Multichain: What is a Bridge in Crypto? Bridging Explained

Bridging is about to become a much bigger deal in blockchain and crypto. But what is a bridge in crypto? A "bridge" is the connection between different blockchain networks that can’t work together without it.

So let’s dig into the concept of crypto bridges, and the role they play in the future of decentralised finance (DeFi).

Understanding a crypto bridge

A bridge (or a cross-chain connector) in the crypto world enables the transfer of assets and data between two or more distinct blockchains.

Before the bridge was enabled, these blockchains operated independently. This means that their users could not move assets across chains before the cross-chain connector was put in place. After the bridge is in place, this makes it much easier for the user, as the blockchains can work together. It acts as a pathway, allowing users to move tokens, smart contracts, and other information across these otherwise separate networks.

Example: Ethereum and Polygon

Ethereum, being the more established blockchain, has a larger user base and a large ecosystem of decentralised applications (dApps). However, it also suffers from network congestion, particularly during periods of high activity. This means the fees charged to use it (called gas fees) rise when the network is in demand. So it can get slow and expensive.

Polygon, on the other hand, is a blockchain that works alongside Ethereum. It is called a layer-2 scaling solution for Ethereum. Ethereum Mainnet is the first layer, Polygon is the second layer. Polygon was developed to make Ethereum faster and have cheaper transactions.

The Polygon Bridge

The Polygon Bridge allows users to transfer assets between Ethereum and Polygon. This is achieved by locking the original asset on the Ethereum blockchain and creating a representation of that asset on the Polygon blockchain. When the user wishes to move the asset back to Ethereum, the representation on Polygon is burned, and the original asset on Ethereum is unlocked.

Advantages

Users can interact with Ethereum dApps using Polygon, taking advantage of Polygon's significantly lower gas fees and faster transaction speeds. This makes using Ethereum-based dApps more accessible and cost-effective, particularly for microtransactions or frequent interactions.

Developers can deploy their dApps (apps built on the blockchain rather than the internet) on Polygon, tapping into its growing user base.

And, by bridging assets between Ethereum and Polygon, the liquidity of those assets can be increased across both blockchains. This can benefit traders and investors by providing more opportunities for buying and selling assets.

How do crypto bridges work?

The inner workings of a crypto bridge can differ based on its design and the specific blockchains involved. However, most bridges use a combination of smart contracts, locking mechanisms, and minting processes.

Locking and minting

When a user wants to transfer an asset from one blockchain (Chain A) to another (Chain B), the asset is first "locked" in a smart contract on Chain A. The bridge then "mints" a corresponding wrapped token or a representation of the original asset on Chain B. This wrapped token maintains a 1:1 peg with the original asset and can be used freely on Chain B.

Cross-chain communication

Some bridges facilitate more complex interactions between blockchains, allowing them to exchange data and execute smart contracts across networks. This enables the development of cross-chain dApps and interoperability between different ecosystems.

Benefits of crypto bridges

Crypto bridges contribute to the overall growth and efficiency of the blockchain space.

Bridges break down the barriers between blockchains, allowing for greater collaboration, data sharing, and the seamless movement of assets.

By enabling asset transfers, cross-chain connectors can increase liquidity across various blockchain networks, making it easier for users to access and trade different tokens.

Cross-chain connectors can alleviate congestion on a particular blockchain by facilitating the movement of transactions to other, less congested networks. Cross-chain communication and interoperability helps developers to create novel dApps and explore new things in DeFi.

Risks

Unfortunately, with cross-chain connectors come the risks of any technology: Hacks.

The biggest ever bridge hack was the Ronin Bridge hack in March 2022. Hackers exploited vulnerabilities in the Ronin Network, an Ethereum sidechain used by the popular game Axie Infinity, and stole approximately US$625 million worth of cryptocurrency.

Also, some cross-chain connectors may rely on a centralised entity that runs it which can be seen as against the decentralised ethos of blockchain.

##Bridges in blockchain: Conclusion

Cross-chain connectors connect separate blockchain networks and unlock the full potential of decentralised finance.