<h2>What is a blockchain bridge?</h2>A blockchain bridge is a protocol that links two blockchains that are economically and technologically distinct in order to allow communication between them. These protocols serve as a virtual bridge connecting various blockchain ecosystems (like a bridge between two islands).As a result, blockchain bridges enable interoperability, which allows digital assets and data maintained on different blockchains to communicate with one another. Blockchain bridges are necessary for the blockchain ecosystem, where there are numerous unique protocols, to enable similar ease of sharing data and value. As of this writing, over 100 blockchain bridges are in use to transport data between Layer 1 and Layer 2 ecosystems. Because the market is becoming increasingly complex for new entrants, adopting frameworks to simplify the varied designs can be beneficial.<h2>Categorize blockchain bridges</h2>A variety of qualities distinguish bridges. These include how they move information between chains, their assumptions about trust, and the types of chains they connect. However, in this article, we will focus on how they transfer data across chains - the most important feature.<h3>Pool-based mechanism</h3>Let's suppose a user wishes to transfer USDT from Ethereum to Solana in order to comprehend how Pool-Based bridges function. First, the user deposits the Ethereum version of USDT into a predefined contract address (the pool) on Ethereum. After that, the user provides the recipient address on the Solana network to which this USDT shall be credited. This data is used by the bridge to send a Solana version of USDT to the specified Solana address.One significant restriction of this architecture is that the bridge must have enough assets in the target chain's pool for the user to shift cash. If the Solana USDT pool is depleted, the USDT placed in the Ethereum pool will be "frozen" until another user requests a reverse transfer from Solana to Ethereum with enough USDT to replenish the Solana USDT pool. Furthermore, these bridges can only transmit a particular type of asset across chains (e.g. USDT from Ethereum to Solana). You can only swap USDT on Ethereum for SOL on Solana after obtaining USDT on Solana.On the other hand, the key advantage of this architecture is that users do not have to rely on the pool's security after receiving their tokens on the new chain. Because the assets they receive are native versions of the asset on the new chain, they do not rely on the redemption of the underlying asset to preserve their value.<h3>Lock-mint mechanism</h3>Another popular type of bridge employs a mechanism known as "locking" or "burning," which is followed by either minting or redeeming. To demonstrate how the technique works, we will utilize the Ethereum USDT to Polygon USDT example from the previous section. As always, the user begins by depositing the Ethereum version of USDT into a bridge-owned contract address and selecting the Polygon destination address. This process is known as "locking." Unlike previous bridges, however, this form of bridge "mints" or issues its own version of the submitted item on Polygon and credits it to the receiving account. These issued tokens are sometimes referred to as "wrapped" tokens, and their value is determined by their ability to be redeemed for the underlying asset on the source chain. When the user decides to return to Ethereum, the wrapped token is automatically transmitted to the Polygon bridge contract address and "burned." This permits the Ethereum underlying asset to be redeemed and delivered to the specified recipient address.Holders of wrapped assets are subject to smart contract risk since wrapped tokens depend on their redeemability to retain their value. The wrapped tokens lose value if the source chain's pool is overused and depleted of its underlying resources. This is exactly what occurred during the recent Wormhole bridge exploit, which cost more than $320m in losses.The benefit of the lock/burn/mint process is that it can always transfer assets from the source chain to the target chain and vice versa thanks to these bridges. This is due to the fact that they do not call for a token pool to be sitting in the target chain's bridge contract.The benefit of the lock/burn/mint process is that it can always transfer assets from the original chain to the destination chain and vice versa thanks to these bridges. This is due to the fact that they do not call for a token pool to be sitting in the target chain's bridge contract. In terms of scalability, this benefits these kinds of bridges.<h3>Native swap with a decentralized intermediary mechanism</h3>A native swap bridge enables a user to trade one native token from the source chain for another native token from the target chain. A user, for example, can exchange native BTC for native ETH on their respective chains without the usage of wrapped assets. This is made possible by employing a cross-chain automated market maker (AMM) and an intermediary chain that observes and records the states of the source and target chains. Although the capacity to swap distinct native assets across chains is quite beneficial, this form of bridge employs the most difficult transfer process.In this illustration, a user holding BTC would start by sending this BTC to a Bitcoin address called a vault, coupled with the Ethereum address of the recipient.&nbsp;<img src="https://cdn.builder.news/news/11ed237e9744f8cea8e6023f659fee92.jpg" alt="nativeswap bridge mechanism" title="nativeswap bridge mechanism" width="600" height="315" class="lykafe0">Image 1. Source: Medium.Numerous nodes oversee and manage this vault, which they do by keeping track of incoming transactions and updating the Bitcoin vault's state on the intermediary chain (e.g. THORChain). The nodes determine the proper amount of ETH to credit to the user on the Ethereum blockchain once they have verified that BTC was received by the vault. The magnitude of the cross-chain swap in relation to the corresponding amounts of BTC and ETH available in the vaults on both chains determines the price at which it is conducted, just like any other AMM swap.A native swap bridge with an intermediary chain, as opposed to a pool-based bridge, provides a better level of decentralization and censorship resilience. It also eliminates the smart contract risk posed by wrapped assets for bridge users, though liquidity providers can still have their assets looted from the AMM's liquidity pools via exploits.Despite these benefits, these bridges' architecture is much more intricate than other bridge designs. It takes a lot of effort and money to build a decentralized native swap bridge that can be trusted. For instance, every THORChain node must both run a complete Bitcoin node and a full Ethereum node in order to facilitate native swaps from BTC to ETH. Each THORChain node needs to be motivated to act trustworthily and consistently. All of this is necessary to permit only one switch.<h3>Native swap by stablecoin swap mechanism</h3>These bridges seek to provide the ease of native swaps while maintaining the architectural simplicity of pool-based bridges. They function similarly to pool-based bridges, but with one extra step that allows users to get a different asset on the destination chain than the one they placed on the source chain. LayerZero Labs' Stargate bridge is an example of this type of bridge. We'll use another example to demonstrate how they work.&nbsp;Let’s consider a native SOL to ETH swap in this situation. Once again, the user begins by putting their asset, SOL, into the bridge's designated contract address on Solana. Unlike earlier examples, however, this deposit results in an AMM swap of SOL to a stablecoin on Solana. It may, for example, convert SOL to USDC. From here, the bridge operates similarly to a pool-based bridge; the bridge provider credits the stablecoin balance in the Solana contract address to the user on the Ethereum contract address. Finally, once the USDC is credited to the user's Ethereum account, the bridge performs another AMM swap from USDC to ETH. This ETH is subsequently transferred to the user's designated destination address.These bridges essentially serve as pool-based bridges that solely transfer stablecoins between chains in order to guarantee better price delivery during the cross-chain procedure. As is customary, the AMM swap execution prices on both chains are determined by the swap size in relation to the available liquidity in both pools.<h2>Trilemma Trade-offs</h2>Just like the scalability trilemma of Layer 1 platforms including security, decentralization, and scalability, blockchain bridges have their own trilemma: The interoperability trilemma. Despite several bridge designs, no bridge has achieved all three interoperability trilemma criteria: generalizability, extensibility, and trustlessness.<ul><li>Generalizability: the capacity to transfer any data between two chains.</li><li>Extensibility: the capacity to deploy quickly on diverse chains.</li><li>Trustlessness is the reduction of trust assumptions.</li></ul><img src="https://cdn.builder.news/news/11ed237e9745007aa8e6023f659fee92.jpg" alt="blockchain bridge interoperability trilemma" title="blockchain bridge interoperability trilemma" width="600" height="406" class="lykafe1">Source: CointelegraphWhen a bridge picks two of these traits, the third one suffers, much like the scalability trilemma. A trustless bridge called Connext, for instance, facilitates token transfers between two chains that are compatible with the EVM. Its current inability to pass arbitrary data indicates that its extensibility and trustlessness qualities have taken precedence over generalizability. Other bridges, like ZetaChain, require an extra layer of trust through the bridge's validator set in order to promote extensibility and generalizability over trustlessness.The majority of projects have selected generalizability and extensibility to swiftly deploy on diverse chains and keep the flexibility to convey arbitrary data because token transfers between two blockchains have been the key use case for bridges. As a result, these bridges have been able to deploy more quickly than many of their rivals and meet the market's demand for token transfers. These kinds of bridges can broaden their use cases from carrying out straightforward token transfers to becoming more extensive developer platforms, albeit this comes with an unknowable cost to many of its customers (to be covered in the hazards section).<h2>The bridges that have grown into application platforms</h2>Some bridges can use their current user activity to incentivize developers to build applications on top of their bridges because they have tens of thousands of unique users and have exchanged billions of dollars in volume. There are some famous projects that are attempting to create a thriving community. These initiatives are focused on developing unique ways to connect data across chains while also laying the groundwork for a Dapp ecosystem. They are as follows:<h3>LayerZero Lab</h3>LayerZero is a communication primitive that permits data and information to be exchanged between EVM chains with a LayerZero endpoint. A LayerZero endpoint is essentially an on-chain client. A chain having a ZRO endpoint can execute a transaction with any other chain with a ZRO endpoint. A third-party oracle service, such as Chainlink, is required to reside between the endpoints and serve as the transactional and communication security mechanism.LayerZero protects the authenticity of cross-chain communication by requiring two independent entities, the Oracle and Relayer, to verify the transaction. This strategy will be fairly straightforward for applications deployed on the multiple Layer 1 blockchains. For example, if your Dapp was built on Solana, you may utilize the endpoint to easily enroll your Dapp onto LayerZero. Decentralized apps, such as Stargate, leverage the LayerZero communication protocol to construct decentralized exchanges/bridges.<img src="https://cdn.builder.news/news/11ed237e97450e74a8e6023f659fee92.jpg" alt="layerzero bridge explain" title="layerzero bridge explain" width="600" height="308" class="lykafe2">Souce: LayerZero whitepaper<h3>Zeta Chain</h3>ZetaChain is a Layer 1 platform that does not require wrapped assets to move value across the chain and does not require bridges between each pair of blockchains. This is made possible through Zetachain's usage of cross-chain messaging, which enables data and values to be transmitted across chains and layers. Developers can program ZetaChain to listen for and act on events on connected blockchains by using omnichain smart contracts. To avoid a single point of failure, ZetaChain depends on validator node consensus and a distributed threshold signature technique to secure private keys on connected chains. PoS incentivizes validators to act correctly.What distinguishes Zeta chain from competitors such as LayerZero is that it allows blockchains without smart contracts, such as Bitcoin, to be integrated into the multi-chain network.These bridge platforms enable interoperability across chains and the creation of new ecosystems. This opens up new possibilities beyond simply passing a token from chain A to chain B. However, each unique mechanism of a bridge/bridge platform carries some level of danger.<h2>The risks of using bridges</h2>Bridges pose a number of concerns due to the technological intricacy needed in managing cross-chain message transfer. Among the most serious dangers are:<ul><li>Censorship risk: the risk of having funds withheld</li><li>Halting risk: the risk of delay or complete halt of transferred assets due to the bridge’s verification system</li><li>Security risk: the risk of losing assets due to hacks and exploits</li></ul>Users can easily limit their use of trusted bridges and optimistic bridges to reduce censorship and halting threats. However, security threats can never be totally eliminated, thus it is critical to understand the various attack vectors in order to determine which security methods are more resistant than others.Smart contract exploits and root-of-trust exploits are the two main attack vectors used to compromise a bridge's safety.When a hostile attacker successfully assaults a bridge at its application layer, a smart contract vulnerability happens. Newer blockchains are easier targets for assaults because the majority of bridges require safe smart contracts to be deployed on all the chains that they connect. Although the developer communities for languages like Rust, CosmWasm, and Substrate are all expanding, they do not have as many developer tools and auditing companies as more established languages like Solidity, which increases the risk of problems making it to the mainnet. When speed and competition are taken into account when building a bridge, it is simple to see why smart contract exploits are the most popular attack method used by hackers.When it comes to the root of trust hacks, a hostile actor must be able to successfully attack the bridge's primary verification strategy. By gaining access to 5 out of 9 private keys belonging to Sky Mavis, the studio that created Axie Infinity, the bad actor in the Ronin hack questioned the presumption that the majority of people were honest. The primary security system of Sky Mavis was penetrated, and the rest is history.ConclusionAs the crypto industry evolves, new bridge designs will be investigated, new security models will be tested, and fresh bridge-based applications will arise. The success of a few safe, adaptable, and efficient bridges will enable increased interconnection between protocols and communities. While there may be some short-term pain when unsecured bridges are removed, the sector's future seems promising.Written by Blue Pine<div class="pr-block-special">Disclaimer: This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.</div>

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Blockchain Bridges: A Trilemma Trade-off

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