What Are Cross Chain Bridges?

What exactly are Cross-Chain Bridges? How do they work? And why are blockchain
bridges needed in the crypto industry? Let's find out. Another week, another cross-chain bridge
hack. Crushing bridges seemingly appear
to be constant targets of hackers. And with millions of dollars
lost in these hacks, One may wonder why the need for blockchain
bridges. There are over hundreds of blockchains
with different features and use cases. While blockchain technologies continue To gain traction and attract more users,
the issue of interoperability Between different siloed blockchains
has remained a major challenge. Currently, blockchains
exist largely as isolated networks That cannot effectively communicate
and share data with one another. For instance, Ethereum users cannot deploy
smart contracts on the Bitcoin network, And Bitcoin holders
cannot use their tokens for transactions On the Ethereum network. Put simply,
Cross-Chain bridges connect individual Blockchains, enabling the transfer
of assets and information between them. This allows intelligibility between
blockchains, allowing users to access Protocols and decentralized applications
or DApps in a multichain manner. Crashing bridges have emerged
as one of the available solutions That are being used to connect Different blockchains and ecosystems
within the crypto space. So what are Cross-Chain Bridges? A Cross-Chain bridge,
otherwise known as a blockchain bridge, As a protocol that connects
to blockchains, allowing users to transfer Digital assets and also information
from one blockchain to another. It's more or less a middleman
that connects different blockchains Facilitating token transfers. It's more contracts and data exchange, As well as communication
between two independent chains. For instance, if you have Bitcoin
and you want to spend it On the Ethereum blockchain,
a crashing bridge will make this possible

By wrapping Bitcoin. Blockchain bridges grew in popularity
partly due to the rise of alternative it Layer one blockchains
such as Solana, Avalanche and BNB chain. These so-called Ethereum killers
attempted to win market share and users From the first smart contract chain. However, many users had funds
locked up on Ethereum and Bridges Gave them a way to seamlessly
move their assets over to other chains. In general,
having access to multiple blockchains Through a single network enhances
the experience of users, increases Liquidity for DApps
and also enhances efficiency of assets. So how does a Cross-Chain bridge work? Although crossing bridges can be used
for other cool stuff like converting Smart contracts and also sending data,
the most common utility is token transfer. Before blockchain bridges,
you'd have to rely on the services Of centralized exchanges
like Binance or Coinbase. If you want to use a particular asset
on another blockchain. So let's assume you have some Bitcoin
on the Bitcoin blockchain And you want to move these tokens To the Ethereum blockchain,
which has a native ETH token. To make this happen,
you will need to send your bitcoin To a cross-chain bridge
which will hold your coin And create equivalence
in ether for you to use. In reality,
your bitcoin is not transferred From the Bitcoin network
to the Ethereum Network. Instead, it's locked in a smart contract
that gives you access to an equivalent Amount in wrapped bitcoin that can be used
on the Ethereum blockchain. If you decide to convert it to BTC
and then back to bitcoin, Whatever is left of the wrap
token will be destroyed or burned While you receive
an equivalent amount of bitcoin. Cross-Chain
bridge would allow you to convert And use your Bitcoin
on the Ethereum network Without going through a tedious process
on a centralized exchange. It works by wrapping your tokens
in a smart contract and then issuing The native assets that can be used on
another blockchain of choice.

So why are Cross-Chain bridges
important in the crypto ecosystem? To understand the importance
of crossing bridges in the crypto space, It is necessary to understand
how interloper ability Is powering seamless transactions
in traditional finance. You may not have noticed, But you can use your Visa to pay
for your MasterCard bills. Similarly, you can use PayPal to pay For virtually all your online purchases,
irrespective of where you're buying from. These are all different companies
operating on different systems And protocols. Yet
transactions are fast and seamless. The lack of interoperability between
different blockchains has been touted As one of the hurdles preventing mass
adoption of cryptocurrencies. And while as a result,
the solutions like cross-chain bridges Are a big step towards the wider adoption
of blockchain technology. Blockchain bridges Also help to lower transaction costs
while providing a better user experience. Imagine
having to go through a different exchange Every time you need to swap a token. Apart from the higher fees
associated with doing this, every time, The process is quite cumbersome
and general cross-chain bridges Allow users to enjoy the best features
from two blockchains Such as lower gas fees
with higher transaction Throughput
and a better utility in the form of DApps Notable Cross-Chain Bridge Hacks in 2022
to use the services Of a Cross-Chain Bridge users face
smart contract risks, among other things. Decentralized bridges are trustless
using oracles in smart contracts To manage the bridging of assets. However, smart contracts are prone
to vulnerabilities. Moreover,
the nascent sea of the technology Means that many new design models
are still being built and tested, Thereby presenting other novel
attack vectors that can be exploited. In August of 2022,
Chainalysis released a report claiming That about $2 billion worth
of cryptocurrencies had been stolen across 13 separate Cross-Chain bridge attacks
since the beginning of the year.

And according to the report,
attacks on bridges make up for nearly 70% Of all the total funds
stolen between January and August of 2022. Here are some of the top
Cross-Chain bridge hacks in 2022. The Ronin Bridge Hack. The Ronin Bridge attack
might go down in history As the largest DeFi exploit ever
committed. In late March, the sidechain built
for the popular Play2Earn game Axie Infinity was compromised. The attackers made away with over 173,600
ether and 25.5 Million USDC, valued
at more than $600 million at the time. According to the company,
the hackers gained entry Through the private keys To the validator nodes, resulting
in the compromise of five validator nodes. There are claims That the North Korean Lazarus
Group was responsible for the attack, With later reports Showing how an advanced phishing attack
was used to get the private keys To the validator nodes. Wormhole
hack a month before the Ronin incident. Another Cross-Chain bridge had already
been hacked on February 2nd of 2022 At the second largest Cross-Chain Bridge
exploit happened on the wormhole bridge. Wormhole is a decentralized,
universal message passing protocol That connects to multiple blockchains. A post analysis of the event revealed
that the attacker was able to bypass The verification process of the protocol,
and this led to the loss of 120,000 Wormhole Ethereum or with close
to $325 million to carry out the attack. The hacker forged a valid signature
for a transaction that allowed them To mint 120,000 worth without first
inputting an equivalent amount. This was then exchanged for around $250
million in Ethereum. 2 minutes after the attack. The attacker bridged 10,000 ether to the Ethereum blockchain
and then another 80,000 ether About 20 minutes later, effectively
amounting to nearly $250 million. And interestingly,

The funds are still sitting
in the attacker's wallet to this day. Harmony Bridge hack. Another recent crushing bridge Hack is that of the harmony chain,
which happened at around 11 a.m. UTC on June 23rd of 2022. On that day, The bridge between the harmony chain
and Ethereum suffered multiple exploits. Some security experts were able
to identify 12 attack transactions And three attack addresses. Surprisingly, the Lazarus Group, a
well known North Korean hacking syndicate, Was identified as the primary suspect
behind the incident. The group used the login credentials
of how many employees In the Asia-Pacific region to gain
entry into the protocol security system. Once in the hackers
deployed an automated laundering program That actually transferred
the stolen assets. Late at night they netted a plethora
of tokens on the bridge, including ETH, USDC, WBTC, USDT, DAI, BUSD,
AAG, FXS, SUSHI, AAVE, WETH and FRAX, with varying values
between $49,000 and $41 million. And in total, the protocol
lost around $100 million worth of assets. Nomad Bridge Hack. In the beginning of August of 2022, Nomad
Token Bridge suffered a security breach That allowed the attackers To systematically drain
a large portion of the protocols funds. Over a long series of transactions,
over $190 million was removed From the bridge, leaving
just around $651 in the protocols wallets. The company told reporters
that some of the funds Were withdrawn by White hat friends
who took the funds out to safeguard them. Over 24 hours later, only $9 million
out of the $190 million had been returned. And unlike other blockchain bridge hacks, The incident saw hundreds of addresses
receiving tokens from the bridge And what could be best described
as a free for all. Top Cross-Chain Bridges. As with blockchains,
there are quite a number Of cross-chain protocols
and this image gives an idea of the number

Of blockchain bridges
operating across different networks. Portal Token Bridge
formerly known as Wormhole. Despite the February attack,
a portal has remained One of the most popular
cross-chain bridges in the space. Although originally built on the Solana
Network for bidirectional crypto Token transfers Between Solana and Ethereum,
the multichain now connects over Ten blockchains, including Solana. Ethereum BNB chain, Polygon, Avalanche,
Oasis and more. The portal uses special validators Known as guardians to provide its users
with a robust cross-chain swap experience. The Guardians monitor
the activity on the bridge and verify user Requests in addition to its beginner
friendly interface. Portal Token Bridge
also offers competitive transaction fees. The protocol has so far processed over
$400,000 in transactions And also has around $350
million in total value locked. And next up is Binance's Bridge,
coming from the world's leading exchange, Binance Bridges and Ethereum BNB smart
chain bridge that allows anyone to convert Into in from the BNB Smart Chain
and from other BSC-compatible formats. Currently, the Binance Bridge supports
the conversion of ERC 20 tokens, Along with coins on other networks
like XRP, LINK, ATOM, DOT, XTZ and ONT. T's also worth mentioning that the bridge
charges user fees for transactions And users are only required
to pay the gas fees on the native In destination chains. Avalanche Bridge. The Avalanche Bridge is a two way
cross-chain bridge between avalanche In the Ethereum network. It uses chain saves Chain Bridge To enable two way transfers of both crypto
tokens and also NFT. The protocol Depends on relayers to secure the bridge
and these relayers compare the proposal To swap assets against Avalanche's
data and approve or reject the proposal Three Voting Process. This additional voting process
makes avalanche One of the most secure crypto

Bridges in the space Fantom Anyswap bridge
like the Avalanche Bridge Fantoms. Anyswap is a bi directional solution
that facilitates cross-chain transfers Between the Ethereum network
and the EVM compatible Fantom network. Anyswap provides a multichain of liquidity
solutions and also uses liquidity pools To enable cross-chain swap
the liquidity pools Deployed across various blockchain
networks. Facilitate transfers to Fantom
from Ethereum Avalanche Polygon in The BNB chain.

Coinbase
OUR TAKE

Coinbase is a popular cryptocurrency exchange. It makes it easy to buy, sell, and exchange cryptocurrencies like Bitcoin. Coinbase also has a brokerage service that makes it easy to buy Bitcoin as easily as buying stocks through an online broker. However, Coinbase can be expensive due to the fees it charges and its poor customer service.

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