A blockchain bridge, also known as a cross-chain bridge, joins two blockchains and allows users to transmit cryptocurrency from one chain to the other. Essentially, if you have bitcoin but wish to spend it like Ethereum, you can do so via the bridge.Let’s understand about blockchain bridge in detail.
One of the most serious issues with blockchain was the inability to collaborate. While each blockchain is fluid and somewhat efficient as a single entity, each blockchain is constrained by the boundaries of its domain. This frequently results in high transaction costs and congestion.
Blockchain bridges tackle this problem by allowing token transfers, smart contracts, and data sharing, as well as other feedback and instructions between two distinct platforms.These blockchains issue distinct coins and follow different sets of regulations; the bridge acts as a neutral zone, allowing users to seamlessly switch between them. Having access to many blockchains via the same network significantly improves the crypto experience for the majority of us.
Even though the two systems serve different goals, this notion is very similar to Layer 2 solutions. Layer 2 is built on top of an existing blockchain, thus while it improves speed, interoperability remains an issue. Cross-chain bridges are also autonomous entities that are not part of any blockchain.
How Do Blockchain Bridges Function?
Blockchain bridges can perform a variety of useful functions such as smart contract conversion and data transfer, but the most prevalent is token transfer. For example, the two main cryptocurrency networks, bitcoin, and Ethereum have radically different laws and procedures. Bitcoin users can utilise a blockchain bridge to transfer their money to Ethereum and perform things with them that they couldn’t do on the bitcoin blockchain. This can include buying different Ethereum tokens or making low-fee payments.
When you have bitcoin and want to move some of it to Ethereum, the blockchain bridge will retain your coin and convert it to ETH equivalents for you to utilise.
None of the cryptocurrencies involved moves.
Instead, the amount of BTC you wish to send is locked in a smart contract, and you obtain access to an equal amount of ETH.
When you convert back to BTC, the ETH you had, or whatever was left of it, is burned, and an equal amount of BTC is returned to your wallet.
If you did this regularly, you’d have to convert bitcoin to ETH on a trading site, withdraw it to a wallet, and then deposit it again on another exchange. By the time it arrives, you’ll have spent more money than you intended to spend in the first place.
Consider how you can use your Visa to pay your MasterCard bills, or how PayPal can pay for all of your online purchases regardless of where you buy them. Although separate systems use distinct protocols, transactions remain quick and seamless. This is because interoperability has always maintained the financial system in place long before cryptocurrencies existed. As blockchain technology becomes increasingly popular, and not just for cryptocurrency, solutions such as cross-chain bridges are an important step toward standardization.
Blockchain Bridges: Trusted vs. Trustless
One unspoken disadvantage of blockchain bridges is centralization. Users must give up ownership of their currencies to convert them to another cryptocurrency, basically putting their faith in the hands of someone else. If you’ve ever seen a wrapped token, like BTC, it’s because of this procedure. They take your Bitcoin and “wrap” it in an ERC-20 contract, giving it the functionality of an Ethereum token.
When transferring a big quantity of cryptocurrency, trust-based bridges are a quick and cost-effective choice, but the pool of trusted services is quite small. Venturing into less-known brand territory might increase risks, making it unappealing to smaller merchants.
There are decentralized blockchain bridges, also known as trustless bridges, that aim to make consumers feel more secure when exchanging money. These technologies work just like a blockchain, with individual networks chipping in to validate transactions. If you’re concerned about your coins getting into the wrong hands, employing a trustless bridge will provide you with peace of mind. The issue with decentralized bridges is that the service is provided on a freelance basis. When mishaps occur, this can be a liability because they are simply paid to process your request and not to fix them.
Selecting a Bridge
Here are some of the most well-known blockchain bridges for transferring cryptocurrency.
Bridge Binance: This decentralized bridge has one of the most diverse offerings of traded coins. It works with popular blockchains including Ethereum, Solana, and TRON, among others.
cBridge: If you do not want to use Binance’s main bridge, you can access this solution straight from it. You can communicate with a multitude of blockchains and cryptocurrencies, just like any other trustless bridge. One minor quibble with cBridge is that you must first link a wallet before proceeding.
AnySwap: This platform is well-known for having services other than cryptocurrency transmission. You can see all of your balances across different types of coins after you log in to a wallet. Balances can also be easily transferred from one location to another. However, there are other blockchains where you can only transfer from and to a specific destination.
Decentralization has always been a distinguishing feature of blockchain, therefore it takes precedence over other operational enhancements such as scalability.
Naturally, developers are hesitant to make major modifications for fear of departing from the decentralizing principle. Blockchain bridges are evidence that they are progressing beyond that notion. We may be making headway toward a creative and normalized crypto economy, but any progress is preferable to remain stuck with what we have.
Forward-thinking, multidisciplinary executive and business leader with 15+ years of experience spearheading operational and cultural transformations, maximizing bottom-line savings, and driving profitability.
Fill out the contact form, reserve a time slot, and arrange a Zoom Meeting with one of our specialists.
Get a Consultation
Get on a call with our team to know the feasibility of your project idea.
Get a Cost Estimate
Based on the project requirements, we share a project proposal with budget and timeline estimates.
Once the project is signed, we bring together a team from a range of disciplines to kick start your project.
Join our email list to receive regular updates on our latest blog posts, industry news, and insights. By subscribing, you’ll never miss out on the latest content from our team.