What is a Blockchain Bridge?
A blockchain bridge is a protocol that will allow you to transfer crypto-currencies from a first blockchain to a second. Here is a simple example: if you have stablecoins for example USDC, you want to transfer from the Solana blockchain to the Fantom blockchain, then you will have to use a bridge for that.
In this article, we will try to be as exhaustive as possible regarding bridges and the most used blockchains.
What is a Blockchain Bridge?
A blockchain bridge allows transfers of tokens or data between two blockchain and allows users to interact with another chain of decentralized applications. All coins have their own blockchain. Tokens however are virtual versions of an asset built on another coin's blockchain. There are many cryptocurrency networks, for example, the Ethereum network, the Solana network, the Binance Smart Chain network, the DAI network, the Cardano network, the Polygon network...All native coins from these networks have their separate networks. Now, Ethereum's network is obviously built using Ethereum as the main coin, and so on for all the other networks. However, you can have an Ethereum token on the Binance Smart Chain, you can have Ethereum on the Polygon network, etc… These coins will be represented as tokens on the other coins networks. They use specific mechanisms so that the prices trade the same.
Why use a Blockchain Bridge?
Blockchain bridges are needed for mainly 3 reasons:
- One is that most of the ERC20 tokens you buy right now are native to the Ethereum network. This means that even if you buy Polygon or Matic on Bitget, we give you an Ethereum version of Polygon or Matic instead of the “true" Polygon token on the Polygon network. In other words, major cryptocurrency brokers literally do not sell native tokens, instead they sell tokens on the Ethereum network. This means that you are not getting the “true coin”.
- The second big reason you would switch your native Ethereum on the Ethereum network to the Polygon network is because a transaction on the Ethereum network is more expensive. Polygon was created as a way to scale Ethereum. However it currently does not have the same security that Ethereum does. This is simply because by nature, Polygon is a bit more centralized. So bridges are needed so regular people can more easily access new networks and they are also needed because some networks are cheaper, faster or maybe safer than other networks.
- Lastly, we need bridges for progression. In the current state, the responsibility is on each of the different blockchains to innovate, solve security issues and be able to scale. For example, what Bitcoin brings to the table, Ethereum cannot really use to make it better. Now this is where bridging will come in. In turn, it will turn cryptocurrencies into more of a team sport, working all together to make crypto a more all-around solution to the problems that it is trying to solve.
How Blockchain Bridges work
There seems to be two main ways that a cryptocurrency bridge works. We have done some research and if you find a third way, definitely drop us a mail and we will try to cover it.
The first method is very centralized and is essentially an extension of any other exchange in a sense there is a large pool of Ethereum/Tether and a large pool of Polygon/Tether, both are Tether representations on each network. You should know that sometimes, instead of a pool it’s literally a company or a person but usually it’s a pool. Now, when you go to deposit your Ethereum/Tether, it gets added to the Ethereum Tether pool and then the centralized authority will send you an equivalent amount of Polygon/Tether which actually gets taken out of that pool. Of course, there is a fee that you pay that gets taken out and given to the centralized authority or the liquidity providers but it’s usually a very small fee and you are pretty happy paying it because there is not really any other way to get on the network. One of the issues is that you must trust that central authority does not steal the money in the process, especially if this process takes days. Along with that, this method only works if people keep trading back and forth. A lot of people have experienced a problem when they tried to transfer some of stablecoins from the Binance Smart Chain to the Polygon network. The Polygon network had no stablecoins to give to them and the pool was literally empty. In that case, they had to wait for around 4 hours for someone else to make the reverse transactions so that the pool that they needed to have access to was filled with their funds.
The second way that a cryptocurrency bridge or a blockchain bridge works is through smart contracts. Now, this one is very complicated and could be its own article but we are gonna summarize it really quickly. Whenever you bridge your crypto, your current asset that you are sending is actually frozen in a smart-contract. Then, once your assets are frozen, you are given a copy of that token on the new network that you wish to move to. The smart contract literally mints you more of that token. And it’s okay doing that because it knows that you burned or you froze that token on the other network. It should also be assumed that this smart contract method is usually used for coins that don’t have their own smart contract capability (for example Bitcoin, Bitcoin Cash and Dogecoin are three big coins that people love investing in but they do not have the ability to do things like lending and borrowing). You can simply get representations of these coins on a network that does allow smart contract interaction like Ethereum. In fact, renBTC is an Ethereum token that allows you to hold a token that is pegged to Bitcoin’s price. So essentially, it is Bitcoin but since it’s on the Ethereum network it gives you the capability to do things like lend it and interact with other decentralized applications.
Examples of Blockchain Bridges
How to bridge between EVM compatible blockchains?
Compatible EVM blockchains are all blockchains that use the Ethereum Virtual Machine. Some examples of EVM-compatible blockchains are: the Binance Smart Chain, Fantom, Harmony, Ethereum layers 2 (e.g. Arbitrum and Optimism) and Polygon.
To bridge between these different blockchains there are several possibilities offered by different bridges and today this whole ecosystem of compatible EVM bridges is quite rich so it will be relatively easy to bridge from one blockchain to another.
Here are the most famous bridges: Cbridge, Multichain, Connext, Synapse. The list is not exhaustive, there are many more bridges. Be careful because the fees and liquidity is different depending on the bridge used so we recommend you always compare before using one or the other. To give you an example, the Multichain bridge offers a fixed fee.
To use a bridge it is very simple, just connect your wallet then select the original blockchain and then select the destination blockchain. Once this is done it will be necessary to validate the transaction and then the swap will take place. The transfer is not instantaneous but don't worry it doesn't take hours either. Generally, between 2 and 10 minutes are needed to retrieve the funds from the receiving blockchain. What will impact the transaction validation processing time are network congestions.
Li.finance a bridge aggregator
LI.FI has built a middle layer between DeFi infrastructure and the dApp layer. Aggregating the cornerstones of DeFi allows developers to focus on their own value proposition. The ultimate gateway to any swapping and bridging available today. A bit like a flight comparator when you want to go on vacation, LI.FI will be your favorite comparator for bridges.
Bridge on Solana
There are two major bridges for bridging from Ethereum, from Polygon and from other blockchains: Allbridge & Wormhole. As usual, remember to check the fees between these two bridges and especially, in the case of Solana, pay attention to the tokens you receive when using these bridges. We wanted to give you an example: we launched the Allbridge application to bridge USDC from the Polygon blockchain to the Solana blockchain. The peculiarity of bridging between a blockchain like EVM Polygon and the Solana blockchain is that we transferred USDC from Polygon but on the Solana blockchain "we didn't receive real USDC'' but USDC that will be wrapped, so we received apUSDC. The prefix "ap" means: “allbrige polygon". Since it is not the same programming language between Polygon and Solana, the tokens are wrapped since then we swap them against "real USDCs of the Solana blockchain". In our case we used the Jupiter aggregator. Importantly, you will understand that there is always a swap fee and a small slippage and this is to be added with the bridge fee.
Issues with bridges
Because one of the issues is that they cannot be 100% trusted unlike a decentralized application which uses code and programming language as a backbone, a blockchain bridge generally must have an entity or a person or a company behind it. In other words, a majority of bridges currently being used are centralized along with that issue another issue is that they are usually quite slow. Some transfers take minutes, others take hours and some even take multiple days. To give you an idea of how long this takes, most transactions on any of the big networks can be completed in less than 10 minutes.
Bridges are needed to create a more open and collaborative cryptosphere. However, they still have many flaws that need to be addressed in order to become more used. This is clearly a trend in blockchain projects that seek to be as compatible as possible. And this trend doesn't seem to be stopping anytime soon.
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