Blockchain Bridges: A Comprehensive Guide

Sep 15, 2022
06:09
2 min reading

Choise.com team

Table of Contents:

What is Bridging In Crypto?
Bridge Use Cases
Different Bridges’ Categories
Risks & Precautions

The blockchain market has gone through many changes since the Bitcoin whitepaper was published in 2008. Its key attribute is the iconic decentralized model, whereby no single entity or foundation is controlling the management of the network. Instead, the management of the network is distributed among a great number of stakeholders.

What is Bridging In Cryptocurrency?

To connect two blockchain networks a blockchain bridge (BB) is needed. It allows you to exchange information about tokens or cryptocurrencies. The bridge can connect two completely different platforms.

How do BBs work?

In short, a user connects to the system and transfers tokens to another address paying a transaction fee. After transfer, wrapped tokens appear on the acceptor side.

Sometimes the user needs to transfer his tokens from one blockchain network to another. To proceed with the transaction, he should go through the following steps:

Decide what type of platform he wants to transfer his tokens from.
Select the amount and type of tokens.
Receive the address and use it to deposit tokens in a crypto-bridge .
The BB will transfer an equal amount of wrapped tokens to your address on another network.

Note: Transaction fees are required.

How does this technology help us?

If a developer creates an application based on one blockchain platform, he/she will be limited only to it. BBs help to use multiple platforms and seamlessly transfer tokens between them. Also, with the right connection, it will be possible to transfer specific information with smart contracts.

Each blockchain network has several unique features, such as:

smart contracts;
governance;
coins;
protocols.

Blockchain bridges help to eliminate the disparition of abovementioned structures for each blockchain and integrate isolated crypto ecosystems.

Note: In addition to the option of cross-chain transactions, blockchain bridges may offer other advantages. They provide users with access to new protocols on other chains and allow developers from different blockchain ecosystems to cooperate.

Bridge Use Cases

Best crypto bridges provide a flexible link to safely transfer cryptocurrencies between different networks. All clients can explore a huge number of blockchain technologies and are not limited to a particular chain.

Lower transaction fees

Users are not satisfied with the need to pay additional fees to speed up transactions in blockchain networks. But this is crucial for security.

In blockchain networks, a commission is charged during a transaction. It is necessary to pay validators that help protect transactions from spam attacks and conduct secure transactions. A very high fee creates difficulties when using the blockchain. However, if the fee is too low, this creates severe security problems.

Most cryptocurrencies apply transaction fees for several reasons. They include:

Cutting the percentage of spam on the network;
Reducing the percentage of spam attacks;
Improvement of the system of transaction verification;
A proportional increase of fees according to the confirmation speed.

Decentralized apps on other networks

Decentralized applications are the apps based on the blockchain and they are fundamentally different from regular apps. Unlike the regular apps that are run on centralized servers owned by the company they work with, decentralized apps use peer-to-peer (P2P) network based on blockchain.

Explore blockchain ecosystems

Blockchain ecosystem is a group of elements that are able to interact with each other and other ecosystems to establish an environment with anticipated characteristics. The blockchain ecosystem can be also described as a reliable governance structure for a specific use case.

The BB control system provides:

definition of participants’ acceptable behavior;
ownership information;
financing;
entry/exit criteria;
data exchange rules for users.

Native crypto assets world

A native cryptocurrency – a bridges token – is a digital coin that is inseparable from the network. That is, during transactions, the asset is transferred along with the coin that covers the fee. Native coins move from one blockchain address to another while covering the miner’s commission.

Different Bridges’ Categories

BBs can be subdivided according to centralization type, classification of techniques, and operation models.

Crypto bridges by centralization types

Centralized bridges suggest that users rely on a central controller to correctly and securely use the technology. There are certain criteria in this system that the user must comply with to move and operate correctly.
Decentralized ones work independently, utilizing smart contracts. Any user of these bridges can carry out transactions using them without the regulator’s control.

Operation models

Another subdivision takes into account how the crypto bridges operate. The two wide-spread types are wrapped token bridges and side chain bridges. Token-wrapped bridges provide crypto interoperability. Side chain bridges link the original network to the daughter side chain, permitting the token transfer between two networks.

They are must-haves because the original and daughter networks may have different operational mechanisms.

Classification by techniques

With a one-way bridge, you can move tokens in one direction. Whereas, a two-way bridge does it in two directions.

Risks And Precautions

Despite opportunities, the use of crypto bridges may lead to significant problems, such as a lack of security. There have been cases when, during transactions, attackers stole users’ tokens.

Important: Users of custodial bridges can become victims of bridge token theft. There is also a high risk of stealing the user money. When using custodial bridges, you should choose the best and most approved crypto bridges with many years of experience.

Another possible technical restriction is the limited speed of transactions. A bandwidth limitation in a particular chain can hinder the significant interoperability function of the blockchain industry.

Wrapping up

Blockchain technologies are constantly improving and offering users new opportunities. However, they are not without risks. The pioneers of Bitcoin and Ethereum can be called successful, but most their followers are still poorly established and potentially vulnerable. Blockchain bridges are required to connect multiple cryptocurrencies and platforms.

The developers do everything to keep them safe for storing data and your funds. Let’s continue to follow the developments. If you are still itching to test the existing technology capabilities, be prepared for any outcome. With the help of blockchain bridges, transactions are made much faster and with lower fees, but to avoid the theft of your tokens, choose trusted platforms carefully.

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