Indeed, cryptocurrency is the buzzword! Initially, it was a topic of discussion due to the investment trend; however, now it is being talked about due to growing robberies by hackers via crypto bridges.
It is essential to mention that this year has been a disaster for crypto investors, and the primary reason behind the same is theft by cybercriminals.
Have you heard about blockchain bridges?
Pay attention to the term since it’ll be used multiple times in this article!
So, why did the thievery of billions took place this year?
Continue reading to learn more!
What are Blockchain Bridges?
Blockchain bridges are also popularly known as cross-chain bridges or network bridges used for solving the consistency challenge between blockchains.
You must be familiar that blockchain operates in terminals, and it is hard for them to communicate with each other. Here is precisely when bridges come into the picture that connects multiple networks.
For instance, if a user uses BTC on the Ethereum blockchain or vice versa, he cannot directly transfer BTC to Ether and the opposite. Therefore, blockchain bridges remove the issue with ease!
Have you ever thought about blockchain app development?
Bridges Have Resulted in the Loss of Billions
More than $1.4 billion has been lost this year due to the cross-chain bridges, the biggest single event being $615 million stolen from Ronin, a bridge that supported a popular NFTgame, Axie Infinity.
Another rip-off was from Wormhole, a crypto bridge supported by wall-street high-frequency trading organization Jump Trading.
The Working Mechanism of a Blockchain Bridge
As mentioned earlier, a bridge enables sending a token from one blockchain network to a different chain. While a token is swapped, they are deposited into a smart contract by an investor. Furthermore, that crypto gets ‘minted’ on a new blockchain network, which further represents a claim on the original coins.
Bridges Under Attack: Here’s More
Considering Ronin’s case, hackers only had to convince five validators out of nine on the network to acquire access to a crypto-locked system.
On the other hand, the Nomad case required hackers to manipulate, and that was pretty much it! Hackers could enter any value in the system and withdraw funds easily without having any knowledge of programming.
Then Why Bridges are Important?
No wonder bridges are a vital tool, especially for the decentralized finance (DeFi) industry, which is a crypto-based substitute for the banking system.
Considering DeFi, the money exchange is managed by a programmable code known as smart contracts. It is a contract stored on a public blockchain, including Ethereum or Solana, which executes only after certain conditions are met.
In simpler words, assets cannot be easily moved, which is why bridges are needed!
Types of Blockchain Bridges
Blockchain bridges can be segregated based on categories, including mechanisms, functions, and centralization as follows:
– Custodial vs. Non-Custodial Bridges
Custodial bridges expect users to place their trust in a central entity for it to function safely. However, before that, users must conduct proper research to make sure that the entity is authentic.
On the other hand, non-custodial bridges functions in a decentralized manner and closely works with smart contracts for managing crypto locking.
– Functions-Based Blockchain Bridges
Some of the best examples based on how a blockchain bridge functions are wrapped asset bridges and sidechain bridges.
The former enables crypto consistency, for instance, transferring bitcoins to the Ethereum network by wrapping the BTC.
Meanwhile, sidechain bridges bridge the gap between the parent blockchain and child sidechain, ensuring consistency between the two.
– Mechanisms-Based Blockchain Bridges
There are two types of mechanisms-based blockchain bridges: Unidirectional and Bidirectional.
Evidently, a unidirectional bridge is one-way that lets users’ take bridge assets to one destination while not allowing them to bring them back to the native location.
Bidirectional bridges enable the movement of bridge assets in both directions.
The Future of Blockchain Bridges
Undoubtedly, the internet is a massive and revolutionary ecosystem, and blockchain bridges are a critical element in enhancing the blockchain industry’s interoperability.
Indeed, the industry will require the use of blockchain bridges as we also move forward to witnessing Web3. Unfortunately, though, there have been attacks on cross-chain bridges, the hunt for a robust mechanism continues.
Need further assistance on the safety of blockchain-based apps and app development? Then, get in touch with an exceptional mobile app development company in USA for further assistance.
Have a great day, and happy innovation!