Types of blockchain bridges explained

What are blockchain bridges and why do we use them?

A blockchain bridge is a connection between two separate blockchain networks that allows them to interact with each other. This can be useful for several reasons, such as allowing the transfer of assets or data between the two networks, enabling cross-chain communication, and allowing users of one network to access the features and capabilities of the other.

The primary reason for using blockchain bridges is:

Types of Blockchain Bridges

There are several types of blockchain bridges, including one-way bridges, two-way bridges, federation bridges, also known as trust bridges, side-chain bridges, and cross-chain bridges. Here’s how each of these bridges works.

One-way and two-way bridges

One-way bridges allow a one-way transfer of assets, while two-way bridges allow the free transfer of assets between two blockchains. Wrapped Bitcoin is an example of a one-way bridge. You can use Bitcoin to create tokens (WBTC) that are tied to the value of ETH. However, it does not work the other way around. On the other hand, unidirectional bridges like Wormhole allow you to transfer tokens between Solana and other top DeFi protocols.

Connected or trusted bridges

Federated bridges are blockchain bridges controlled by a group of trusted organizations or individuals, known as a federation. The association is responsible for facilitating the transfer of assets between the two networks and ensures that the transfer is secure and in accordance with relevant regulations.

An example of a unified bridge is the Ripple Network, which uses a network of trusted validators to facilitate the transfer of assets between different payment networks. The Ripple Network is used by banks and financial institutions to transfer money and other assets around the world and is designed to be faster and cheaper than traditional payment methods.

Lateral chain bridges

Sidechain bridges allow assets to be transferred between two separate blockchain networks, without the need for a third party. This is achieved by connecting the two networks through a side chain, which is a separate blockchain that works in parallel with the main chains.

An example of a sidechain bridge is the Bitcoin-Ethereum Bridge, which allows users to transfer Bitcoin and other assets from the Bitcoin blockchain to the Ethereum blockchain and vice versa. The bridge is implemented using a side chain called WBTC (Wrapped Bitcoin), which is a token on the Ethereum blockchain backed by Bitcoin on the Bitcoin blockchain. Basically, Wrapped Bitcoin is a one-way sidechain bridge.

Transverse chain bridges

Cross-chain bridges enable the transfer of assets between two different blockchain networks, but unlike side-chain bridges, they do not require a separate side-chain to facilitate the transfer. Instead, they use smart contracts and other techniques to enable the transfer of assets directly between the two networks.

An example of a cross-chain bridge is the Cosmos Network, which uses a system of interchain communication (ICC) to enable the transfer of assets between different blockchain networks. The Cosmos Network uses a proof-of-stake (PoS) consensus algorithm and allows users to build custom blockchain applications that can interact with other blockchain networks.

Another example is the Polkadot Network, which uses a system of relay chains to enable the transfer of assets between different blockchain networks. The Polkadot network uses a shared security model, which allows users to benefit from the security of the entire network rather than just their own chain.

Disadvantages of using blockchain bridges

Like any technology, blockchain bridges have their own advantages and disadvantages. Some of the potential disadvantages of using blockchain bridges include:

Complexity

Blockchain bridges can be complex to implement and maintain, especially if they involve multiple blockchain networks with different technical architectures and protocols. This can make it difficult for developers to build and deploy applications that use blockchain bridges.

Limited supply

Blockchain bridges may not be widespread, especially if they are new or not well known. This can limit their usefulness and make it difficult for users to take advantage of the benefits they offer.

Centralization

Some types of blockchain bridges, such as federated bridges, rely on a central authority or federation to facilitate the transfer of assets between the two networks. This may introduce centralization into the system and may not be suitable for users who value decentralization.

Regulation

Blockchain bridges may be subject to regulatory oversight, particularly if they involve the transfer of assets or involve sensitive information. This can add complexity and compliance costs for users and can limit the use of blockchain bridges in some cases.

Security concerns

Blockchain bridges can be vulnerable to security risks, especially if they involve the transfer of assets between different blockchain networks. Hackers or other malicious actors may try to exploit vulnerabilities in the system to steal assets or disrupt the transfer of assets. In fact, this year alone has seen 4 significant hacks on blockchain bridges, including the $375 million Wormhole attack in February, the $624 million Ronin Bridge exploit in March, the $190 million Nomad hack in August, and finally the $160 million Wintermute attack in September .

Conclusion

Blockchain networks are usually developed in isolation. Therefore, while blockchain bridges may be useful in enabling interoperability between different blockchain networks, these systems are still in their nascent stages. However, in the next few years, we should see a lot of development of blockchain applications, enabling fast, convenient and secure transfer of assets between the different blockchain networks.