In this blog, I will discuss blockchain bridges. An essential component for the mass adoption of blockchain. These blockchain bridges should allow for easier transfer of cryptocurrencies from one blockchain to another.
What are blockchain bridges and what function do they serve? Why is it necessary to have blockchain bridges?
Problem to tackle
Each cryptocurrency has its own blockchain network. For example, the Bitcoin blockchain, the Ethereum blockchain, Solana, Binance smart chain network etc. On the bitcoin blockchain, the network uses bitcoin, on the Ethereum blockchain ETHER etc. Each blockchain network has its own cryptocurrency.
I think you can already see what the problem is. The different blockchain networks cannot communicate with each other. This lack of interoperability ensures that when a developer builds a platform, that developer is bound to that platform. It is not possible to use the advantages of the other networks.
For example, Ethereum has scalability issues. If developers move to another, faster platform, such as EOS, they lose the advantages that Ethereum does offer: a large and active community, a widely supported token standard, and the most widely adopted smart contract platform.
Blockchain bridge
To ensure that the benefits of different blockchain networks can be used, a developer can use a bridge to send its token/crypto from one blockchain platform to another, using the benefits of both. In a truly interoperable blockchain ecosystem, tokens, data and smart contracts could potentially move between many different platforms.
Benefits of blockchain bridges?
There are many advantages to using blockchain bridges. For example, a developer using Ethereum experiences the following problems: poor user experience due to slow transaction processing speed and expensive gas fees (transaction costs) during periods of high traffic on the network. By using a bridge, these developers can send their token/crypto to another blockchain for processing at a higher speed and lower cost. This means that the developer can continue to use Ethereum's positive features. They also benefit from the advantages of a different network.
Blockchain ecosystems also benefit from blockchain bridges. It reduces network traffic on, for example, Ethereum by distributing Ether to other, less overcrowded blockchains. This helps solve Ethereum's scalability problems and reduces gas fees.
How do blockchain bridges work?
Generally, blockchain bridges use the "burn-and-mint" approach. According to this approach, the tokens/crypto do not leave their blockchain on which they reside during the transaction. The token is ''burned'' or locked in its blockchain, while its equivalent is created on another blockchain. This method ensures a constant supply of the token you move and reduces volatility.
Different types of bridges
- Centralized bridges: Centralized bridges rely on a central authority or system, meaning that users must rely on a third party to use a specific application or service (to move tokens/crypto across different blockchain networks).
There are certainly advantages to using a centralized bridge, such as ease of use and automation. Nevertheless, most crypto users prefer to engage in cross-chain operations on their own and generally look to more decentralized options.
- Decentralized bridges: in decentralized bridges, crypto users do not have to rely on a single entity, but rather place their trust in the blockchain's codebase. In blockchain systems, mathematical truth is achieved through consensus (for example the bitcoin's proof of work). This allows for the creation of an open, decentralized and transparent system that relies on the blockchain infrastructure and solves many of the problems embedded in centralized systems. For example corruption and malicious behavior.
Bridges can be used for a variety of purposes and thus not only for token/crypto transfer to other blockchains. Blockchain bridges can also be used to exchange any type of data.
BTC address: bc1q3nnm8m2vrsv8med8a38dl37g8l3mm4wa7ph7wj
ETH address: 0x38b84E2D3B50F83A067A7488C1733180651f418A
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