Think of blockchains as separate countries. A healthy global economy requires exchanging goods, money, and information between countries. Similarly, blockchain networks are much more efficient when they interact, which is what blockchain bridges enable. Here is all you need to know about them.

What Is a Blockchain Bridge?

A blockchain bridge is a piece of infrastructure that enables the transfer of assets (e.g., tokens, NFTs) or data (e.g., block data, messages, contract calls, and on-chain events) between two or more blockchain networks. 

What Problems Do Bridges Solve?

Blockchains are economically isolated networks. In the early days of cryptocurrency, when there was just the Bitcoin network with a few active users, isolation helped maintain security and speed. However, with millions of users and hundreds of blockchain networks now in active use, cross-chain bridges can eliminate some limitations. They have three main advantages: 

  • Unite fragmented liquidity: Without bridges, the money flowing into the crypto economy is fragmented across several blockchain networks. A little bit lies in Ethereum, some in Solana, another chunk in Avalanche, and so on. This is undesirable because it leads to separate liquidity pools for the same coins and tokens in different networks. Higher liquidity minimizes price movement from transactions; because there are more funds to borrow or use, there’s less impact from any individual trade.
  • Remove the need for Dapp cloning: Developers often have to reprogram Dapps (decentralized applications) to make them compatible with new blockchain networks. Bridges (and cross-chain messaging) can remove the need to do this.
  • Enable specialization: With bridges, blockchain networks can leverage the best attributes of multiple networks (for instance, the security of Ethereum and the throughput of Optimism) and improve overall efficiency.

How Bridges Work 

There are several ways to implement a cross-chain bridge, but every bridge comprises two main components: 

  • A pair of smart contracts, one on each chain, that send/receive cross-chain data.
  • A connector that observes on-chain activity; after spotting when the smart contracts are accessed, it delivers the data across the chain accordingly.

Any data or asset a user needs to send first goes through the smart contract on the source chain. When the connector spots this, it performs the necessary security checks and sends the data to the destination chain smart contract, which then delivers it to the target address.

That’s the basic explanation. But within this, there are three broad bridge designs. Each has advantages and drawbacks regarding security, fees, speed, and versatility (compatibility with other networks). These three designs are defined by the connector mechanism.

  1. Light clients: The connected chains run a light client of either chain to observe and verify their on-chain activity. The connector uses on-chain proofs to verify the cross-chain message.
  2. External validators: A group of validators outside the validator network of either the source or the destination chain is responsible for bridging assets.
  3. Liquidity networks: These work like peer-to-peer networks, where the liquidity in the involved chains makes the transfer possible. Routers (connectors) must lock collateral into source and destination chains to ensure a trustless cross-chain transfer. 

How to Pick the Right Bridge for You

Obviously, you’ll need a bridge that connects your two chosen chains. But there are other factors to consider, such as cost, speed, security, and versatility.

  • Light-client bridges are as secure as the underlying chains, making them the most secure bridge design. However, such bridges are not versatile, are typically slow, and incur high fees. Therefore, they are most suitable for high-value, one-off transfers. (Examples: Gravity bridge, Cosmos IBC, Rainbow bridge, Snow bridge, LayerZero)
  • External validators are fast, cheap, and versatile. The trade-off made here is having to trust external entities for security. Therefore, they are ideal for day-to-day, low-value transfers. (Examples: Multichain, THORchain, Wormhole)
  • Liquidity networks have good speed and offer protocol-level security. However, they can only facilitate token transfers (not arbitrary data) available on both of the connected chains. Therefore, they are ideal for cross-chain token transfers, typically stablecoins. (Examples: Celer, Connext, Hop protocol)

Drawbacks and Exploits

Cross-chain bridges are prime targets for hackers and exploits in Web3. The technology is new and has relatively few users. Bridges represent points of concentrated liquidity, often secured by a small group of participants, and are prone to bugs and loopholes. 

Here are some examples of damaging hacks and exploits: 

  • Nomad bridge exploit (August 2022): A developer fault allowed exploiters to rebroadcast previously approved transactions with their address. As a result, they managed to rob about $200 million worth of crypto assets from the bridge.
  • Harmony bridge hack (June 2022): The attacker gained majority control over the private keys that secured the bridge and exploited it for $100 million.
  • Ronin bridge hack (March 2022): A combination of weak security logic and human errors let hackers pull off a social engineering attack and rob $600 million from the protocol.
  • Wormhole bridge exploit (February 2022): A coding loophole allowed a hacker to mint about 12,000 unwrapped ETH, worth about $320 million at the time.

Can We Have a Multi-chain Future Without Bridges?

Several blockchain networks have created multi-chain ecosystems that don’t rely on cross-chain bridges. The Polkadot ecosystem adopts a shared security model where blockchains connect via a central relay chain, which performs basic functionalities like interoperability and security. Another, the Cosmos ecosystem, is a network of standalone blockchains built with a similar consensus model called Tendermint and connected through a common standard called IBC (Inter-blockchain Communication). 

Yet layer-1 networks such as Ethereum remain hotspots for DeFi. (Most of the liquidity is locked in Ethereum and Bitcoin alone.) Therefore, cross-chain technology creates an essential link between major blockchains.

Closing Thoughts

Cross-chain bridges can prove beneficial and secure for the diligent user, but using them requires research and caution. Now that you have a pretty good idea about how they work, we advise you to make informed decisions about moving your assets across blockchains.