All About Blockchain Bridges

What Are Blockchain Bridges?

As a refresher, blockchain bridges are a technology platform, channel, route, or medium that connects two blockchain ecosystems with the purpose of allowing the two sides to communicate information as well as transfer digital items such as data, cryptocurrencies, and other blockchain-based token assets.

Exploring The Concept

Cryptocurrencies, blockchains, and Web3 can be broken down into specific segments and industries such as DeFi, smart contract platforms, currencies, stablecoins, interoperability, infrastructure, layer-2s, and bridges.

Bridges, in particular, are often underreported and talked about with hesitancy as they’re a complicated concept riddled with controversy. However, blockchain bridges are a necessity in moving the Web3 industry forward.

This is because the demand and use cases for blockchain bridges have increased as the number of blockchain protocols has increased and with that the amount of data, assets, and tokens being exchanged on certain blockchains across ecosystems.

However, in this process, as with all growing industries and technologies, there’s been setbacks regarding the technology, safety, risk, and reliability of bridges in being able to accept the burden of being the ‘transferer’ of cross-chain assets.

Why Are Blockchain Bridges Needed?

Blockchains need to communicate because developing in a silo is similar to driving down a dead-end road.

As the industry grows, as more transactions hop onto the blockchain, as more DApps go live on the blockchain, and as there’s increasing activity happening and more use cases developing, blockchain bridges are needed to bring these functionalities and features to other chains. This is why blockchain bridges are needed i.e., to expand the realm of cross-blockchain functionality.

Specifically, blockchain bridges are needed to facilitate the cross-chain transfer of assets and information, they’re needed to help DApps access the strengths of various blockchains (scalability and speed), they’re needed to help users access new platforms and experiences, and they’re needed to facilitate cross-chain developer collaboration.

If these four facets of blockchain bridges can be achieved, then this will allow the cryptocurrency, blockchain, and Web3 industries to grow to the next level.

What Are The Problems/Risks With Cross-Chain Bridging?

It’s not easy to spin up a blockchain, and it’s even more difficult to create mechanisms that make blockchains able to communicate with each other. So far, the perfect bridge has not been created — and currently, there are multiple problems/risks with blockchain bridges.

• First, is smart contract risk, which occurs when there are bugs in the smart contract code that causes users to lose their funds and for the bridging service to malfunction.

An example of this type of cross-chain bridge problem occurred with the Nomad Bridge hack which was essentially a result of a vulnerability in the smart contract’s code that allowed the hackers to withdraw users’ BTC and ETH.

Another example is the Wormhole Bridge hack which occurred when a hacker managed to siphon $320 million in wETH because of exploited unpatched Rust contracts in Solana.

• Second, is technology risk — as said before, the technology hasn’t reached near peak development. As a result, there’s been recorded software failures, buggy code, human errors occurring, spam, and malicious attacks.

Two examples of this type of cross-chain bridging risk can be seen in the Ronin Bridge hack and the Harmony One Horizon Bridge hack.

• Third, is censorship risk — this problem with cross-chain bridging typically occurs with bridges that are overly centralized or that rely on a powerful intermediary that gets to decide how the service is run or operationalized.

• Fourth, is custodial risk, which happens when bridge operators collude to steal funds from the bridge.

• Fifth is money-laundering and criminal risk, which happens when pseudonymous individuals or organizations use cross-chain bridges to facilitate crimes, hacks, and money laundering for nefarious activity.

RenBridge is an example of this type of cross-chain bridging issue where nefarious actors take advantage of the decentralized nature of bridges and use them to anonymously launder funds that were either stolen, hacked, or gained through ransom.

In summary, the above examples and illustrations show the apparent issues and weaknesses of traditional blockchain bridges.

Connecting With Other Blockchains Without Using Oracles

Blockchain interoperability with other blockchains and the traditional web is still underdeveloped and plagued with technical issues, many layer 1 blockchains have limited smart contract functionality, and blockchains can’t be used for many services outside of the blockchain industry.

And besides cross-chain bridging, there’s another way for blockchains to interoperate with other chains i.e., oracles.

Chainlink currently dominates the oracle market with a greater than 70% market share. However, this centralization of oracles into one protocol is harmful to achieving a decentralized Web3. What’s needed is a direct blockchain-to-Web2 and blockchain-to-blockchain integration without the use of oracles.

But in this regard, only one blockchain is working on this compatibility, the Internet Computer. The Internet Computer is releasing a direct HTTPS Outcall capability for DApps built on its platform. This will allow Internet Computer DApps to access Web2 data, information, and services without needing to rely on oracles.

As a result of this functionality, Internet Computer DApps can avoid the aforementioned problems with cross-chain bridges, and instead, keep everything direct on-chain to on-chain.