Blockchain bridges, or cross-chain bridges, are protocols designed to connect two blockchains, allowing users to transfer digital assets and information between them.
This platform facilitates the transfer of tokens, smart contracts, and data exchanges between two independent blockchains, and also facilitates communications between them.
A cross-chain bridge will, for instance, enable you to spend Bitcoin on the Ethereum blockchain by wrapping it in BTC.
Solana, Avalanche, and BNB Chain are examples of “alternative” layer-one blockchains that have grown in popularity. The first smart-contract chain was attacked by these so-called “Ethereum-killers” in an effort to take over market share and users. In spite of that, many users were unable to access their funds on Ethereum. They were able to transfer assets seamlessly between chains with the help of bridges.
It enhances the user experience, increases liquidity for DApps, and increases asset efficiency to be able to access multiple blockchains through a single network.
An Overview of Cross-Chain Bridges
Token transfers are the most common usage of cross-chain bridges, although they can also convert smart contracts and send data.
If your Bitcoin tokens are on the Bitcoin blockchain, and you want to move them to the Ethereum blockchain, which has the native ETH token, let’s assume that you have some BTC. ETH equivalents will be created for you by a cross-chain bridge that holds your BTC and converts it into ETH.
Bitcoin is not transferred from the Bitcoin network to the Ethereum network in reality. The exchange rate is locked in a smart contract, but you can use it on the Ethereum blockchain as wrapped Bitcoin (wBTC). You’ll receive BTC equivalent to the remaining portion of the wrapped token if you convert it back to BTC.
A By using a cross-chain bridge, you would be able to convert your BTC and use it on the Ethereum network without having to go through a lengthy conversion process on a CEX. Smart contracts wrap tokens, which are then issued on another blockchain by issuing native assets.
Crypto Ecosystem: Why Cross-Chain Bridges Matter?
To fully grasp the importance of cross-chain bridges in crypto, it is necessary to grasp how interoperability drives seamless transactions in traditional finance. It may not have occurred to you, but you can pay your Mastercard bills with your Visa card. In the same way, PayPal is available for virtually all online purchases, regardless of where you purchase.
They all operate on different systems and protocols. While Bitcoin Wallet makes transactions seamless, they are fast and efficient.
A major obstacle to the mass adoption of cryptocurrencies is the lack of interoperability between different blockchains. Blockchain technology, therefore, is progressing towards a wider adoption as a result of solutions like cross-chain bridges.
A blockchain bridge provides a better user experience while also lowering transaction costs. Each time you need to swap a token, you have to go through different crypto exchanges. It is also quite cumbersome to do this every time, as well as being associated with higher fees.
The advantages of a cross-chain bridge can be found in better transaction rates and lower gas fees, as well as greater utility from the use of two different blockchains.