The size and number of blockchains has continued to exponentially grow since the initial release of the Bitcoin network in 2009, today it is estimated that there are hundreds of individual blockchain networks with varying degrees of sophistication and functionality.
While the number of blockchain networks continues to expand, each network remains isolated from each other, one cannot simply send their Bitcoin to an Ethereum address or their Solana to the Neo network. Each blockchain is its own separate economy.
Blockchain bridges attempt to solve this issue.
A blockchain bridge or a cross-chain bridge connects two blockchains and allows users to transfer their cryptocurrency assets onto another chain. With the help of a bridge, you can use your bitcoin on the Ethereum platform. To accomplish this, the blockchain bridge will hold your bitcoin as collateral in a locked smart contract and create ‘synthetic’ or ‘wrapped’ equivalents in ETH that represent your ownership of the original bitcoin. When you want to transfer back to the bitcoin network, the ‘synthetic’ bitcoin will be burned, and the smart contract will be unlocked.
This allows you to transfer digital assets across multiple chains without having to trade in and out of the assets on an exchange.
This whole process does have its faults. Many blockchain bridges are centralised, and you are required to essentially give up control of your assets to a third party that you are required to trust. There are blockchain bridges that are decentralised, but these services are ‘freelanced based’ and if there is a problem in the bridging process you may not be able to get in contact with a party who can help you. A further problem is that bridging can be unsecure. The user interface of bridging platforms can be hacked and replaced with illegitimate information that could see you send your assets to a scammer. Fairly significant sums have been stolen in this way, in February 2022 blockchain bridge wormhole was exploited and an estimated $323M in cryptocurrency was stolen, making it the fourth-biggest cryptocurrency theft of all time.
While the bridging process does represent a security flaw, it is still a necessary service that allows users to connect one blockchain to another. There are alternatives being developed aiming to address the security problem, an example includes the Australian-based Thorchain, a protocol that aims to enable the trading of crypto assets cross-chain in a completely decentralised way.
