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Feb 21, 2022

by Yash Chaudhary

Overview of Cross-Chain Bridges

A cross-chain bridge allows cryptocurrencies, smart contract instructions, and data transfer between blockchains. Although two blockchains may have different protocols, rules, and governance models. A bridge securely unites them through interoperating.

Users Can Use a Cross-Chain Bridge To:

Quickly and easily implement digital asset transactions.

Take advantage of low operational difficulty.

Take advantage of lower transfer fees on non-scalable blockchains.

Here's an example of how a bridge is used to transfer cross-chain assets: When a user wants to convert an ERC20 A token on Ethereum to a BEP20 A token on the BSC chain via AnySwap, the ERC20 A is locked on the source chain, and the bridge is notified to generate the BEP20 A on the BSC chain before transferring it to the user.

Issues addressed by Cross-Chain Bridges

Cross-chain bridges foster growth across chains (as evidenced by Fantom and Avalanche prices, which rose more than 12 percent and 18 percent in the first week of November) by providing multiple asset interoperability and increased security. Investors have to go through a lot of trouble if there isn't a bridge.

Cross-chain bridges also address the following issues:

Reduced gas expenses and faster transaction speeds.

User assets can freely interact, providing a good user experience.

Existing crypto assets' productivity and utility have increased.

Better security and privacy.

In the following circumstances, cross-chain bridges are appropriate:

Token exchanges between Ethereum and a Layer 2 network, with assets interoperable between chains, faster and easier fund deposits, asset withdrawals, and exit times to reduce operational complexity.

Single chains support thin assets, while cross-chain bridges support larger assets.

Investors can use bridges to go faster when investing in new chains, but they must first examine its full mechanics and security.

Arbitrage trading on Optimism, Arbitrum, and Polygon, and others, throughout the Decentralized Exchanges.

Explanation of various cross-chain bridges:

Multichain

Multichain is the web3's ultimate router. It is a system designed to allow arbitrary cross-chain transfers. On July 20th, 2020, Multichain, formerly known as Anyswap, was created to address the need for communication between distinct and diverse blockchains.

Multichain's technology enables practically all blockchains to communicate with one another. There are no restrictions on Ethereum like chains (e.g. Binance Smart Chain), Layer 2 chains (e.g. Polygon), chains like Bitcoin (e.g. Litecoin), a network of parachains (e.g. Moonbeam in the PolkaDot system), or COSMOS chains (e.g. Terra). All of these have either been incorporated or are on their way to being integrated. Multichain is generally used as an interoperable layer because it supports all ECDSA and EdDSA encrypted chains. Multichain is currently supporting 33 different blockchains.

Multichain is the leader in the cross-chain category, with a rapidly expanding family of chains (currently 33) and daily volumes above $100 million. Its sustained daily volume of more than $100 million, Total Value Locked more than $5 billion, and its thousands of daily users are testament to its popularity, security and rich user experience.

Synapse

Synapse is a cross-chain layer protocol that enables frictionless blockchain interoperability. Synapse powers essential blockchain activities like asset transfers, swaps, and generalized messaging with cross-chain functionality. It allows new primitives based on its cross-chain architecture by providing decentralized, permissionless transactions between any L1, sidechain, or L2 ecosystem. Synapse supports EVM ecosystem blockchains.

Hop Protocol

Hop is a protocol for delivering tokens quickly and trustlessly among rollups and its shared layer-1 network. Although rollups can extend the Ethereum network, they create a segregated environment for their applications.

Moving assets between rollups and the layer-1 network are sluggish and expensive, reducing the benefits of using the rollup for users. The Hop protocol allows assets to be transported straight from one rollup to the next, saving money and enabling cross-rollup application composability.

Wormhole

A wormhole is a message-passing mechanism that connects Ethereum, Solana, Terra, Binance Smart Chain, Polygon, Avalanche, and Oasis to many chains. Wormhole works by scanning a group of chains for messages sent by smart contracts running on those chains. Messages are then directed to destination chains, facilitating cross-chain message transfer.

Currently, two functionalities have been implemented on top of the general message-passing protocol:

A token bridge allows users to seamlessly transfer wrapped assets between supported chains.

ERC721 and SPL NFTs may be moved between Ethereum, Binance Smart Chain, Polygon, Avalanche, Oasis, and Solana using this NFT bridge.

RenVM

RenVM is a decentralized virtual machine protocol that does not require permission.

A secure network of virtual computers that enables cross-chain financing, exchanges, collateralization, and more for decentralized applications.

RenVM is one of the few scaleable interoperability options available. It's also the sole technique that enables hidden computation across many inputs and participants. RenVM is a network (along with an SDK) that lets developers add cross-chain capabilities to their DeFi apps. RenVM supports Bitcoin, bitcoin cash, Ethereum, and Zcash.

Conclusion

Cross-chain bridges are used by thousands of users daily. Currently, there are many bridges in the ecosystem supporting transfer between various blockchains. These bridges need to work on their security as one major exploit in a bridge can cause billions of dollars of tokens to get stolen.

Everyone in the web3 world believes that there will be no single blockchain that can handle everything, thus we will be having a multi-chain world. In this multi-chain world, cross-chain bridges will play a significant role. We will see billions of dollars in daily volume on these bridges in the coming years.

Disclaimer: The views and opinions expressed in this article are for informational purposes only and do not constitute financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.

Hop Protocol Wormhole Synapse Cross Chain Bridges Multichain Ren VM

Yash Chaudhary

Yash completed his graduation in b.tech (Computer Science ). Yash is passionate about applications of blockchain technology. Yash believes use of blockchain technology can transform our lives at a large scale. Yash daily reads articles, research reports and also documentation of different protocols. Yash listen to podcasts to know the view of industry experts.