What You Need to Know About Blockchain Bridges?
What You Need to Know About Blockchain Bridges
A blockchain bridge is a useful tool that helps solve one of the main challenges of blockchains: the lack of “transfer at mismatch”. It allows users to move assets that are not naturally compatible with each other from one blockchain to another. By creating synthetic derivatives that represent assets on another blockchain, it can open new markets and create a bright multi-chain future.
A blockchain bridge is a useful tool that helps solve one of the main challenges of blockchains: the lack of “transfer at mismatch”. It allows users to move assets that are not naturally compatible with each other from one blockchain to another. By creating synthetic derivatives that represent assets on another blockchain, it can open new markets and create a bright multi-chain future.
So how do bridges work?
For example, if you use a bridge to send a Solana token to an Ethereum wallet, that wallet receives a token that is “wrapped” by the bridge and converted into a token based on the target blockchain. In this example, the Ethereum wallet will receive a “bridge” version of Solana converted to an ERC-20 token. ERC 20 is the token standard used in the Ethereum blockchain.
In short, when the investor transfers 1 Sol to Ethereum via the bridge, 1 WETH (converted ETH) is created on the Ethereum blockchain. Thus, the investor transfers the Sol he holds to the Ethereum blockchain at a one-to-one ratio.
However, bridges are not without their own safety problems. The $326 million deficit on the new Wormhole bridge in February 2022 is one of the biggest losses.
Bridge Types and Comparison
Blockchain bridges can be unidirectional or bidirectional. One-way bridges allow you to move assets only to the target blockchain, while two-way bridges allow you to convert assets between blockchains.
Bridges can also be classified as custodial or noncustodial. While Custodial bridges leverage a central entity or system for their operations, Noncustodial bridges operate using smart contracts and algorithms. This difference determines who controls the tokens used to create bridged assets.
For example, all Wrapped Bitcoins (WBTC) are held by BitGo, making it a centralized bridge. In contrast, bridged assets on Wormhole are held by the protocol, making it more decentralized.
In general, trusted bridges have trust assumptions regarding the escrow of funds and the security of the bridge. Users mostly trust the reputation of the bridge operator. In contrast, nontrusted bridges minimize trust and do not make new trust assumptions outside of the underlying domains. Insecure bridges ensure that users remain in control of their funds through smart contracts.
Portal Token Bridge, the platform previously known as Wormhole, enables both token and NFT transfers between different chains. It supports various blockchain networks including Acala, Karura, Klaytn, Moonbeam, Near, Oasis, Polygon, Terra and Terra Classic.
Powered by the Synapse protocol, Synapse Bridge enables secure cross-chain communication through the universal collaboration model.
It supports various blockchain networks such as Ethereum, Arbitrum, Avalanche, BNB Chain, Optimism, Polygon, Aurora, Boba Network, Canto, Cronos, DFK Chain, Fantom, Harmony, Klaytn, Metis, Moonbeam and Moonriver. It also supports several cryptocurrency tokens such as USD Coin, USD Tether, DAI, Ethereum, Synapse, Wrapped Bitcoin, ChainLink Token, Angle Euro, Frax, Olympus DAO, Highstreet, New Order and Vesta.
Umbria Narni Bridge enables blockchain asset transfer where assets are held on multiple chains using liquidity pools. It currently supports Polygon Mainnet, Ethereum Mainnet, BNB Chain and Avalanche, with plans to support Fantom, Ronin, Solana, Cardano, Immutable X, Worldwide Asset Exchange, Gnosis, KuCoin Community Chain and Huobi Eco Chain.
Finally, we can give examples of some valuable bridge tokens to consider: SYN, LINK, DAI and BRIDGE.
