Leveraging Interoperability Bridges to Move Assets Between Blockchains

The Expensiveness of Leading Smart Contract Platforms

Leading smart contract systems like Ethereum have severe issues with high gas prices and network congestion. These limitations make developing and operating decentralized apps (DApps) on Ethereum exceedingly costly.

Gas costs on Ethereum have escalated to untenable heights in recent years. The average gas charge went above $60 at points in 2021, rendering many transactions unviable. These high fees are driven by increased network demand and activity, especially around popular DApps like decentralized finance (DeFi) protocols.

However, Ethereum's throughput is restricted to roughly 15 transactions per second. With demand greatly outperforming capacity, the network regularly becomes overloaded and transaction rates drop to a crawl. Users must then pay expensive gas costs for priority inclusion, which pricing out many users and DApps.

This presents a big pain point for developers developing on Ethereum. Deploying smart contracts and DApps necessitates paying gas expenses that can quickly reach into the hundreds of dollars. Building any non-trivial application becomes excessively expensive for many engineers and entrepreneurs.

The high price and restricted scalability of Ethereum creates a challenge for developers trying to construct censorship-resistant and decentralized apps. Moving to more cost blockchain alternatives has become an intriguing choice.

The Scalability Trilemma

Leading smart contract systems like Ethereum confront what's known as the scalability trilemma. This relates to the problem of attaining decentralization, security, and scalability concurrently.

Platforms must frequently favour two of these traits at the expense of the third. Ethereum, for example, has put decentralization and security over scalability. This lets it to remain permissionless and very secure, with validators spread globally.

However, the focus on decentralization and security comes at the cost of scalability. Ethereum can only execute 15 transactions per second, causing to network congestion and hefty gas prices. This makes deploying and operating DApps on Ethereum exceedingly costly.

The scalability restrictions emerge from Ethereum's consensus method and design. While these enable censorship resistance and trust reduction, they hinder transaction throughput. Ethereum is researching ideas like sharding to assist solve scalability, but they remain works in progress.

The Benefits of Alternative Smart Contract Platforms

Leading smart contract systems like Ethereum have issues with high gas prices, network congestion, and restricted scalability. This makes deploying and operating DApps on these networks unacceptably costly and inefficient.

Alternative smart contract platforms can give a more inexpensive and scalable solution. Here are some of the primary benefits of switching DApps to newer blockchains:

Lower Fees

Alternative systems like Solana, Avalanche, and Fantom employ different consensus techniques and architectures that allow them to provide much cheaper transaction costs. On Ethereum, typical gas prices can easily approach $10-20 per transaction. On more scalable networks, costs can be sub $0.01 per transaction.

Higher Throughput

Leading systems frequently have throughput limits, only able to execute 10-30 transactions per second. Newer blockchains employ sharding, proof-of-stake, and other advances to reach throughput in the hundreds of transactions per second. This larger capacity eliminates congestion and assures smooth functioning.

More Scalable

Alternative platforms are developed with scalability in mind from the ground up. This helps businesses to manage increased demands and scale up network capacity as use rises. Leading systems frequently have scaling limits embedded into their initial architecture. Newer blockchains overcome these issues.

Migrating DApps to more inexpensive and scalable blockchain alternatives can save considerably on running costs. It also enables apps to function smoothly without being impeded by congestion and costly prices.

Overview of Interoperability Bridges

Interoperability bridges are protocols that allow assets, data, and other information to be moved across multiple blockchains. Bridges offer connectivity across otherwise unconnected networks.

For example, a bridge may enable tokens on the Ethereum blockchain to be transported to a suitable smart contract platform like Polygon. The bridge locks up the tokens on the originating chain, then mints equivalent representation tokens on the destination chain. This allows assets to transfer easily across blockchains without needing to convert through centralized exchanges.

Bridges enable assets like bitcoins, NFTs, and even complete dApps to be exchanged between other networks. This compatibility enables new use cases and flexibility for developers and consumers. You may exploit the characteristics of several blockchains for diverse reasons, while yet retaining interconnectivity.

Bridges assist tackle one of the fundamental difficulties of a fragmented blockchain environment - asset liquidity and transferability between chains. They are a vital infrastructural component facilitating smooth mobility between networks. Well-designed bridges allow users to access the benefits of many blockchains, while avoiding the downsides of closed-loop systems.

Popular Interoperability Bridges

Several interoperability bridges have arisen to ease asset transfers across multiple blockchains. Here are some of the most popular and commonly used:

Wormhole

Wormhole is a bridge linking the Solana and Ethereum blockchains. It exploits Solana's high speed and cheap prices for rapid and economical transfers between the two chains. Wormhole employs a network of relayers to validate transfers and leverages Solana's Proof of History consensus for timestamps. It facilitates transferring tokens, NFTs, messages, and other data.

Connext

Connext allows non-custodial, peer-to-peer transfers over several layer 1 and layer 2 networks. It employs XT tokens to move value between chains without locking assets. Connext supports Ethereum, Arbitrum, Optimism, Avalanche, Fantom, Gnosis, and Moonbeam. It's supposed to offer quick, low-cost transfers between chains.

Celer

Celer is a layer 2 scaling technology that facilitates quick, low-cost transfers across blockchains. Its cBridge system facilitates transfers between Ethereum, BNB Chain, Polygon, Avalanche, Fantom, Arbitrum, Optimism, and other chains. Celer employs decentralized relayers and cryptographic proofs for security. It focuses on creating a smooth cross-chain user experience.

Using Bridges to Transfer Assets

Interoperability bridges allow developers to move tokens, NFTs, and other assets across multiple blockchains. This section will give instructions on integrating bridges and conducting cross-chain transfers.

To utilise a bridge, developers first need to integrate the bridge smart contracts into their DApps. Popular bridges like Wormhole and Connext provide SDKs and documentation to simplify integration.

Once integrated, performing cross-chain transfers is trivial. Here is example pseudocode for moving an ERC-20 token from Ethereum to Avalanche using the Wormhole bridge:

// Wrap ERC-20 token const wrappedToken = bridge.wrapToken(tokenAddress, amount); 

// Transfer wrapped token bridge.transferToken(wrappedToken, recipientAddress, { targetChain: 'avalanche' })

This wraps the ERC-20 token into a voucher that may be redeemed on the destination chain. The bridge facilitates moving the wrapped token between chains.

The receiver may then use the coupon on Avalanche to get the original ERC-20 tokens:

// Redeem voucher const tokens = bridge.redeem(voucher) ```

Bridges like Wormhole and Connext employ a network of relayers to safely transmit assets across chains. This provides smooth cross-chain transfers without liquidity constraints.

The same considerations apply for transferring NFTs and other asset types. Bridges take away the complexity underlying cross-chain communications and asset locking, making integration easy for developers.

## Bridge Architecture

Interoperability bridges offer a decentralized design to permit cross-chain transfers. This comprises a network of nodes known as relayers that monitor activity on different blockchains and coordinate asset transfers across them.  

When a user starts a transfer, the relayer freezes the money on the source chain and generates a proof of this transaction. This evidence is subsequently sent to the target chain, where the relayer can unlock the cash. The user receives the same money, reflected on the new blockchain.

Bridges incorporate numerous security approaches to avoid theft or loss of goods. Some employ economic incentives and staking procedures to guarantee relayers perform honestly. Others rely on cryptography and zero-knowledge proofs to guarantee legitimacy of transactions.

Relayers play a key role in bridge security. They must remain online and cooperate appropriately to permit transfers. The decentralized network of relayers makes bridges immune to outage or manipulation by a single entity. This allows bridges to transport assets safely without a centralized authority.

## Ensuring Bridge Security

Blockchain bridges enable the easy movement of assets between multiple networks, but this also raises significant security issues that must be managed. Several procedures are done to ensure bridges run securely:

### Audits
Reputable auditing organisations rigorously analyse bridge code, design, and operations to discover and resolve problems. Frequent audits are undertaken, especially after any significant bridge renovations, to maintain security requirements.

### Insurance Funds  
Insurance funds are designed to compensate damages in the case of a bridge exploit. Users pay a modest fee on transfers that goes into the insurance fund as a protection. Theft of cash can be compensated from the insurance pool.

### Decentralization
Bridges are meant to work in a decentralized fashion, with control dispersed across multiple entities rather than a single entity. This minimizes single points of failure. Validation and consensus techniques ensure no one party may jeopardise bridge transactions.

With meticulous auditing, insurance backing, and decentralization, blockchain bridges can provide smooth interoperability while emphasising user security. Ongoing inspection and testing is necessary to identify and address developing dangers.

## Risks and Limitations

Deploying interoperability bridges comes with several risks and limits that developers should be aware of:

### Hacks

Bridges can be vulnerable to hacking, as they provide a focal point of failure. If a bridge is breached, hackers may be able to steal cash being moved across blockchains. There have been multiple high-profile hacking of bridges, leading in millions of dollars worth of crypto assets being stolen. Proper auditing and security policies are crucial to limit hacking threats.

### Loss of Assets

Bugs or unsuccessful transactions on bridges might potentially lead to a loss of cash. If something goes wrong during an asset transfer via a bridge, such assets might be permanently locked or unavailable. Thorough testing and infrastructure updates are needed to mitigate these hazards.

### Centralization

While bridges offer decentralization by connecting blockchains, the bridges themselves tend to be more centralized. This presents a contradiction, since the bridges become a concentrated point of failure. Projects must guarantee bridges are maintained in a decentralized manner to decrease hazards. But there are limits to how decentralized bridge systems can be in practice.

## The Future of Blockchain Interoperability

The future of blockchain seems to be one of enhanced interoperability and easy transfers between multiple networks. As more bridges are constructed, assets and data will be able to travel freely between an internet of blockchains.

More bridges between large blockchain networks are being established all the time. Already there are bridges linking Ethereum, Binance Smart Chain, Polygon, Avalanche, Fantom, and other important platforms. These let assets like tokens, NFTs, and other digital property to flow across chains with ease. 

In the future, moving assets across blockchains may become as straightforward as sending data packets across the internet. Users will be able to pick the perfect platform for their requirements, whether that's reduced prices, quicker speeds, or sophisticated capabilities. Moving objects between chains will involve just a few clicks.

This multichain future points to a scenario where blockchain networks interoperate effortlessly. Assets like cryptocurrencies and NFTs will attain their full potential once they obtain seamless liquidity across a network of chains. Users will no longer be locked into any one platform. The opportunities for innovation and matched incentives between networks are tremendous in this integrated blockchain environment.