Top Popular Crypto Bridges and How They Work

Published on: 28.12.2022
Top Popular Crypto Bridges and How They Work

Assets and data stored on a blockchain cannot be transferred to another blockchain because of the inherent incompatibility between blockchains. Many initiatives attempt to solve this problem by creating cryptocurrency bridges between them to facilitate the flow of data and assets. However, as each crypto bridge only connects certain blockchains, they are only a partial answer.

For instance, even if a group builds a bridge from ETH to BTC, they still won’t be able to use it to exchange XRP for ETH. In addition, a bridge may only be used by those who have crypto wallets compatible with that bridge.

What Is a Crypto Bridge?

Crypto bridge technology allows for the exchange of digital assets across different blockchain networks. Facilitating cross-chain operations, using resources across blockchains, and utilizing decentralized applications (dApps) across blockchains are all made easier with this approach. Blockchains have varying coins, consensus methods, user bases, and leadership structures. A crypto bridge is a protocol that allows information and digital assets to be transferred from one blockchain to another.

Thanks to crypto bridges, blockchains may use one another’s capabilities. Thus, Bitcoin doesn’t have to rework its blockchain to accommodate smart contracts since other networks can likely meet this need. As a bonus, crypto bridges allow programmers to communicate and collaborate irrespective of the network they’re utilizing. This allows protocols to build upon the features and applications of existing ones more easily.

Types of Bridges

🔹Trusted bridges

All trusted bridges must be connected to a single system or trusted authority. In addition, external verifiers are included to provide a secure exchange of information and money. Unfortunately, this implies users must surrender custody of their digital currencies, which goes against the grain of the crypto community.

🔹Trustless bridges

Trustless bridges don’t depend on trustworthy third parties as those used by trusted bridges. However, they avoid centralization by handling interoperability using smart contracts. Users will always be the legal proprietors of their cryptocurrency. Users using trusted bridges must depend on the credibility of the bridge operators, while those using trustless bridges must rely on the integrity of the code itself.

🔹Uni-directional bridges

With the use of unidirectional bridges, users may transfer their cryptocurrency to a different network without having the option of transferring it back over the same path. Thus, they are suitable exclusively for one-way exchanges.

🔹Bi-directional bridges

Alternatively, bidirectional bridges provide two-way traffic of assets. They make it simpler to exchange encrypted data between two networks. This might be more practical for a user that often sends and receives encryption via two separate networks.

List Of Popular Crypto Bridges And How They Operate

🔸Solana Wormhole Bridge

With Solana’s high throughput and low transaction costs as its foundation, Wormhole aims to serve as a bidirectional bridge for transferring tokenized assets across blockchains. High gas costs, network congestion, and price slippage are just a few of the problems that Solanas aimed to address with Wormhole, his decentralized financial system. Launched in 2020, it provided a decentralized link between Ethereum and Solana, bridging the gap between ERC-20 tokens and the Solana Protocol Layer. Today, 17 blockchains may communicate with one another due to Solana Wormhole.

Certus One, a blockchain node operator and provider of infrastructural security apparatus for proof-of-stake (PoS) blockchains, collaborated in creating Wormhole. There is no requirement for a cryptocurrency project to modify its existing codebases for Solana since developers may use Wormhole to get access to the Solana network. Instead, the bridge relies on cross-chain decentralized oracles. 

Tokens are transferred across chains through these “guardians,” who either destroy or lock up tokens on the chain before minting them on another. Node operators like Solana validators and network stakeholders operate as the “guardians.” Their shared incentives with Solana may keep the bridge operating smoothly.

🔸Cosmos

Cosmos is a distributed network of separate, competing blockchains controlled by the Cosmos Hub. The Cosmos Hub is a central location for the Cosmos network’s several blockchains to interact and facilitate the transfer of digital assets. To do this, they employ “pegs,” essentially separate accounts that retain the transferred assets and allow for their transfer to other blockchains.

🔸Polkadot

Polkadot is a distributed ledger (blockchain) that facilitates the creation of decentralized applications (dApps) and digital money transfers across different blockchain networks. Parachains, or decentralized blockchains connected to the Polkadot system that can function together, are used to achieve this goal. This enables the transfer of digital assets across the blockchains that make up the Polkadot network.

🔸The Interledger Protocol (ILP)

It is a way to move funds between different accounting databases or electronic wallets. It is achieved by building a “conduit” between the twin ledgers to facilitate value movement. Since it is not tied to a specific payment or ledger system, the ILP may move money between any two networks that implement it.

🔸Polygon Bridge

Early in 2020, the Polygon team suggested that the trustless Polygon Bridge improve network interoperability between the Ethereum and Polygon networks. At a later point in the same year, the bridge was made operational.

In the present day, it is possible to move tokens and NFTs from Ethereum to Polygon. It allows users to benefit from Ethereum’s widespread use while taking advantage of Polygon’s reduced costs and quicker transaction speeds.

Users may move funds across accounts in Polygon using the PoS or the Plasma bridge. The former implements the PoS consensus mechanism to safeguard its network. While depositing on the PoS bridge is instantaneous, withdrawing funds may take a little longer. As a result of this bridge, ether and other standard ERC tokens may be traded across other blockchains.

Polygon’s token bridging mechanism is standard. When a token is transferred off the Ethereum network, it is immediately frozen, and an equivalent amount of tokens are created on Polygon. As with Polygon, the pegged tokens are destroyed in the bridging process, releasing the Ethereum tokens for use.

Conclusion

Crypto bridges improve cryptocurrency ecosystem interoperability, but it’s important to do your homework before deciding on one.

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