Cross-Chain Bridges: Fad or Future?

As more blockchains supporting smart contracts pop up, the landscape keeps getting even more filled with options for launching or holding tokens and other digital assets. The question of whether to use Ethereum, Solana, Avalanche, or one of many other chains is becoming more relevant than ever. With this increasing fragmentation comes a problem: every token isn’t available on every chain. If you want to use your Ether or other ERC-20 tokens on Solana, you can’t. Cross-chain bridges were designed to solve this problem.

How do cross-chain bridges work?

Cross-chain bridges allow you to send an asset and get a tokenized version of that asset on a different blockchain. Like bridges in the real world, they allow you to bridge items across a gap. By allowing you to move assets from one chain to another, it is possible to transact with your Ethereum based assets on Solana or the Binance Smart Chain. The fees on other chains can often be much lower than on Ethereum. For example, transactions on Solana cost a fraction of a cent, compared to similar transactions on Ethereum that can often cost upwards of $15. These lower fees allow for more people to be active in the ecosystem. Higher fees, like the ones seen on the Ethereum blockchain, make only high value transactions worth it, excluding people who don’t have as large of an investment in the ecosystem.

Etherscan Gas Tracker

The existence of many different bridges, such as Wormhole, Multichain, and Binance Bridge, allow for a myriad of options when moving your tokens between different chains. Some of these are completely centralized, like the Binance Bridge, which has one company holding all of the assets in their own custody, while others like Multichain and Wormhole attempt to be as decentralized as possible.

When a user wants to bridge an asset over to another chain, they send the coins or tokens to an address or contract specified by the service that is being used. Once this is confirmed, another token is minted on the chain that you wanted. One benefit of this is being able to use coins like Bitcoin in smart contracts on Ethereum. For example, you can send Bitcoin to the RenBridge which mints renBTC and sends it to the Ethereum address you specified. Without this bridge, it wouldn’t be possible to trade Bitcoin on Ethereum-based decentralized exchanges or use Bitcoin as collateral for a loan with Synthetix.

Because different blockchains currently can’t interact with each other on their own, services have to be built by third parties to facilitate bridging between different chains. This can lead to security risks and the possibility for centralized bridges to steal user funds.

Are cross-chain bridges safe?

As was recently witnessed in the case of the Wormhole exploit, the more connected different chains become, the more potential there is for problems to occur. If the Ether that was stolen in the exploit mentioned had stayed on Ethereum instead of being bridged to Solana, it couldn’t have been stolen. While this is an extreme case, it shows that it is possible for thousands of users to collectively lose millions of dollars in funds. Luckily, in this instance, the company behind Wormhole, Jump Crypto, fixed the bug, replenished all of the funds, and then opened up the bridge again.

The company stated, “@JumpCryptoHQ believes in a multichain future and that @WormholeCrypto is essential infrastructure. That’s why we replaced 120k ETH to make community members whole and support Wormhole now as it continues to develop.” Not all bridges have backers that are able to do what Jump Crypto did. If a different crypto bridge gets hacked and isn’t able to replenish user funds, those funds could be lost forever.

Vitalik Buterin, the only Ethereum co-founder still active in the project, tweeted, “My argument for why the future will be multi-chain, but it will not be cross-chain: there are fundamental limits to the security of bridges that hop across multiple 'zones of sovereignty'.” He reasons that there is a security limit on how much attack resistance there can be for bridges between different networks. For example, if someone bridges their assets to another chain that gets rolled back due to a 51% attack, the new chain wouldn’t have your assets and the old chain would believe that your assets had already been bridged. While this is currently a relatively small concern now, in the future as more chains become popular and have bridged assets on them, it could become a much larger issue. If you would like to read a more in depth explanation of his concerns, he has more information with the tweet linked above.

Before using a bridge or bridged assets, make sure to do your own research to check out how reputable the bridge is. The best way to ensure the safety of your crypto is to hold it on the chain that it was originally created on. By doing so, you remove yourself from another attack vector and end up being that much more protected. Whether the benefits are worth the risks is up to you. If you are going to bridge, happy bridging!