Let’s say you’re wanting to go and spend a week in Italy with your wife and her family. In fact, my wife actually is Italian, and I would absolutely love to go visit her father’s family in Sardinia, he says it is beautiful over there, especially the beach.
You put together a todo list to make sure that all the important items that need to be done beforehand are completed. For the sake of this article, there is one thing left, exchanging currency.
In most countries this is easy because there’s already a system set up where you can go to a kiosk or to a bank and exchange your dollars easily for the Euro, but what do you do when you want to say trade your bitcoin for Ethereum or your Ethereum for Matic? Well that is the dilemma but more on that in this article!
Welcome to Whiteboard crypto where we spend a lot of time and resources creating these amazing articles and animations so you can sit back, relax, and understand the topic with the help of our analogies, stories, and examples.
What is a Blockchain Bridge?
A blockchain bridge is a connection that allows the transfer of tokens or data from one chain to another or the ability to interact with another chain's dapps.
Before we get into this, you need to realize something very important.
All Coins have their own blockchain.Tokens, instead, arevirtual versions built on a coin’s blockchain.
Note: If you don’t want to read through this article, we have created an animated video that you can watch below instead.
Let’s break this down. There are many different cryptocurrency networks.
For example, there is the Ethereum network, Solana Network, Binance Smart Chain network, xDai network, Cardano network, Polygon network… you get the picture. These coins have their own networks.
The Ethereum’s network is obviously built using Ethereum as the main coin, and so on for the other networks. However, you can have Ethereum on the Binance Smart Chain. You can have Ethereum on the Polygon network. These coins can be represented as tokens on other coin’s networks.
So now that you know each coin has it’s own network, and that each coin can be represented on another coin’s network… you can hopefully understand the reason for a blockchain bridge.
Let’s go over a very simple example as to why you would want to use a blockchain bridge. AAVE is a very popular lending and borrowing platform that allows you to lend out your cryptocurrency in turn for earning interest on it. If I lend out Ethereum on the Ethereum network, I can earn .50% right now. However, if I lend out Ethereum on the Polygon network, I can earn 3%.
So if I take my Ethereum on the Ethereum network, move it over to the polygon network, I can get a polygon representation of the Ethereum coin and use it on AAVE so I can earn higher interest.
Or maybe I want to move my Tether from Polygon to Ethereum. Or maybe I want to move my USDC from BSC to Polygon. All of this can be done through a blockchain bridge.
Why are Blockchain Bridges Needed?
Now the big question, why are blockchain bridges needed? Well, bridges are currently needed for 3 big reasons.
1. Native Tokens
The first is that most ERC20 tokens that you buy right now are native to the Ethereum network.
This means even if you buy Polygon on Coinbase, they give you an Ethereum version of polygon, instead of the actual polygon token on the polygon network. In other words, major cryptocurrency brokers literally do not sell native tokens, they sell tokens on the Ethereum network.
2. Transaction Fees
The second big reason you would switch your native ETH on the Ethereum network to the Polygon network is because a transaction on the Ethereum network costs $2 right now, while a transaction on Polygon is so cheap, you could perform 50,000 transactions for $2 right now. Polygon was created as a way to scale Ethereum, however it currently doesn’t have the security Ethereum does, because by nature it is a bit more centralized.
So bridges are needed so regular people can more easily access new networks, they are also needed because some networks are cheaper, faster, or safer…
And 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 can’t really use and make better.
This is where bridging will come in, it’ll turn cryptocurrencies into more of a team sport working all together to make crypto a more all-around solution to the problems it’s trying to solve.
The issue with Bridges
One of the issues with bridges is that they cannot be 100% trusted. Unlike a decentralized application, which uses code as it’s backbone, a blockchain bridge generally must have an entity or person behind it. In other words, a majority of the bridges currently being used are centralized.
Along with that, another issue they have is that they are quite slow. Some transfers take minutes, others take hours, and some even take days. As an alternative, most transactions on any of the big networks can be completed in less than 10 minutes.
How do Blockchain Bridges Work?
There seems to be 2 main ways a bridge works.
We’ve done some research, and if you find a 3rd way, drop a comment below and we’ll cover it!
1. Bridges are Centralized
The first, is very centralized, and it 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 their respective networks. Sometimes, instead of a pool, it’s a company or a person.
Now, when you go to deposit your Ethereum Tether, it gets added to the pool, and then the centralized authority will send you an equivalent amount of Polygon Tether, which gets taken from the pool. Of course, your fee is taken out and given to the centralized authority or the liquidity providers, but it is usually a small fee and you’re happy paying it. You must trust that the central authority doesn’t steal your money in the process.
Along with that, this method only works if people keep trading back and forth. I ran into this problem when I tried to transfer some of a stablecoin from Binance Smart Chain to the polygon network, and the polygon network had no stablecoin to give to me. The pool was empty. I literally had to wait around 4 hours for someone to give the pool what I needed.
2. Smart Contracts
The second way is through smart contracts. When you go to “bridge” your crypto, your current asset is actually “Frozen” through a smart contract. Once your assets are frozen, you’re then given a copy of that token on the new network you wish to move to.
The smart contract literally mints you more of that token. And it is okay doing so, because it knows you burned, or froze, it on the other network. It should 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 3 big coins that people love investing in, but don’t have the ability to do things like invest in Aave. Instead, you can get representations of these coins on a network that does allow smart contract, like Ethereum. renBTC is an Ethereum token that allows you to hold a token that is pegged to bitcoin’s price, but gives you the capability to do things like lend it and interact with other decentralized Apps.
Crypto Bridge Examples:
- xPollinate is powered by two companies that are unaffiliated with the blockchains they allow you to bridge too. They are probably in it to collect fees paid by the traders. This is actually the bridge I mentioned earlier that had 0 liquidity. Though they only let you currently bridge between 4 different chains: xDai, Matic, Phantom and Binance.
- Matic Bridge
- This bridge was developed by the matic team to help get more people onto the true Polygon network.
- Binance Bridge
- This bridge was created by the Binance company to also help onboard people from other cryptocurrencies to move to the Binance Smart Chain.
There are many other bridges, but we highly recommend to check reviews and do your own research on the bridge before sending the bridge your assets and hoping they get sent back on the secondary network.
One quick trick is to google “xPollinate reviews reddit” and you’ll get a ton of personal reviews. If xPollinate decides to start scamming or rugpulling, it’ll quickly show up on reddit.
Alright grandchildren, now that we tried to educate you on the topic of crypto bridges, we want to hear from you! Have you guys used any crypto bridges before and if so what was your experience? Let us know in the comments below!
As always, thanks for watching our videos, we hoped you enjoyed it, we really hope you learned something, and most importantly we hope to see you in the next one!
A blockchain bridge serves as the ideal solution for interoperability among different types of blockchain networks. It opens up the scope for applications based on one blockchain network to use the resources of another blockchain network.What is block chain examples? ›
Examples Of Blockchain
Bitcoin and Ethereum are popular examples of blockchains. Everyone is allowed to connect to the blockchain and transact on them.
A blockchain is a decentralized ledger of all transactions across a peer-to-peer network. Using this technology, participants can confirm transactions without a need for a central clearing authority. Potential applications can include fund transfers, settling trades, voting and many other issues.What are blockchain bridges and how do they work? ›
What Is a Blockchain Bridge? A blockchain bridge is a connection that allows the transfer of tokens and/or arbitrary data from one chain to another. Both chains can have different protocols, rules and governance models, but the bridge provides a compatible way to interoperate securely on both sides.How do cross chain bridges work? ›
A cross-chain bridge typically involves locking or burning tokens on the source chain through a smart contract and unlocking or minting tokens through another smart contract on the destination chain. Token bridges often leverage a cross-chain messaging protocol for a specific purpose—to move tokens between blockchains.What are the top 5 Blockchains? ›
- Chainalysis KYT.
- Hyperledger Fabric.
- Hyperledger Sawtooth.
- IBM Blockchain.
Blockchain defined: Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding).What is a blockchain Mcq? ›
A blockchain is “a distributed database that maintains a continuously growing list of ordered records, called blocks.” These blocks “are linked using cryptography. Each block contains, A cryptographic hash of the previous block, A timestamp, and. Transaction data.What is blockchain explain simply? ›
Blockchain technology is a decentralized, distributed ledger that stores the record of ownership of digital assets. Any data stored on blockchain is unable to be modified, making the technology a legitimate disruptor for industries like payments, cybersecurity and healthcare.Why is it called chain bridge? ›
In 1810, a third bridge was constructed that was truly a “Chain Bridge,” the name by which all subsequent bridges have been known. Two chains were made from four-foot links of wrought iron and suspended from massive stone towers at either shore. The bridge itself was 136 feet long and 15 feet wide.
- Distributed ledger technology. All network participants have access to the distributed ledger and its immutable record of transactions. ...
- Immutable records. No participant can change or tamper with a transaction after it's been recorded to the shared ledger. ...
- Smart contracts.
Cross-chain bridges are software applications that enable transactions to occur between various blockchains. If someone wants to transfer cryptocurrency, non-fungible tokens (NFTs), or other digital assets between blockchain networks, cross-chain bridges are an essential part of the process.What is the best bridge for crypto? ›
- Portal Token Bridge (formerly Wormhole) Portal is one of the most popular cross-chain bridges in the industry. ...
- Binance Bridge. ...
- Avalanche Bridge. ...
- Tezos Wrap Protocol Bridge. ...
- Synapse Bridge. ...
- Bitcoin Cash SmartBCH Bridge. ...
- Fantom AnySwap Bridge. ...
beam bridge: A bridge that consists of beams supported by columns (piers, towers). cable: A very strong rope made of strands of metal wire, as used to support cable cars or suspension bridges. cable-stayed bridge: A bridge that consists of one or more towers (or columns) with cables supporting the bridge deck.What does cross a bridge mean? ›
Deal with a situation when, and not before, it occurs. For example, If we can't sell the house—well, we'll cross that bridge when we come to it. The ultimate origin of this proverb, a caution not to anticipate trouble and often put as don't cross a bridge till you come to it, has been lost.Why do we need bridges to cross? ›
Bridges have a special place in transportation infrastructure due its direct relationship with other places. These structures have the purpose to carry on the traffic loads of the highway, crossing any obstacle and perform an effective communication between two destinations.What are the two types of Blockchains? ›
- Public blockchain. A public, or permission-less, blockchain network is one where anyone can participate without restrictions. ...
- Permissioned or private blockchain. ...
- Federated or consortium blockchain.
Ethereum and Bitcoin are both layer 1 blockchains because they are the underlying foundation that various layer 2 networks build on top of. Examples of layer 2 projects include "rollups" on Ethereum and the Lightning Network on top of Bitcoin.Is there only 1 blockchain? ›
There are four main types of blockchain networks: public blockchains, private blockchains, consortium blockchains and hybrid blockchains. Each one of these platforms has its benefits, drawbacks and ideal uses.What kind of network is blockchain? ›
A blockchain network is a technical infrastructure that allows applications to access ledger and smart contract services. Smart contracts are primarily used to originate transactions, which are then transmitted to each peer node in the network and recorded immutably on their copy of the ledger.
- Coinbase Institutional.
- Azure Blockchain Workbench.
- IBM Blockchain Platform.
Abstract. The blockchain architecture consists of various components like peer network, smart contract, membership, events, ledger, system integration, wallet, and system management.What is the most common blockchain? ›
Bitcoin accounts for nearly 40% of the entire cryptocurrency world's value, so it is reasonable to say that the Bitcoin blockchain is the most popular.How do you explain blockchain in plain English? ›
Simply put, Blockchain is a chain of blocks. A block is a “package” of information wrapped up primarily with 3 types of data: Ledger, Hash and pHash. Each block can store up to 1MB of data, about 4,000 transactions (the actual number of transactions varies depending on the size of transactions).What is not a blockchain? ›
Stores assets- Blockchain doesn't store assets!!! It stores the records of the flow of assets across various parties. For example- As a use case for land registry; blockchain holds the record of transaction of land (instead of actual land LOL). Similarly, it doesn't store files and physical information.How are Blockchains different from each other? ›
Public blockchains allow anyone to access them; private blockchains are closed to only selected users; permissioned blockchains are a hybrid of public and private blockchains where anyone can access them as long as they have permission from the administrators to do so.Which is true about blockchain? ›
Answer: The answer is Blockchain enables users to verify that data tampering has not occurred. Explanation: Blockchain is a machine of recording facts in a manner that makes it difficult or not possible to change, hack, or cheat the system.How does blockchain work step by step? ›
- STEP 1: Facilitating a transaction. ...
- STEP 2: Verification of a transaction. ...
- STEP 3: Formation of a new block. ...
- STEP 4: Proof-of-work. ...
- STEP 5: Addition of the new block in the blockchain. ...
- STEP 6: Transaction complete.
Bridges are of two general types: fixed and movable. Fixed bridges are usually classified by their basic geometry such as arches, trusses, beams, girder, suspension and cable stayed. Steel has been used in the construction of bridges for many years. Many small bridges today are constructed using concrete beams.Where is Chain Bridge found? ›
The Chain Bridge is one of the best known landmarks of Budapest. The picturesque historic stone bridge straddles the Danube between Széchenyi Square on the Pest side and Clark Ádám Square in Buda.
What is the meaning of the name Bridge? The name Bridge is primarily a gender-neutral name of English origin that means Structure Over A Passage Of Water.What is the most important part of the blockchain? ›
Decentralization is one of the most critical components of Blockchain Technology which is the cause of all their benefits like trustlessness, censorship resistance, and immutability. At its core, Blockchains have enabled people to come up with systems that do not rely on a centralized third party to keep money safe.What are the most important principles in Blockchains? ›
For this project I chose three key principles of blockchain: cryptography, open-source software, and network decentralization.What does bridge in crypto mean? ›
A blockchain bridge, otherwise known as a cross-chain bridge, connects two blockchains and allows users to send cryptocurrency from one chain to the other. Basically, if you have bitcoin but want to spend it like Ethereum, you can do that through the bridge.What does bitcoin bridge mean? ›
UA bridge or bridge between chains is a service (centralized or decentralized) that allows you to create a connection between two blockchains that normally cannot communicate with each other, so that tokens can be transferred between them.What is the difference between a bridge and a router crypto? ›
The key difference between a bridge and router is a bridge sees the two networks as a single entity and a router sees two networks as discrete entities.How do NFT bridges work? ›
How does NFT bridging work? NFTs bridging works exactly how blockchain bridges work, connecting two unique networks. Technically, the bridge works like this: The user is required to deposit an NFT into Network A (NFT platform), and the smart contract of that network will immediately lock it.How are blockchain bridges hacked? ›
False Deposit Events: Often, a cross-chain bridge will monitor for deposit events on one blockchain to initiate a transfer to the other. If an attacker can generate a deposit event without making a real deposit or by making a deposit with a valueless token, then they can withdraw value from the bridge at the other end.Why do you bridge a token? ›
Benefits of blockchain bridges
The most important benefit of blockchain bridges is the ability to improve interoperability. They enable the exchange of tokens, assets, and data across different blockchains, whether between layer 1 and layer 2 protocols or various sidechains.
Cryptocurrency transactions are recorded in a digital ledger called a blockchain. The concepts behind blockchain technology make it nearly impossible to hack into a blockchain.
For Bitcoin, which is perhaps the most well-known cryptocurrency, the most common bridge is with the use of Wrapped Bitcoin (WBTC). Wrapped Bitcoin is sometimes referred to as a blockchain bridge, as it enables Bitcoin as an ERC-20 token -- a token specification that is supported on many other blockchains.When would you use a network bridge? ›
Uses of Bridge
Bridges connects two or more different LANs that has a similar protocol and provides communication between the devices (nodes) in them. By joining multiple LANs, bridges help in multiplying the network capacity of a single LAN.
The benefits of using bridge mode
Bridge mode allows you to leverage two routers to extend your Wi-Fi across a larger area; in turn, you'll experience faster speeds and better reliability. Without bridge mode, conflicts can occur by setting up two routers, resulting in a common error known as Double NAT.
A bridge is a class of network device that's designed to connect networks at OSI Level 2, which is the data link layer of a local-area network (LAN).Can you transfer NFT from one blockchain to another? ›
However, a new technology known as a blockchain bridge lets you transfer an NFT from one blockchain to another. A blockchain bridge, also known simply as a bridge, is software that lets collectors move NFT across blockchains. These third-party programs actively monitor blockchains to ensure a smooth transaction.How do you make a NFT bridge? ›
- Step 1 — See if your NFT is already in your inventory. ...
- Step 2 — Import your NFTs (if not already in inventory) ...
- Step 3 — Deposit your NFT. ...
- Step 4— Withdraw your NFT.
Whether it be a portrait, landscape, drone, or sports photography, it doesn't really matter – every piece of art can become an NFT. Once you decide what photos to sell as an NFT, the next thing you need to know is how to sell photos as NFT, and for that, you'll need a digital crypto wallet such as MetaMask.