network. This is the most secure type of bridge, but it is difficult to develop and scale to chains.
Some outstanding projects:
Near Rainbow bridge
Wormhole của Solana
Gravity Bridge của Cosmos
Polkadot Snow Bridge…
In addition to the above projects, there is another big name called Connext Network which can be understood as an untrusted bridge but supports connections to many chains.
Summary
Hopefully, this article can help Mochis get an overview of details about cross-chain bridge, understand its importance in the development of Blockchain both now and in the future, acknowledge how it works as well as the pros and cons of each type.
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