What is a blockchain bridge?
A bridge is a way of moving cryptoassets and data across blockchains. It can be a one way bridge e.g the Wrapped Bitcoin (WBTC) bridge which allows you to send your bitcoin to Ethereum but not ether to Bitcoin, or a two way/bidirectional bridge e.g the Ethereum-Polygon bridge which allows any assets to move freely between these chains.
More recently, the term is used to apply to any movement of cryptoassets across blockchains — however there are a number of implementations which allow assets to move between chains e.g atomic swaps, DEXs, CEXs .
Bridges are required since there are thousands of blockchains but they are not all connected in such a way that assets and information can seamlessly move between them. Therefore as applications and use cases develop on different blockchains it is becoming ever more important for assets and data to need to move between them. This could be being able to port over your bitcoin to be used in a DeFi app on Ethereum, sending some ERC20 tokens to Polygon to use a play-to-earn game with lower fees, or wrapping your ether to make use of a new market on Solana.
Making use of Bridges helps to provide this interoperability.
How are Bridges Implemented?
There are a number of technical implementations for bridges however at a high level they generally require cryptoassets to be locked up on one chain and a representation of them to be created on the other chain. This can be done in a centralised manner where the assets are held in custody and the representations are created by a trusted intermediary, or via smart contracts and multi-signature wallets to enable a decentralised/hybrid process.
I explore the different types of wrapping in https://www.linkedin.com/pulse/how-does-cryptocurrency-move-across-blockchains-part-1-tara-annison/ and how Wrapped Bitcoin (WBTC) works in more depth in https://tara-annison.medium.com/a-walkthrough-of-wrapping-btc-to-wbtc-part-2-ff11493bdcc6
How Much Value is Within Bridges?
There is currently over $10billion locked in via bridges with the Wrapped Bitcoin (WBTC) bridge being the most valuable, followed by the Multichain network which supports movement across 56 different protocols in a non-custodial fashion.
The Risk of Using Bridges
With this much value moving between blockchains through bridges it may come as no surprise that illicit actors are targeting them.
At the start of this year there was an $80m bridge theft of the Qubit bridge between Ethereum and Binance Smart Chain. But this was quickly dwarfed by the theft of $320m from Solana’s Wormhole bridge in February. Then in April, the Ronin bridge saw $600m stolen through a cleverly executed phishing attack and just a few months later the Horizon bridge was compromised for $100m with North Korea’s Lazarus group being attributed as the criminal masterminds to this as well as the earlier Ronin bridge hack.
In line with this, bridge hacks have already surpassed $1billion for the year and many within the cryptosphere are questioning whether they are inherently risky. This includes Ethereum co-creator Vitalik Buterin who wrote a long blog post in January warning of the risks:
“The fundamental security limits of bridges are actually a key reason why…I am pessimistic about cross-chain applications” (Full post here)
However there’s also an argument (that I made in a recent Blockworks interview) that bridges are an important part of the multi-chain world we’re living in and the recent spate of attacks has been due to bridges holding high volumes of funds which make them a honeypot for hackers. This is coupled with much of the technology being nascent and so there will, as there always is, a period of it being battle tested before it’s improved and strengthened.
Originally published at https://www.linkedin.com.