- Blockchain bridges are built to improve the interoperability of blockchains.
- They are mainly of two types Trustless Bridges and Trusted bridges
What Are Blockchain Bridges?
The basic functioning of blockchain bridges is just like the bridges in the real world. The basic work of bridges is to connect two different locations. A blockchain bridge has the same functioning in the blockchain ecosystem. In the case of blockchains bridges, they facilitate communication between different blockchains by transferring information.
They allow users to port their assets from one blockchain to another. This solves a major problem of the blockchain infrastructure which is interoperability.
What is the Need for Bridges?
Blockchain has many types of problems. For example, ethereum has a major problem of scalability. Therefore to temporally solve this problem it uses layer-to-scaling solutions such as rollups which are of two types – optimistic rollups and Zero-knowledge proofs. The blockchain have their isolated environments which do not allow for tokens to move freely between the blockchains.
Although the main use of blockchain bridges is to improve inter-blockchain connectivity other than this they can also be used for:
- Cross-chain transfer of assets and information.
- It significantly improves the capabilities of Decentralized applications by allowing them to access various blockchains so that they can utilize the resources of all of them.
- Users can then access newer platforms and also leverage the benefits of the different chains.
- Developers from different blockchains can collaborate to the generation of new ideas, hence, improving the functioning of the overall blockchain ecosystem.
Types of Bridges
Blockchain bridges are mainly of two types Trusted and Trustless bridges
- The trusted bridges are those which depend on the central entity for their functioning. They are managed and operated by centralized organizations. Trustless bridges are designed to operate without any centralized network with the help of smart contracts and algorithms.
- The trusted bridges are called trusted because they require trust in the operator. The trust assumptions are made based on the custody of funds and the security of the bridge. Users need to trust the bridge operators. While in trustless bridges the security of the bridge depends on the security of the underlying blockchains. Hence there is no role of the operator as there are no operators in these types of bridges; everything depends on the security of the blockchain.
Risks Associated with These Bridges
Blockchain bridges are a new technology and are currently in the early stages of their development. Therefore they are associated with certain risk factors. Some of the risks are listed below.
- Smart Contract Risk
The bridges often work based on smart contracts. These smart contracts are just codes that support the functioning of the bridges. If a developer wants, they can inject some malicious codes into the smart contracts of the blockchain bridge. This results in the user’s funds being lost.
- Technology Risk
Since they are just a new technology they are also associated with all the risks associated with modern technologies whether international or unintentional. These risks are software failure, buggy code, and even human errors.
- Censorship Risk
This issue is especially associated with centralized bridges. Because in the centralized bridges, the whole control of the control of the bridges is in the hands of a few centralized authorities. They can utilize this authority to stop users from performing transactions.