Technology attributes
A blockchain bridge, sometimes known as a cross-chain bridge, connects two blockchains. This can allow users to send cryptocurrency, or other arbitrary data, from one chain to another. This is to allow two chains with different protocols, rules, and governance models to be compatible with each other and offers secure interoperability. This kind of interoperability could allow users to:
- deploy digital assets hosted on one blockchain to dApps on another;
- conduct fast, low-cost transactions of tokens hosted on otherwise less scalable chains; and
- execute dApps across more than one platform.
There are various types of designs for bridges, but they can largely be divided into either centralized bridges that rely on trust or federation, and "trustless" bridges offering greater decentralization. Centralized bridges rely on a central authority or system to operate, meaning users are required to place trust in a mediator. Whereas a trustless bridge does not require a user to trust in an entity or authority; rather, the trust is placed in mathematical truth built into the code. This achieves trust through multiple nodes reaching a common agreement and removes many problems of centralized systems that introduce problems of corruption or abuse of power.
Amongst the different bridge designs, they tend to have certain components in common for all designs:
- Monitoring: usually a bridge will include an actor, either an "oracle" or "validator" or "relayer" that monitors the state on the source chain
- Message passing/Relaying: after an actor picks up an event, it needs to transmit information from the source chain to the destination chain
- Consensus: some models require consensus between the actors monitoring the source chain in order to relay the information to the destination chain
- Signing: actors need to cryptographically sign, either individually or as part of a threshold signature scheme, information sent to the destination chain
Bridges can be developed for various purposes, including exchanging tokens from one network to another; building data exchanges for smart contracts, decentralized identifiers, or off-chain information; knowing your customer (KYC) applications; and other applications, where a bridge can allow for greater decentralization without network limitation.
One of the main discussed benefits of blockchain bridges is the interoperability between blockchains, which can allow users access to other chains without sacrificing the advantages of a host chain or a preferred chain. This has a variety of implications and use cases:
- Cross-chain collateral: bridges can allow users to transfer digital assets from a blockchain that holds value but few dApps of its own, such as Bitcoin, to one that has a developed DeFi ecosystem, like Ethereum, for increased liquidity
- Scalability: bridges designed for high transaction volumes offer greater scalability without forcing developers or users to give up the liquidity or network effect of original chains
- Efficiency: users can make and receive micro-transfers quickly and without needing to pay high transaction fees for better gaming or e-commerce experiences
