Moshe Hogeg explains Blockchain Bridges
Moshe Hogeg is a technology entrepreneur and chairman of blockchain research at the University of Tel Aviv in Israel. Moshe Hogeg has donated millions to cryptomining research and founded the Alignment Blockchain Hub. In addition, he led three coin offerings for his companies, raising over $250 million. In the following article, Mr. Hogeg explains blockchain bridges, issues and security risks as well as improvements for the digital currency to become a global standard.
A blockchain bridge is a digital resource that allows two different blockchain networks to interact with each other. By creating a bridge between two blockchain networks, users can transfer data and value between the two networks, enabling a wider range of capabilities and use cases that were previously not possible. That said, Moshe Hogeg says blockchain bridges currently account for the majority of digital asset thefts.
Although the bridging of blockchains has allowed for a greater share of innovation, it has also created new security risks that did not exist in previously airtight digital systems. Therefore, software designers are now developing better systems that can connect individual blockchains without exposing assets or user data to potential hackers, reports Moshe Hogeg.
The problem of interconnection across blockchains
Blockchains are designed to be isolated and independent from each other. This is done for security reasons as it reduces the attack surface and makes it harder for hackers to target specific blockchains. However, Moshe Hogeg says that this isolation also creates a number of problems.
First, each blockchain operates using a distinct set of rules and protocols, making it difficult to transfer data or value from one system to another. In addition, it makes it more difficult to develop applications that work across multiple blockchains.
Finally, the lack of interconnection has made it difficult to create a truly global and decentralized ecosystem. For example, if there is no way to transfer value between the Bitcoin and Ethereum networks, it is difficult to create a decentralized application (DApp) that uses both networks.
The solution: Blockchain Bridges
Moshe Hogeg explains that a blockchain bridge is a digital asset that connects two different blockchain networks so that they can interact with each other. By creating a bridge between two blockchain networks, users can transfer data across the two systems, allowing them to transact across assets. This is similar to how a bank can perform transactions with both USD and Euro.
The most common type of blockchain bridge is a two-way pin. A two-way peg enables the transfer of value from one blockchain to another. For example, the Bitcoin-Ethereum Bridge enables the transfer of value from the Bitcoin blockchain to the Ethereum blockchain.
However, blockchain bridges can also be used to transfer data between blockchains. For example, the Cosmos Hub is a blockchain that is designed to interact with a number of different blockchains. Cosmos Hub enables these different blockchains to share data with each other, making it possible to develop applications that use data from multiple blockchains.
Security risk: Trust-based and trustless bridges
When a blockchain opens up to external data, it also exposes itself to new security risks. To date, it is estimated that bridges have been responsible for around $2 billion worth of lost assets, stolen by hackers exploiting the holes in the bridge. Therefore, it is important to assess the security risks of any blockchain bridge before using it.
In terms of security, there are two primary types of blockchain bridges – trust-based bridges and trustless bridges. A trust-based bridge is a bridge that is based on a centralized third party. This third party is responsible for holding the private keys of the assets being transferred. This means that the third party must be trusted for the bridge to function properly.
The most common type of trust-based bridge is a centralized exchange. Moshe Hogeg explains that when a user makes a transaction through a centralized exchange, they trust that the exchange will not lose or steal their assets because it has previously been verified and secured on both sides of the bridge. For example, Ethereum and Bitcoin Bridge.
A trustless bridge is a bridge that does not require a third party to have private keys. Since they do not rely on a centralized third party, trustless bridges are more secure if designed properly, but they are also vulnerable to inherent weaknesses in the code if not well designed.
The most common type of trustless bridge is a smart contract. A smart contract is a program that runs on a blockchain and automatically executes transactions when certain conditions are met. For example, the Ethereum-based decentralized exchange – Uniswap – uses smart contracts to enable the trustless exchange of digital assets.
Of course, Moshe Hogeg reports that both types of bridges are vulnerable to attack, which is why many software developers now run rigorous source code audits to verify that their bridges are protected from potential hacks.
The bottom line
The blockchain bridge was originally designed as a solution to cross-blockchain functionality issues. In theory, they have helped promote innovation, but they have also created new security risks, amounting to around $2 billion in stolen assets. Nevertheless, they are an integral part of modern blockchains and will continue to improve as digital payments become a global standard.
