What is a Crypto Bridge?

What is a Crypto Bridge?

Blockchain technology has come a long way since the Bitcoin white paper was published in 2008. Since then, blockchain networks have exploded with a variety of designs and anticipated features.

One of the key value propositions of blockchain technology revolves around the promise of decentralization. The isolated nature of today’s blockchain networks contradicts the principle of decentralization

As blockchain technology matures, some projects are tackling this issue by creating “bridges” between networks. The transition to a world where blockchains and systems are interoperable will allow applications to build on each other’s services and strengths.

This could have significant implications for many services as the new, decentralized and interoperable internet takes shape. Applications like Decentralized Finance (DeFi) will benefit from increased liquidity and the ability to build a network of services that interact across communities, increasing their user base and expanding available resources.

In this article, we will discuss what a crypto bridge is, how it works, and look at some crypto bridges.

What is a Crypto Bridge?

A crypto bridge, also known as a cross-chain bridge, connects two blockchains and allows users to send cryptocurrencies from one chain to the other. The two chains may have different protocols, rules, and governance models, but bridges provide a compatible way for both sides to work together securely.

How Does Crypto Bridges Work?

Bridges can exchange information remotely or locally, i.e., they are bridges between different domains. Local domains are different layers, tools, and protocols within a single blockchain, while remote domains are entirely separate blockchain ecosystems. In either case, the bridge connects these domains and establishes communication between them.

A remote bridge, occurring from chain A to chain B, is typically used by the bridge to lock tokens on chain A and mint new tokens on chain B. The total amount of tokens in circulation remains the same but is split between two chains, in this case, Chain A and Chain B. If chain A has 10 tokens and then sends 5 to chain B, chain A still has 10 tokens (5 locked ), but the other 5 are minted on chain B. If the holders of minted tokens want to redeem them at any time, they can burn them from Chain B and unlock them on Chain A. Because chain A always has a locked copy of the token, the token’s value is the same market price as chain A. This lock-and-mint/burn-and-release process keeps the number and cost of tokens sent between the two chains the same.

Bridges communicate with the blockchain in many different ways. First, these data exchange processes can be divided into trustless and trusted processes. Trusted bridges typically have a consortium of relayers that communicate, bringing information and tokens from one chain to another. On the other hand, in a trustless system, users and developers do not need to trust a federation or centralized entity to move data and tokens from one chain to another.

List of Some Crypto Bridges

  • Binance Bridge: Binance bridge is a decentralized bridge that offers one of the largest selections of tradable cryptocurrencies. It supports popular blockchains like Ethereum, Solana, TRON, etc.
  • cBridge: If you don’t want to use the main bridge, you can access this solution directly from Binance. Similar to any trusted bridge, there are different blockchains and cryptocurrencies that you can interact with. One minor gripe you might have with cBridge is that you have to connect a wallet before you can do anything.
  • AnySwap: The platform is popular for its capabilities beyond cryptocurrency transfers. Once connected to the wallet, you can view all the balances of different types of coins. You are also free to transfer your balance from one location to another. However, if you want to transfer from some blockchains, you can only go to a specific destination.
  • tBTC: Known as Wrapped Token. This means that tBTC is a Bitcoin token that can be used on Ethereum. 1 BTC corresponds exactly to 1 tBTC. When users want to transfer their tokens from Bitcoin to Ethereum, a bridge locks Bitcoin on Bitcoin and mints the corresponding tBTC tokens on Ethereum.
  • Cosmos: Cosmos IBC (Inter-Blockchain Communication) protocol is used in a completely different way. Cosmos is an internet of sovereign blockchains (called zones) revolving around the “hub” chain whose primary function is to facilitate communication between zones. IBC ensures that all ledgers supported in the network can actively communicate with each other.
  • Rainbow Bridge: The Rainbow Bridge connects Ethereum to the NEAR network, allowing assets to flow freely between the two chains while users can bridge any ERC-20 token with NEAR. ERC-20 tokens are Ethereum tokens used to deploy smart contracts. Many wrapped tokens, like tBTC, are cross-chain accessible ERC-20 tokens. Users and developers may want to route their traffic over NEAR to enjoy low gas fees while enjoying Ethereum’s high-speed performance and smart contract features.
  • Parity Bridge: The parity bridge uses off-chain participants to pass headers and GRANDPA deterministic proofs from A to B. B uses these headers to run within A’s light client and inside the runtime of B. This process is called header sync. Evidence of a specific transaction is forwarded from A to B and checked for validity using the light client.

Disclaimer: The information in this article should not be considered financial advice, and FXCryptoNews articles are intended only to provide educational and general information. Please consult with a financial advisor before making any investment decisions.

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