Blockchains don't talk to each other. That's a fact. One blockchain might have a different system for making crypto transactions, storing data, or issuing tokens — resulting in incompatible ledgers, transactions, and data. This creates many challenges for developers who are building Dapps across different blockchains — it's often hard to communicate between them, meaning that if you build on one blockchain, you can't really connect with users of another blockchain. We've seen this be a real obstacle to the adoption of blockchain in finance.
Suppose you want a bottle of water but the water machine only accepts coins (because of its machine features) and you have notes so you have only two options just leave or exchange your notes with coins and here exchanger worked as a crypto blockchain bridge. It sounds like an exchange, but it's not. How let's see it.
So, what Is a Blockchain Bridge?
In simple words - Crypto blockchain bridges is a bridge between blockchains. Or A blockchain bridge is a linkage that allows tokens or data to be transferred between two different blockchains.
Blockchain Bridges connect different blockchains using an interoperability protocol. The aim is to lower the barriers to entry, increasing the adoption and use of independent chains, complementing the existing crypto-economy with distributed applications that can communicate with each other, as well as new chains that emerge in the future.
A Blockchain bridge is an application of blockchain technology in which separate blockchains communicate.
Types of Blockchain bridges.
There are two types of crypto blockchain bridges.1) Centralised based. 2) Smart contract-based.
1 - Centralized based - In this bridge, a centralized authority involves in completing the transaction. This one is less popular among the users because users have to put their trust in a centralized mediator.
2 - Smart contract-based - This blockchain bridge is also called a trustless bridge. In this bridge, no centralized mediator involves, and all processes are done through mathematical algorithms called smart contracts that give more trust. Trustless bridges have a decentralized and transparent nature, so they are very popular in the Defi space.
How does it work?
A decentralized bridge required a liquidity provider, and it can be anyone if the community allows it. Let's say you are a liquidity provider on a bridge and you deposited Binance version USDT into the pool. When a user chooses your pool, the bridge will ask you to accept the transaction as soon as you accept it. The user will receive your USDT and you will get his Ethereum version USDT also you will earn some gas fee reward. While on another hand, in a trustless bridge, anyone can be a liquidity provider without any permission, and all transactions are done through the smart contract.
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Advantages of Blockchain Bridge.
A crypto blockchain bridges give a vast number of opportunity to the developer while, as users, you can lower transaction fee, time, and multi-blockchain choice.
- Blockchain bridges give multi-choice to the users and end the monopoly of a single blockchain.
- It eliminates the transaction cost and users' load on a single blockchain also helps to decrease the transaction time.
- Blockchain bridges connect smart contracts across blockchains as well as off-chain networks.
- The bridge enables trustless exchange and payment in any digital or real-world currency.
- Blockchain Bridge's innovative solution enables banks to participate in ecosystem business models, even if they were not in the original consortium.
- The non-profit nature of the approach is beneficial for all participants.
- It is an ecosystem where users can participate in the mining of coins, the transfer of assets, and even the development of decentralized applications (DApps).
Disadvantages of Blockchain Bridge.
- Blockchain bridges also have some problems and one of the issues is they can not be 100 percent trusted if the bridge has centralized nature and does not involve any smart contract which is the backbone of blockchain. Currently, all most every blockchain bridges are centralized, and they are governed by an institute or persons.
- The second problem is liquidity pool or liquidity provider. Let's say you have Ethereum version USDT and you want Binance version USDT. When you deposit your eUSDT using the bridge, then the authority give you the same amount of Binance version USDT from the liquidity pool but in case the liquidity pool of Binance version USDT is empty, you will have to wait until someone to fill the pool by making a reverse transaction and it can take a long time and off course in all process little fee required.
- And yes, timing is the very critical disadvantage of blockchain bridges. The bigger your amount, the more time it will take. Some bridges demand 10 to 12 hours to reflect tokens.
Popular Blockchain Bridges.
Imagine a world in which blockchains can talk to each other, so they can transfer assets, like cryptocurrency or tokens, peer-to-peer. Sound futuristic and sci-fi? Well, technology has come a long way over the past few years since Bitcoin was created. It's now possible to transfer assets across different blockchains without an intermediary. Here are the best five centralized and decentralized crypto blockchain bridges.
AnySwap bridge - It is now changed to Multichain and is considered one of the best-decentralized blockchain bridges. It has listed almost every blockchain network and tokens like polygon, ethereum, BSC, Avalanche, and more. AnySwap charges a fee of 0.4% for each swap transaction, 0.1% goes to the project, and 0.3% goes to the liquidity providers.
cBridge - If AnySwap can full fill your requirement, then cBridge will. This blockchain bridge was launched by Celer Network to instantly transfer tokens across Ethereum, Arbitrum, Polygon (Matic), and Binance Smart Chain at a low cost and latency. The best thing about cBridge is you can see all liquidity providers, but be careful it is currently in beta version.
RenBridge - This bridge is for bitcoin users who want to use Dapp but don't want to exchange their bitcoin for others. This bridge lets you BTC, BCH, DOG, FIL to transfer on Ethereum blockchain (renBTC, renBCH, renDOG, and renFIL) and back to native coin so you can easily any Dapp without compromising with your original coin.
Avalanche bridge - This is a proof of stake blockchain bridge and is compatible with Ethereum only. On it, users allow to convert AVAX to ETH and ETH to AVAX based tokens. This bridge works best with MetaMask and gives AVAX AirDrop if you send more than $75 worth of any cryptos.
Wormhole bridge - The Wormhole Token Bridge allows you to seamlessly transfer tokenized assets across Solana, Ethereum, BSC, Terra, Polygon, Avalanche, and Oasis.
Other Bridges - Polygon, Cosmos, Near, Optimism, Harmony, Fantom, Smart Bitcoin Cash, Tezos, Synapse.
Last word.
And now you can tell blockchains can talk to each other and share data like never before through a brand new solution called Blockchain Bridges. This technical innovation will facilitate the safe, secure, reliable, and efficient exchange of data between different blockchains. Basically, crypto bridging looks more like crypto wrapping than crypto exchanging, but what do you think? And as always, do your own research before making any investment.
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