Understanding Blockchain Bridges: Benefits, Challenges, and Examples

Blockchain bridges allow different blockchains, which normally can't interact, to communicate and transfer assets like cryptocurrencies. This enables users to leverage the advantages of multiple blockchains, such as lower fees on one and specific features of another. When transferring an asset, the bridge locks the original asset on the starting blockchain and creates a representative token on the destination blockchain. This new token can then be used on the destination blockchain. Afterward, users can redeem the representative token for the original asset. There are two main types of bridges: custodial and non-custodial. Custodial bridges rely on a third party to manage the transfer, while non-custodial bridges use smart contracts and are therefore decentralized. Examples of bridges include Wrapped Bitcoin (WBTC), which represents Bitcoin on the Ethereum blockchain, and the Polygon Bridge, connecting Ethereum to Polygon for faster and cheaper transactions. However, bridges face challenges such as security risks from hacking, potentially high fees, complexity for new users, and concerns about centralization with custodial bridges. The Ronin Bridge hack, for example, resulted in a $600 million loss. Despite these challenges, developers are working on improving bridge security and user experience, along with creating interoperability protocols that could eventually eliminate the need for bridges altogether.