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Bridges are a revolutionary technology for the cryptocurrency space. The ability to interconnect blockchain networks that are otherwise isolated helps to establish an accessible ecosystem for all crypto users. While this technology and ability to transact through ‘cross-chain’ infrastructure, it comes with added risks.
Blockchain bridges strive for three primary characteristics:
- Security and Trust-minimized: the guarantee that funds sent will arrive safely to their destination chain and required no additional trust assumptions outside of the code
- Native Assets: given the choice, a user would prefer the native asset rather than a wrapped alternative due to the latter having less liquidity and security guarantees
- Liquidity and Finality: liquidity creates a better UX experience with less slippage and better prices while instant finality means faster settlement and no delay when bridging from one blockchain to another
Bridge hacks have accounted for over $1 billion in lost or stolen funds of which the Ronin Bridge hack was the single largest breach in crypto history. This hack surpassed Solana’s Wormhole bridge hack, where 120k wETH ($325 million USD) was stolen.
Bridges are in the early stages of development. It is likely that the optimal bridge design has not yet been discovered. Bridges are crucial to onboarding users onto Ethereum L2s too, and even for users who want to explore different ecosystems. However, given the risks involved in interacting with bridges, users must understand the trade-offs the bridges are making.
The founder of Ethereum, Vitalik Buterin, released his own thoughts and comments about the debate between multi-chain and cross-chain infrastructure, citing reasons which show how cross-chain tech carries vulnerabilities.
Interacting with any type of bridge carries risk:
- Smart Contract Risk — the risk of a bug in the code that can cause user funds to be lost
- Technology Risk — software failure, buggy code, human error, spam, and malicious attacks can possibly disrupt user operations
Moreover, since trusted bridges add trust assumptions, they carry additional risks such as:
- Speed - If adequate liquidity isn’t available, users must wait until there is. This can be hours, days, or even weeks while the crypto markets continue to trade and your funds are tied up.
- Centralization/Censorship/Custodial Risk — some bridges have a small set of operators that can censor and, in the worst cases, steal user funds
To this last point, cross-chain bridge contracts that secure immense amounts of crypto in a single location (a smart contract on the source side of a bridge) is a single point ofm failure and honeypot for hackers. This is the reality of most cross-chain bridging today.
The alternative to cross-chain is a base L1 and rollup design (discussed in detail in future sections). With an L1+rollup, a protocol only needs to deploy an asset once on the L1 and then it is interoperable by default with all rollups. Rollups inherit the security of the L1 while also featuring “escape hatches” that allow users to exit to L1 vs being stuck on destination chain in the event something goes wrong. Because of this, they need an exponentially cheaper security budget than creating your own L1 or bridge with validator set. Finally, rollups can store data on or off chain depending on their need, creating flexibility in the design space and user experience.
- Connext (xpollinate) https://bridge.connext.network/
- Hop Protocol https://app.hop.exchange/
- Synapse https://synapseprotocol.com/
- Multichain (Anyswap) https://app.multichain.org/
- Stargate https://stargate.finance/
- Celer Network https://cbridge.celer.network/
- Allbridge https://app.allbridge.io/
- Wormhole https://www.wormholebridge.com/
- RenBridge https://bridge.renproject.io/mint
- OrbitBridge https://bridge.orbitchain.io/
- Nomad https://app.nomad.xyz/