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crosschain-bridge

What are Cross-Chain Bridges for blockchains?

The most famous public blockchains are without a doubt Ethereum and Bitcoin. A public blockchain is a blockchain that anyone can access because they are open source and transparent. Everyone can see what is happening on these blockchains, and the network itself makes sure that it does its job. The rules are laid down in the consensus mechanism, which is different for every blockchain.

The latter ensures that, in principle, blockchains cannot work together. After all, they work with different rules and protocols, making it impossible to move tokens or other assets from one blockchain to another.

However, nowadays something has been found to make this possible. Cross-chain bridges for blockchains improve interoperability between blockchains and open up many new possibilities. It could just be that you will soon be able to send a Bitcoin over the Ethereum network .

In this article we explain what a cross-chain bridge is for blockchains, how they work and which bridges are the most popular at the moment.

What are cross-chain blockchain bridges?

Cross-chain blockchain bridges allow for what is called ‘interoperability between different networks’. Cross-chain bridges can then connect blockchains as different as Bitcoin or Ethereum. It is very special that this is possible, because such blockchains cannot naturally work with each other. Let alone that it is possible to make a transaction on the Bitcoin blockchain, which is sent to the Ethereum blockchain.

This interoperability is very practical, such as the transfer of tokens, data and even smart contract instructions between different platforms. One can also use cryptocurrencies running on one blockchain and move them to other dApps on another blockchain. This creates a lot of new possibilities that we could not have envisioned before.

Suppose you have cryptocurrencies running on a blockchain that is very expensive because it is not scalable enough, you could move it to a blockchain that is scalable. In this way you ultimately pay lower transaction costs, and the transaction can usually be processed a lot faster.

This also applies to a so-called mainchain and a subsequent blockchain, called a sidechain, that can work with other consensus rules or take advantage of the security of the mainchain. This is especially the case for blockchains based on the Ethereum blockchain.

While some blockchain bridges are centralized and controlled by a real company behind them, others are completely decentralized. That is, for example, the Ren3 protocol. For example, the Ren Virtual Machine (RenVM) is scalable over a large decentralized network that builds consensus (much like Ethereum is supported by thousands and thousands of nodes).

What is the difference between a normal bridge and a cross-chain bridge?

We talked about a cross-chain bridge above, but chances are you will often see the term ‘bridge’ in its unit. Basically the same is meant by both terms. A blockchain bridge is therefore the same as a cross-chain bridge. Both bridges connect blockchains to each other. This can be a connection between two blockchain networks, but it is also possible that a connection is made between the mainchain and sidechain.

With a blockchain bridge it is possible to transfer various data, such as tokens and assets, between blockchain networks. This provides the following capabilities to users:

  • Send tokens from one blockchain to a dApp running on another blockchain. For example, it may be possible to send tokens from the Bitcoin blockchain to a dApp that runs on Ethereum;
  • Executing transactions on a more scalable blockchain where you have to pay lower transaction costs, and where the processing time is a lot shorter than on the current blockchain;
  • Run dApps on multiple blockchain networks, making it easier for users to work between blockchains.

Why can’t blockchains work together without a bridge?

You may be wondering why those bridges are so important. Still, many people are very happy that there are cross-chain bridges for blockchains. This is because it improves the interoperability of the blockchain technology.

As mentioned earlier, traditionally, blockchains cannot work together. You can probably understand that a lot better with the example below.

Imagine, or maybe it really is the case, that you have a laptop that runs Windows 10. This is a fairly specific operating system that can only run programs that were made for Windows 10. When you want to download a program or application online, you should always make sure that you choose the version that has been developed for Windows 10. If you don’t do this, the program will not work.

Windows is made in a certain way. For example, Windows uses a certain programming language, protocols, variables , etc. which makes it work differently from an operating system like iOS (from Apple). Suppose you download a program on Windows, while that program is written for Apple software, the program will not work.

iOS is an operating system written in a completely different way. It uses other protocols, programming languages, frameworks, etc. which makes a Windows program not work. So you will have to download a version of that program for iOS to be able to use it on an Apple product.

That’s how it works with blockchains. Bitcoin can be compared to Windows 10, while Ethereum can be seen as iOS (chosen at random). When someone sends a program to iOS from Windows 10, the Apple device can’t do anything with it. It will first have to be converted to a program that is readable by Apple’s operating system. Otherwise it can’t work.

When someone wants to send a transaction on the Bitcoin blockchain to the Ethereum blockchain, the transaction will first have to be converted into a transaction that is readable by Ethereum. This is what the cross-chain bridge does. The cross-chain bridge is the ‘program’ that ensures that different networks can communicate and collaborate between each other.

Why is interoperability important?

It is important that blockchains can work together. There are even several reasons why this should be.

DeFi is getting bigger and bigger. We see this in several points. For example, there are more and more DeFi applications that run on blockchains such as Ethereum. This causes a blockchain like Ethereum to experience scalability issues. It takes a very long time for a transaction to be executed, and often people pay high transaction fees.

At the same time, there are more and more new layer 1 blockchains that are a lot more scalable than Ethereum. These blockchains can process an awful lot of transactions per second at low transaction costs. It would be ideal if Ethereum could carry out various transactions on these types of blockchains, in order to relieve its own network.

Then there are also blockchains on which specific and complex transactions can be performed. Suppose a certain application running on Ethereum would like to make use of these complex techniques, it could have certain processes run on a different blockchain. Of course, a bridge is needed to make the connection between these blockchains, because otherwise it is not possible to exchange data.

DeFi is getting bigger and bigger, and due to its growth it is also becoming increasingly important that blockchains can work together. That is why cross-chain bridges are extremely important. More and more developers are realizing this and are developing their own blockchain bridge.

Also, many developers want to get to the root of the problem. This means that they are developing a blockchain that in fact already has a bridge built in. Consider, for example, Polygon and Cardano . These two blockchains can already work seamlessly with Ethereum. Cardano is particularly special, because this blockchain uses its own protocols and techniques, yet is able to work together with the Ethereum Virtual Machine (EVM).

For example, someone can easily copy an Ethereum dApp and have it run on the Cardano blockchain. This ensures that certain processes can be performed on the Cardano blockchain, but also that it becomes easier to develop new applications. All dApps are open source, which means that someone can develop a particular application without having to develop it from scratch. They can simply duplicate an application from another blockchain, adjust some variables, and the application will work immediately.

How does a cross-chain bride work?

So when a user wants to transfer assets from one blockchain to another, he will have to use a bridge. Mind you, in technical terms, assets are not just moved anywhere.

Below you can see the steps that must be taken when someone wants to transfer assets from one blockchain to another blockchain.

  1. The assets are locked or ‘frozen’ on the blockchain on which they reside using a smart contract (or other mechanism). A condition is therefore that the blockchain offers support for smart contracts.
  2. Once these assets are locked, new corresponding tokens are created on the new blockchain. When a user wants his original belongings back, he will request that the belongings he owns be burned to release the original belongings.

This process is widely used in this kind of procedure (for example with wrapped Bitcoin (wBTC)). This prevents assets on both blockchains from being used at the same time. The double spend attack is therefore excluded.

This process makes it possible to move all assets from one blockchain to another in an imaginary way, without intermediaries. For example, RenMV in its current beta version makes it possible to transfer BTC tokens, BCH bitcoin cash and even Dogecoin on Ethereum and Binance Smart Chain without any hassle.

Wrapped Bitcoin and related projects such as imBTC and HBTC are based on the same principle and allow Bitcoin to be used on the Ethereum network and leveraged for decentralized applications. Think for example of Aave , Compound or MakerDao.

side chains

A sidechain is a secondary blockchain connected to a main blockchain, which is also known as the mainchain. It has its own characteristics but takes advantage of the community and security inherent in the main network for the final transactions that will be recorded on the mainchain.

Technically, several independent sidechains can be deployed around the same mainchain. In fact, theoretically many dApps can run on independent sidechains. Thus, the load on each sidechain does not affect the speed of operations on the mainchain.

Sidechains also open up new possibilities in terms of interoperability. Their infrastructure allows them to have parallel computing capacity, instead of executing transactions one after the other like Ethereum does. Ark of Lisk can scale the computing power of different sidechains within a single sidechain. An impressive potential when we think of possible interoperability between several thousand sidechains.

Interoperability is a key element for the development of many dApps that require a wide range of information from different infrastructures. The need for new technologies that allow efficient transfer of information from one blockchain to another makes the sidechain architecture very interesting.

side chain bridges

We have seen the cross-chain bridges connecting two different blockchains like Ethereum with Binance Smart Chain for example. Now let’s take a look at the bridges that connect sidechains, also known as the sidechains. Mainchains can work differently than their sidechain. And in order to communicate with each other, they must use a bridge.

For example, xDai is a sidechain based on the Ethereum blockchain, and xDai is secured by the work of validators other than the miners operating on Ethereum. This has created two points, such as the xDai bridge and the OmniBridge. These are the bridges that will connect the xDai sidechain to the Ethereum network and then allow easy transfers of tokens from one chain to another. OmniBridge allows us to lock any ERC20 token on Ethereum and immediately create an equivalent token on the xDai sidechain.

We see the same principle with Axie Infinity who created an Ethereum-linked sidechain called Ronin to facilitate the transfer of game assets.

What are the advantages of cross-chain bridges?

You already know a lot more about cross-chain bridges for blockchains. This way you know what this is and how it works, but it is probably also clear to you why these types of bridges are important for the further development of blockchain technology.

Let’s take a look at the main advantages of cross-chain bridges to make it even clearer why we can’t live without these types of bridges. We have listed the main advantages below.

  • Interoperability . This is clearly the first big advantage. Blockchains are becoming interoperable with each other. For users, this means they can easily switch from one blockchain to another. Traditionally, it is not possible for blockchains to work together, let alone it would be possible to move tokens from one blockchain to another blockchain, which actually does not support these types of tokens.
  • Exploiting the full potential of these cryptocurrencies . Bridges allow assets such as Bitcoin that have no use on the blockchain to be transferred to a blockchain with multiple options and uses for decentralized applications. So you can get the most out of your cryptocurrencies, even Bitcoin.
  • Greater scalability . This is a strong innovation and brings more liquidity (especially for WBTC) and more solutions. Developers are no longer forced to develop new programs, but simply try to implement bridges to make their blockchain more interesting.
  • efficiency . In general, users are the big winners because they can easily use different blockchains and have a choice in terms of transaction costs, for example. The range of possibilities is expanding and the barriers between blockchains are getting lower. This can only improve the overall user experience.
  • Faster Crypto Adoption . When it becomes easier to use blockchain technology, we will see that cryptocurrencies will be adopted faster. This means that more and more people and companies are using it. After all, it is then easier to use them, so there is less reason not to use them. At best, this can cause the prices of cryptocurrencies to go up as they are used more often, causing an increase in demand.
  • More DeFi applications . When it is possible to make DeFi applications work together between different blockchains, we will see that developers can set up an application more and more easily. After all, it is then possible to use different functionalities. Financial products that currently run centrally can then be transferred much easier and faster to a decentralized variant of this product. This naturally allows the value of the DeFi market to rise further over time.

Bridges for Polkadot

In this article we mainly talked about bridges for Ethereum. Yet there are also other bridges, such as for Polkadot . This project was once conceived to be the ‘blockchain of all blockchains’. It was thought that this blockchain would connect all other blockchains together, creating a large network of blockchains.

The Polkadot project, which was launched in 2017, has been officially in operation since May 2020 and its future, which is strongly encouraged by the community, looks promising. Powered by Gavin Wood, co-founder of Ethereum, Polkadot and its DOT cryptocurrency have quickly reached new heights.

At the time of writing, DOT ranks fourth on the list of largest cryptocurrencies by market capitalization.

Decentralized Finance (DeFi) has been gaining popularity for some time now. DeFi is primarily based on the Ethereum network, but is starting to fall victim to its success: gas prices have skyrocketed and network scalability is struggling to recover. To address this growing problem, competing networks like Polkadot’s are becoming very successful.

Polkadot would connect several layer 1 blockchains together, and its own blockchain could serve as a large bridge. In the case of Polkadot, these layer 1 blockchains are called parachains, and they are fully interoperable with other parachains.

The architecture of Polkadot ensures that an enormous amount of functions and assets can be exchanged across different platforms. This allows blockchains such as Ethereum and Bitcoin to work seamlessly with each other, without experiencing any problems. The Polkadot bridges that take care of this are called the Cross-Chain Message Passing, abbreviated XCMP.

XCMP Bridge

Parachains get their name because they run parallel to the mainchain, which in the case of Polkadot are also referred to as the central Relay Chains. This happens within Polkadot as well as within Kusama Networks, which is Polkadot’s testnet. Still, Kusama is seen as a standalone project, given its popularity.

Because these chains run parallel to each other, transactions can be spread across different chains and still be processed at the same time. This offers a lot of possibilities, and is especially useful for the scalability of blockchains. In this way, transactions can be carried out over different networks, without having to wait for the transaction to be completed. This is a problem that we often see with different chains over which shared transactions are performed.

The parachains are connected to the Relay Chain, allowing them to take advantage of the security that Polkadot provides. However, something still needs to be built for the communication between the parachain and mainchain. That is the Cross-Chain Message Passing, abbreviated XCMP.

Polkadot’s XCMP bridge is a protocol that allows parachains to communicate with mainchains. This communication is completely secured, so that a transaction can be carried out in confidence without any problems. The safety comes from the Relay Chain developed by Polkadot. To make use of XCMP, a proposal will first be made to set up a channel between two parachains.

The channel being set up must be accepted by both the sending and receiving parachain. It is also a one-way traffic channel. This means that when a parachain wants to send something back, a new channel has to be set up. This is to ensure safety. For example, a parachain can always choose to receive certain information back, which prevents a DDOS attack.

Two parachains can only have two channels with each other. This is a channel for transmitting and a channel for receiving data.

In order to actually use the bridge, a certain number of DOT tokens must first be used. These tokens will be returned to whoever deposited the tokens once the channel is closed.

With the XCMP bridge it is therefore possible for two different parachains to communicate with each other. To do this, they will have to set up a channel, for which DOT tokens must first be deposited. Next, XCMP serves as a cross-chain bridge between these parachains.

Plasm Network

Binance Labs, the incubator of the Binance crypto exchange that already finances numerous blockchain-related projects, made another investment in Plasm Network not long ago. This is a smart contract platform that runs on the Polkadot blockchain. Plasm Network is also backed by HashKey, LongHash, Digital Finance Group and PAKA Ventures. There is a good chance that several supporting parties will be added.

Plasm Network has a big and ambitious goal in mind: to develop a gateway between the Ethereum network and Polkadot networks. According to them, the funds raised would also allow them to accelerate the pace of research and development.

Plasm Network is known for rolling out a smart contract on the Polkadot test network called “Rococo”. The latter had the honor of being the first platform with a parachain on the Polkadot network.

Conclusion

A cross-chain bridge for blockchains ensures that blockchains become interoperable with each other. This means that they can work together, which is traditionally not possible. Each blockchain uses its own protocols and standards, which means that it is normally not possible to exchange assets, such as tokens and cryptocurrencies, between these blockchains.

That changes now that we can use bridges. These connect blockchains, allowing us to send tokens and coins between different networks. This also makes it possible to have mainchains communicate with parachains.

Many bridges have been built for Ethereum, as this is, of course, the most important and largest blockchain for DeFi. Bridges are therefore an extremely important stimulus for the further development of DeFi. We dare to say that DeFi could never become big without the use of bridges.

Yet we also see that many other blockchains are starting to use bridges. For example, Polkadot ensures that parachains can work together through the XCMP bridge they have developed. These parachains can set up a channel with each other by depositing DOT, after which they can exchange information directly with each other. Any blockchain could register itself as a parachain with the Polkadot network, which of course also applies to Bitcoin and Ethereum.

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