Hello Everyone,

Back to the crypto academy to find out new horizons of the crypto world. We all know what the bridge is but Blockchain Bridge is a new concept for me. Let's find out what is it.

^{Designed on canva}

What do you understand by a blockchain bridge? And what necessitated bridges in the blockchain.

One of the best ways to understand concepts is to clarify what each word means. In this case Blockchain + Bridge.

Blockchain: Ever since Bitcoin's white paper described blockchain technology, we have seen many cryptocurrencies & blockchains popping up in the crypto world. When we execute a transaction with a cryptocurrency that will be recorded on a blockchain. Hence, In a simple manner, the blockchain is a public ledger that records cryptocurrency transactions.

Bridge: We know that a bridge is a connecting structure which connects two locations in order to facilitate movements.

Now when we consider two locations as different blockchains and wanted to transfer data and value between we can use the Blockchain Bridge as a protocol to do so.

The necessity of the blockchain bridge is that it will allow for faster transactions, lower transaction costs, and more transparency in transactions. More importantly, this will allow for interoperability between different chains, which will in turn increase the number of use cases for blockchain technology.

What are the benefits of the blockchain bridge?

When we take each blockchain they have its own characteristic for operation. For example, Bitcoin does not operate as Ethereum does. They both have different blockchains to validate and record transactions. In this case, a user is constrained to use only one network at one time.

However, when there is interoperability between blockchains, the networks would have a mechanism to communicate between multiple blockchains. Because each blockchain is different and cannot communicate natively. This will allow users to choose the best available trades with less transaction fees and faster transactions.

For example, let's say that you want to do a transaction using the Ethereum network, but a high transaction fee and slow throughput time could be an issue to the proceeding. Instead, now with blockchain bridge you can transfer assets on a cheaper network, like Tron or Polygon and save the fees.

In addition to the benefits for the users, this will allow dApp developers to Explore the blockchain ecosystem where they can utilize different blockchains with different facilities.

Moreover, this could benefit the blockchain itself because it can solve the scalability problem. When users have an option to choose between blockchains they will not stick to one network to do their transactions. This will release high activity on one network.

How does the bridge work?

The most common use of a blockchain bridge is for transferring assets from one blockchain to another. The process is quite simple to understand when it breaks down into steps.

As a first step, we have to decide the cryptocurrency and the network we want to exchange with. Let's say that I choose Bitcoin to transfer to the BNB chain through the bridge.

Then the the BTC amount that we are willing to send will be locked on BTC chain and mint new ones that can run on BNB chain as wBTC (Wrapped token).

Finally, the wBTC will be transferred to the BNB chain through the bridge which is compatible to use on the BNB chain. The wrapped version is pegged to the original asset on a 1:1 ratio.

^{Illustration made using photoshop}

Types of blockchain bridges by category.

There are two types of blockchain bridges:

01.) Trust-Based (Centralized) blockchain bridges: This bridge type has a centralized control body or system hence trust is the main component here. Therefore the reputation of the exchange should be researched thoroughly. When the user wants to execute a transaction crypto exchange will lock the user's crypto asset and convert a similar amount on the preferred network.

02.) Trustless (Decentralized) blockchain bridges: These types of bridges allow users to transfer assets from one blockchain to another without any intermediaries thus named decentralized. Users don't have to trust a single entity to ensure the operation. The bridge utilizes smart contracts and algorithms for smooth functioning.

Pick an example of a blockchain bridge in existence and explain how it works.

• Selected blockchain bridge: Multichain

Multichain is a cross-chain swap protocol which is fully decentralized and uses an automated pricing and liquidity system. Using algorithms Multichain allows for swaps between any coins on any blockchain, including BTC, ETH, USDT, XRP, LTC, FSN, and many others.

^{Home page of Multichain}

Once you click "Enter App" you will be directed to the below window. There you can select "Connect to a wallet" to log in to the platform. Multichain offers 10 types of wallets to proceed, including Coinbase, Trust wallet, Binance & Huobi.

^{Connecting my Metamask wallet to proceed}

The platform currently supports more than 40 chains, including BNB, Fantom and Harmony. In order to change the chain you prefer, you can hover the mouse to "Ethereum" and select the preferred chain. I'm going to select "BNB chain" for this example.

^{Selecting the preferred chain / network}

Once the BNB chain is selected from the list we have an option to go through a different network. Check the area "Reminder" which has been highlighted in yellow colour. You can see that when changing the network Gas fee / Minimum & maximum cross chain amount & Estimate time change accordingly.

^{Checking the second network to swap: Avalanche}

^{Checking the second network to swap: Ethereum Classic}

^{Checking the second network to swap: Polygon}

Once we decided which network is the best in terms of fees and estimated time for the transaction we can complete the transaction just by clicking the Swap button.

Are there limitations to the blockchain bridges? What do you think about the future of blockchain bridges?

The limitations to the blockchain bridges are that it is not yet fully developed and there are some security concerns with this new technology. Especially the Trust-based bridge is a centralized solution so that the users have to depend on a third party entity or software solutions. But there is no exception to the Trustless bridge as well. Since they are run on an algorithms they are vulnerable to hacks. Therefore the biggest limitation would be Security.

The future of blockchain bridges is still uncertain due to the concept being too young. There are some challenges that need to be solved. For example, there is no standard for how these bridges should work and what are the consequences if one losses their capital, who will be responsible? what is the mechanism for recovery?

Putting the negatives aside, connecting all the blockchains will allow maximum expansion in the future and It is not too late for blockchain bridges to make a large impact. At the moment Blockchain Bridges solutions are showing exceptional growth in the crypto world with users and volume. Hence it has all potential to grow further.

Thank you.

Peace to all 🙏

^{Unless otherwise stated, all the images, charts, tables, etc (if any) are my original work}