What are Blockchain Bridges, and how do They Work?

This authentication failure resulted in fraudulent messages being passed to the Nomad BridgeRouter contract, enabling withdrawals. Bridges have become the easiest target for high-profile hacks in the crypto industry, with $2bn lost in 2022. Visit Blockchain Council today and enroll in any of our 50+ certification . Blockchain Magazine, an independent platform, covers and publishes blockchain news, insights, analysis, research and review. Bridges are the most vulnerable part of monolithic blockchain scalability.

For instance, the DeFi protocol Orca is available only on Solana, but supports a wrapped version of ETH. Since blockchain assets are often not compatible with one another, bridges create synthetic https://www.xcritical.in/ derivatives that represent an asset from another blockchain. One recent hack was Solana’s Wormhole bridge, where 120k wETH ($325 million USD) was stolen during the hack(opens in a new tab).

How do blockchains share data?

Blockchain bridges enable users to access the benefits of different blockchain technologies without having to choose between platforms. This not only helps take pressure off of Ethereum, the most popular DeFi network, but also invites innovation in other ecosystems without necessitating a winner-takes-all mentality. Some blockchain bridges can handle a large number of transactions, improving efficiency. For example, the Ethereum-Polygon Bridge is a decentralized two-way bridge that works as a scaling solution to the Ethereum network. As a result, users can benefit from faster transactions and lower transaction costs.

Custodial or centralized bridges require the users to place their trust in a central entity to properly operate the system without any glitch in safety. There is usually a group of validators that monitor a “mailbox” address on the source chain and, upon consensus, perform an action on the destination chain. An asset transfer is typically done by locking up the asset in the mailbox and minting the equivalent amount of that asset on the destination chain.

They have trust presumptions on the handling of money and the bridge’s security. To mitigate the risks, security researchers advise taking precautions such as researching the underlying bridge security and not leaving funds locked in bridges for longer than is necessary. Similarly, when the asset returns to the originating blockchain, the duplicate token is burned on the destination chain. On the originating chain, the asset is either unfrozen or re-created, helping maintain the correct token supply.

Risk using bridges

In 2022, Chainalysis, a Singapore-based research and analysis firm estimated that over $2 billion worth of digital assets has been stolen from blockchain bridges. This figure accounts for approximately 69 percent of all stolen crypto funds in the year. Bridges on the blockchain operate in the same way as the ones we are familiar with.

The growth of new blockchain networks focused on ensuring combined benefits of decentralization, scalability and security. Therefore, you can notice the massive walls between different blockchain networks and ecosystems, which establish the urgency for blockchain bridges to dictate the future of the blockchain landscape. Blockchain technology has covered quite an extensive journey since its introduction to the world in 2008 with the Bitcoin whitepaper. The subsequent rise in the number of cryptocurrencies and development of blockchain networks with programmability, such as Ethereum, have created a completely new ecosystem. Blockchain promises the value of decentralization and freedom from the control of any individual or institution. However, majority of blockchain networks exist in the form of isolated communities with their own economies.

At its core, a bitcoin (BTC) transaction is the process of transferring a specific amount of bitcoin from one digital… Hackers are continuously evolving their techniques and advancing their approaches. Fortunately, developers and platforms are also reinforcing the security of the bridges and being more vigilant about their approach to securing the platform. After a series of interviews, the developer — a senior engineer — was offered the job and received a PDF file listing all the details on compensation. Upon downloading the document, filled with spyware, the hackers gained access to four out of nine validators (responsible for verifying transactions on the network). Seeing how innovative bridges are to the Web3 space, it is important to know simultaneously that they are the target of hackers.

The future of blockchain bridges

Cross-chain or blockchain bridges facilitate the transfer of information and value across different blockchains. Bidirectional bridges are another example of a blockchain bridge variant, working exactly opposite to the functioning of unidirectional bridges. A bidirectional blockchain bridge helps in ensuring seamless transfer of assets and information between two networks. Therefore, bidirectional bridges serve as a favorable alternative to using two different unidirectional bridges.

Relays operate on a chain-to-chain basis, without the participation of dispersed nodes, allowing a single contract to serve as a central client for other nodes on many chains. In this way, relays can validate the whole history of transactions as well as certain central headers on demand. However, some relay solutions, such as BTC Relay, necessitate a significant expenditure in order to run and provide operational security. The next entry among types of blockchain bridges would point at unidirectional bridges. As the name implies, unidirectional bridges can only ensure irreversible asset transfers from one network to another.

• With separate rules and technologies, they need blockchain bridges to be interconnected.
• Relays operate on a chain-to-chain basis, without the participation of dispersed nodes, allowing a single contract to serve as a central client for other nodes on many chains.
• Bridges exist to link blockchains, allowing information and tokens to be transferred between them.
• There are also significant speed drawbacks in optimistic models that rely on fraud proofs, which could increase latency up to 4 hours.
• A single chain’s throughput capacity bottleneck could hinder large-scale blockchain interoperability.

Trustless bridges are much more complicated on a technical level than some custodial bridges. This type of bridge can include many ins and outs across the blockchains they operate. As such, trustless bridges have faced many different attacks and exploits in recent years. The first entry among the types of a blockchain bridge would refer to a trusted blockchain bridge. It is basically a protocol governed under a centralized approach, operator, or entity. Trusted blockchain bridge has earned the name as users have to trust the reputation or identity of a centralized bridge and deposit their funds on the bridge.

Trustless bridges may be vulnerable to majority attacks, particularly if the validator set is made up of a smaller group. Attackers will also seek out bugs or insecurities in the bridge smart contracts (which can be particularly complex) to find a way of draining funds. Since you need smart contracts on both blockchains to build a bridge, there are blockchain bridge more attack vectors and points-of-failures within their code. A bridge may allow the free transfer of assets between two blockchains, or it may have specialized functionality. For example, Solana’s Wormhole bridge or the Avalanche bridge are bi-directional bridges allowing anyone to move Solana or Avalanche assets respectively to and from Ethereum.

Some of the examples of trusted blockchain bridges have shown proof of user-friendly interfaces, which can help in encouraging more users. Chainalysis states blockchain bridges are more susceptible to crypto hacks than blockchain networks. In 2022, bridge hacks accounted for over 52% of all crypto losses and 64% of all defi protocol losses.

We’ll send you a myFT Daily Digest email rounding up the latest Blockchain news every morning. Additionally, the sector might eventually be regulated with standards and frameworks put in place to ensure the overall security of the sector. As a result, albeit slowly, the DeFi landscape will become more secure and less threatened by hacks.