Bridge

This section provides a brief description of blockchain bridges and their use.

1. Interoperability

Blockchain networks exist as spearate, distributed networks with cryptocurrencies on one blockchain network untransferable to another blockchain network. For example, a user on the Ethereum blockchain network could not transfer cryptocurrencies directly to the Avalanche blockchain network.

Blockchain bridges are an attempt to ensure interoperability of cryptocurrencies between blockchains by taking a cryptocurrency on one blockchain and making the equivalent of the same cryptocurrency available for use on another blockchain, by relaying messages between blockchain networks.

2. Types of Blockchain Bridges

There are many different bridge designs each with their own trust assumptions, but what they all have in common is that some mechanism exists to relay messages between blockchains.

For non-programmable, or limited-programmable, blockchains (i.e. Bitcoin) a bridge must run entirely off-chain via other means.

For sufficiently-programmable chains there are more choices. Some blockchain "ecosystems" (i.e. Cosmos) include a built-it method that can be use to run this relaying. In those cases a bridge operator can choose to use the built-in tool or develop their own. For other blockchains (i.e Ethereum) every bridge needs to build this mechanism on their own.

One of the most common methods to “bridge” cryptocurrencies from one blockchain to another is through a process called “wrapping.”

A user can deposit their cryptocurrency into a smart contract that locks up their cryptocurrency on one blockchain, and the smart contract releases a “wrapped” equivalent of that cryptocurrency for use on another blockchain.

All blockchain bridges require an element of trust in the operator of the blockchain bridge and well-established academic research has confirmed that so-called “trustless” blockchain bridges do not exist .

It is sometimes possible to determine the operator of a blockchain bridge by reading the documentation associated with that blockchain bridge. Other times, it is necessary to parse through the software code of the blockchain bridge in detail to determine the blockchain bridge operator.

A blockchain bridge is not “trustless” and as such, it is not uncommon for new blockchain networks to operate their own blockchain bridges, to provide confidence to users wanting to use the blockchain bridge, and to hypothecate cryptocurrencies from an existing blockchain network, to the new one, to increase usage.