Blockchain Bridges: All you want to know!

Blockchain Bridges: All you want to know!

What Are Bridges?

 

Blockchain bridges function the same way as the bridges we have in the real world. Similar to how a bridge links two physical sites, blockchain bridges two different blockchain systems developed by Best Software Developers. Bridges enable exchange between blockchains via the transfer of data and assets.

 

Let's look at an example:

 

It's your home in the USA, and you're considering an excursion to Europe. You've got USD; however, you'll need EUR to purchase. To change your USD to EUR, you can utilize the currency exchange facility at the cost of a small amount.

 

What do you do to perform a similar transaction using a different cryptocurrency? Suppose you want to exchange Ethereum via the Ethereum Mainnet for ETH on Arbitrum developed by Best Software Developers. Similar to the exchange we used for EUR and EUR, we require an instrument to transfer your ETH out of Ethereum into Arbitrum. Bridges allow for this to be feasible. In this scenario, Arbitrum has a native bridge that can transfer ETH from Mainnet to Arbitrum.

Why do we need bridges?


Each blockchain has its limitations defined by top custom software development companies. It requires rollups to allow Ethereum to grow and keep pace with the demand. Additionally, L1s like Solana or Avalanche are constructed differently to facilitate higher efficiency but at the expense of decentralization.

 

However, all blockchains are developed in isolation and are governed by distinct rules and consensus mechanisms. They cannot communicate directly, and tokens cannot transfer freely across blockchains.

 

Bridges connect blockchains, which allow the transfer of data or tokens.

Bridges enable:

 

·        the transfer of assets across chains, as well as information

·        Dapp's tap into the advantages of different blockchains, thereby enhancing their capabilities (as protocols now have the greater design flexibility to allow for new ideas).

·        Users can use new platforms and benefit from the benefits of multiple chains.

·        Blockchain developers from various blockchain ecosystems collaborate to create new platforms for users.

 

Bridge use cases

 

Here are a few scenarios in that you could use bridges:

 

Lower transaction costs

 

Suppose you own Ethereum on the Ethereum Mainnet but want cheaper transaction costs to test various applications developed by top custom software development companies. You can enjoy reduced transaction fees by connecting the ETH via the Mainnet into an Ethereum L2 rollup.

 

Dapps for another cryptocurrency

 

If you've used Aave to Ethereum Mainnet to lend USDT, the interest rate for lending USDT with Aave for Polygon is more expensive.

 

Explore the blockchain ecosystem

 

Suppose you have ETH stored on Ethereum Mainnet and want to look into an alt L1 for a chance to play with the native apps developed by top software development firms. You can use bridges that allow you to move the ETH to Ethereum Mainnet to the alt L1.

 

Crypto assets owned by the native currency

 

Suppose you wish to own your native Bitcoin (BTC); however, you only have funds available on Ethereum Mainnet. To increase the exposure of BTC on Ethereum, you can purchase Wrapped Bitcoin (WBTC). But, WBTC is an ERC-20 token that is native to the Ethereum network developed by top software development firms and is, therefore, the Ethereum alternative to Bitcoin and is not the original asset that is on Bitcoin. 

 

Bitcoin blockchain. To acquire native BTC, you need to connect the assets you have between Ethereum and Bitcoin via the bridge. This would bridge the gap between your WBTC to transform it into a native BTC. Or, you may be BTC's owner and wish to use it through the Ethereum DeFi protocol. This will require you to bridge the alternative route from BTC to WBTC, which could be used as an asset in Ethereum.

 

It is also possible to do all this using a central exchange developed by top software development companies in the world. If your funds are already in an exchange, it will take multiple steps, and you'll likely prefer the bridge.

 

Bridge types

 

Bridges are made of a variety of designs and intricate. In general, bridges are classified into two types: trust bridges as well as trustless bridges.

 

Trusted Bridges:

 

·        Trusted bridges rely on a central system or entity to run their business.

·        They are based on trust regarding the security of funds and that security for the bridge. Most bridge users rely on the credibility of the bridge's operator.

·        Users are required to surrender control of their cryptocurrency assets.

 

Trustless Bridges:

 

·        Trustless bridges work through algorithmic contracts as well as smart contracts.

·        They are not dependable, i.e., the bridge's security is exactly the same as the blockchain used to create it.

·        With smart contracts and trustless bridges, they allow users to keep the charge of their funds.

 

In a nutshell, you can say that trustworthy bridges are based on trust assumptions, and trustless bridges have no trust assumptions and don't have any new trust assumptions other than the ones of the domains they are based on. These terms are explained:

 

·        Trustless: having the same security as the domains that are used.

·        Trust assumptions: separating towards the protection of original domains by introducing external verifiers to the system, making it less secure in crypto-economic terms defined by top software development companies in the world.

 

To gain a better understanding of the main difference between the two approaches, Let's consider an example:

 

Imagine that you're at a security checkpoint at the airport. There are two kinds of checkpoints:

 

·        Manual Checkpoints are run by employees who manually check all the details of your ticket and your identification before handing over your ticket to the board.

·        Self Check-In is operated by a device that lets you enter your flight information and get your ticket to board If everything is in order.

 

The manual checkpoint is similar to a trust model in that it relies on the third entity, i.e., the officials who oversee its operations. As an individual user, you trust officials to make the best decisions and utilize your personal information safely.

 

Self-check-in is akin to a trustless system developed by top software development company in that it eliminates the operator's role and uses technology to perform its activities. The users are always in control of their information and don't need to trust a third party with their private data.

 

Many bridge solutions fall between these two extremes, with different degrees of trustlessness.

 

 


Risk using bridges

Bridges are at the beginning phases of construction. It is possible that the ideal bridge design hasn't yet been found. Any interaction with a bridge is risky:

 

·        Smart Contract Risk -- the possibility of a glitch in the code, which could cause the funds of the user to be lost

·        Technology Risk -- Software glitches, buggy code errors by humans, and malicious attacks could affect user activities

 

Furthermore, bridges that are trusted include trust assumptions and carry risk factors, including:

 

·        Censorship Risk Bridge operators could, in theory, stop users from transferring their assets via the bridge

·        Custodial Risk Bridge operators can collaborate to extort users' money

 

The user's money is at risk the following scenarios occur:

 

·        There is a flaw in the smart contract.

·        The user commits an error

·        The blockchain itself is hacked

·        The bridge operators are malicious in a bridge that is regarded as a trustworthy one.

·        The bridge is attacked.

 

One of the most recent hacks was the Solana Wormhole bridge developed by top software development company, in which 120k WETH (325 million dollars) was stolen in the hack. The majority of the most infamous blockchain hacks involved bridges.

Bridges are vital for allowing users to join Ethereum L2s and those who wish to try out various ecosystems. However, because of the risks of using bridges, users should be aware of the compromises bridges make. These are some methods for cross-chain security.

 

Location: J9MW+2G Beatrice, CA, USA

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