Cross-Chain Bridge

A cross-chain bridge is an application that facilitates the transfer of cryptocurrency tokens, assets, or data from one chain to another.

What Is a Cross-Chain Bridge?

Blockchains are natively unable to interact with each other since each protocol is designed with its own set of rules, standards, programming language, governance structure, and currency, among other elements. This makes them isolated from one another, limiting any economic activity or communication between any two disparate networks. And this is where cross-chain technology comes in.

A cross-chain bridge, otherwise known as a blockchain bridge, defines infrastructure connecting two or more individual blockchain networks. This interconnection enables the exchange of information and value, such as transferring or swapping digital assets and tokens, across different blockchains.

What Are the Types of Bridges?

These bridges consist of three main mechanism types: 

• Lock and mint – A user locks tokens on a smart contract on the source protocol (chain A) while simultaneously minting its wrapped version via another smart contract on the destination protocol (chain B). The user can then unlock their native tokens on chain A by burning the wrapped versions on chain B. An example of such a bridge is the Avalanche Bridge.
• Burn and mint – This involves burning native tokens on chain A, where the same native tokens are minted or re-issued on chain B. Unlike lock and mint, this process is non-reversible. An example of a burn and mint bridge is the Circle’s Cross Chain Transfer Protocol (CCTP).
• Lock and unlock – The user locks their native assets in a liquidity pool on chain A and withdraws native assets from a liquidity pool on chain B. Celer, Connext, and Hop Protocol.

Benefits and drawbacks

Blockchain bridges can improve asset liquidity by making assets available across multiple blockchains. This also improves accessibility as users can interact with different digital assets without having to move between different platforms or wallets. In addition, the bridges curtail the time and complexity involved in moving assets across protocols, thereby increasing efficiency.

However, while they bridge the divide between isolated blockchains, they are often a target for hackers, which creates a potential risk of asset losses. Consequently, flaws in smart contract logic could potentially lead to security breaches. Some token bridges may also face scalability issues, especially when handling larger amounts of transactions per second.