What are Crypto Bridges | Blockchain Bridge 101

Time Stamp: April 8, 2022 6:03 AM
Source Node: 1253150

With the different blockchain networks available, different Dapps (decentralized application) or blockchain games would require another network to make transactions with. For instance, Ethereum (ETH) is in its mainnet but the application requires ETH on a different network.

Then for that case, users need to use crypto bridges.

What are Crypto Bridges?

Imagine driving a car across a river without buying another car to reach the other side of the river. To be able to bring the car, a bridge is needed to cross for the owner to use the same car in a new location.

Crypto bridges utilize the same concept: the same cryptocurrency can be used from one network to another. A familiar example of this is the Ronin bridge for Axie Infinity users. To be able to transfer assets like SLP, ETH, and AXS from Metamask to the Ronin wallet, or vice versa, the user needs to use the Ronin Bridge.

Another example of a bridge is from the Ethereum mainnet to the Abritrum network. The Abritrum network also has their native bridge for users to transfer ETH to this network and vice versa.

Two Types of Bridges

There are two types of Bridges: Trusted and Trustless Bridges.

Before defining each type, imagine going to the customs immigration officer of the airport. One officer has to check all your paperwork and luggages before you could pass through the scanner to be able to get to your flight. While another way of getting your pass is using a self check-in machine to process your pass.

Trusted Bridges – In the example above, this type of bridge is with the custom officer. The user trusts the operator of the bridge to have custody of their asset and rely on the reputation of the operator for the security of the bridge.

Trustless Bridges – This type is the self check-in machine, in which the user doesn’t rely on the operator to handle their transaction but rather rely on the technology or smart contracts. This type is more inclined to a decentralization of the system.

Benefits of Using Bridges

These bridges aid in lessening gas fees. For instance, when depositing ETH to Binance then sending ETH to Abritrum One, users will be charged twice for gas fees, compared to sending ETH to the Abritrum network using its bridge. 

Bridges can also help users explore other ecosystems and in the process can convert their crypto easily to the native currency of the other network. For example, ETH on the mainnet can be converted to WLUNA and when transferred to the network of LUNA, it becomes LUNA. Same with Ronin Bridge, it converts ETH to WETH, vice versa. In the process, users can use Dapps of other networks.

Risks of Using Bridges

No technology is perfect or fool-proof. There are still risks in using bridges. Just like what happened to the Ronin Bridge which BitPinas made articles in relation to the heist that happened: Axie Infinity Ronin Network Hack | Money Has Been Transferred to Binance, FTX, Crypto.com and Tracking the Stolen Funds from Ronin Network Using Breadcrumbs.

There was also an incident prior to what happened to Sky Mavis, which is with the Solana bridge where 120,000 WETH was hacked last February 2022.

For Trusted bridges, it could be done by the operators or leaked security keys that could extract funds from the network. Theoretically, the operator can also censor transactions of specific users. While, for Trustless bridges there could be bugs in the smart contracts or malicious attacks to the system.

Despite the flaws of the technology, developers are continuously finding ways to improve the system and security of these bridges. 

Crypto bridges are beneficial to users especially with lesser cost of gas fees and the convenience of swapping into native cryptocurrencies without using other platforms and having access to Dapp from other networks. These bridges can also be infiltrated or manipulated and may cost a huge loss to the victim of such acts. Users need to be well informed about the bridges they use and well aware of the risks involved in utilizing this innovation. 

This article is published on BitPinas: What are Crypto Bridges | Blockchain Bridge 101

Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.

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