The risks of using cross-chain bridges
The blockchain landscape is a bustling metropolis of independent networks, each with its own strengths and purposes. Bitcoin — the granddaddy of them all — is renowned for its security, Ethereum boasts a robust smart contract ecosystem, and Solana is known for its blazing-fast transaction speeds.
But what if a crypto citizen wants to seamlessly move assets between these vibrant neighborhoods? Decentralized finance (DeFi) shouldn’t be restricted to individual chains, and cross-chain bridges are ingenious software applications that facilitate interoperability between blockchains.
The history of cross-chain bridges
The concept of cross-chain bridges emerged in the nascent stages of blockchain technology itself. As early as 2016, projects like Ethereum’s Plasma and Wanchain began exploring methods for asset movement across chains.
These early bridges were rudimentary, often relying on centralized custodians to hold onto assets during the transfer process. This approach, however, contradicted the very nature of blockchain, which is meant to be a trustless system.
The year 2019 witnessed the rise of decentralized bridges leveraging smart contracts to automate the transfer process. Pioneering bridges like the atomic cross-asset transfer protocol and Wanchain’s decentralized bridge ushered in a new era of trustless interoperability.
As of March 2024, the cross-chain bridge landscape is a flourishing ecosystem with a plethora of projects vying for dominance. Notable examples include the ubiquitous Multichain (formerly Poly Network), Wormhole and Cosmos’ Inter-Blockchain Communication Protocol (IBC).
Risks associated with cross-chain bridges
Over $3.3 billion worth of crypto assets were lost to hacks between 2021 and 2022. Despite their immense utility, cross-chain bridges are not without their share of risks. Bridges, along with smart contracts and oracles, make up the bulk of the points of vulnerability within the blockchain ecosystem. 
Here are some of the key concerns that continue to plague this evolving technology:
Cybersecurity vulnerabilities
Unfortunately, the very code that empowers bridges also makes them susceptible to hacking attempts. Two high-profile exploits highlight this risk.
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Ronin Bridge breach
In 2022, hackers breached the Ronin Bridge, draining over $600 million worth of cryptocurrency. The exploit targeted a private key multisignature scheme, a security measure that ultimately proved inadequate.
Wormhole bridge vulnerability
Earlier in 2022, the Wormhole bridge fell victim to a $325 million heist. The culprit exploited a vulnerability in the bridge’s smart contract code, exposing a flaw in the system’s logic.
These incidents underscore the critical need for rigorous audits, secure coding practices and robust bug bounty programs to fortify bridges against potential attacks.
Lack of traceability
Unlike traditional financial systems, Blockchain transactions can be pseudonymous. While a core tenet of blockchain technology, this anonymity presents challenges when assets are transferred across chains. Tracing the movement of illicit funds across bridges can be an arduous task for law enforcement and regulatory bodies.
This limitation of bridges can be used by hackers to anonymously move funds across blockchains without investigators being able to track them.
Centralization concerns
Over the years, and through the post-mortem of multiple hacks, several bridges have enhanced decentralization. While some bridges operate in a decentralized manner, others are more centralized, often introducing a single point of failure and compromising the trustless nature of blockchain.
Mitigating the risks surrounding cross-chain bridges
The blockchain community is actively exploring solutions to address the risks mentioned above. The following are some promising avenues being pursued:
Decentralized bridge architecture
Moving toward fully decentralized bridges, where governance and operation are distributed across a wider network of participants, can significantly enhance security and reduce reliance on trusted third parties.
The decentralized bridge network that makes up these bridges is incentivized through tokens launched. For instance, Wormhole has recently announced its token program to incentivize its ecosystem.
Formal verification techniques
Employing formal verification — a rigorous mathematical approach to proving the correctness of software code — can help identify and eliminate vulnerabilities within bridge smart contracts before deployment.
Standardization and interoperability
Standardizing communication protocols between bridges can foster seamless interoperability and potentially mitigate some of the traceability challenges. Projects like the IBC are making strides in this direction. The IBC enables secure, trustless communication and asset transfers between independent blockchains.
The cross-chain utopia
The future of blockchain hinges on interconnectedness. Cross-chain bridges hold the key to unlocking a truly interoperable ecosystem where users can leverage the unique benefits of each Blockchain without friction. As Web3 onboards billions of users, they should be agnostic to the blockchain on which their transactions happen.
The following are some improvements that bridges should be striving toward in the years ahead:
Enhanced user experience
Bridges should become more user-friendly, offering intuitive interfaces that simplify the asset transfer process even for non-technical users. To achieve this, the concepts of wallets, chains and bridges need to be integrated into a more Web2-like experience. DeFi users, for instance, should be able to swap assets across chains from a simple interface.
Robust security
Through a combination of robust security practices, constant vigilance, better smart contract governance and the adoption of cutting-edge technologies like formal verification, bridges can evolve into fortresses of security. Fully decentralized bridges, governed by a distributed network of validators, can be the norm, eliminating the risks associated with centralized control.
The ideal future envisions a blockchain landscape where users can move seamlessly between chains, transact effortlessly, and leverage the power of the entire ecosystem without even being aware of the underlying infrastructure.
