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What Is A Blockchain Bridge?


January 2022

Today, Bitcoin and other cryptocurrencies dominate the discussion in finance and on Wall Street, but what makes these emerging assets so valuable is the blockchain network they support.  As the blockchain industry grows vast and expands, the need to connect the various blockchain ecosystems together is becoming more necessary. Blockchain bridges introduce interoperability into current blockchain technology to create a more cohesive and interconnected community of users.

This guide will introduce the audience to blockchain bridges and dive into more advanced concepts which include the future of decentralized finance, the decentralized web, and the entire digital asset industry.

What Is Blockchain? Distributed Ledger Technology Explained

Blockchain technology is a shared, immutable ledger that acts as a digital record for tracking transactions and assets made across a network of users. The asset is most commonly a cryptocurrency, however, the technology behind Ethereum smart contracts allow virtually anything of value to be tokenized and put on the blockchain.

In the increasingly data-driven age, integrity and accuracy of data is critical, as is speed. Blockchain networks provide complete, immediate, and fully transparent data to all parties involved and forever stored within a tamper-proof ledger. 

The blockchain itself essentially handles all the accounting related to these transactions, making business operations and data reporting more efficient. Trustless blockchain networks also give greater confidence to transactions as all information is verifiable. As the blockchain industry scales, the lack of interoperability has limited the growth of the industry and its various use-cases across business and finance. To solve this rapidly growing problem, blockchain bridges are being developed.

What Are Blockchain Bridges?

By default, systems like Bitcoin and Ethereum, and their assets BTC and ETH, are siloed by their own security models. Users and even miners are bound to the rules of the consensus mechanism that underpins the security and accuracy of any distributed ledger. 

Blockchain bridges are essentially a way for two such sovereign blockchain networks to communicate with one another. The blockchain bridge allows the transfer of arbitrary data or crypto tokens from one chain to another. The two chains being connected together can have completely unique protocols and consensus mechanisms, yet the blockchain bridge design creates a way for these chains to interact and transact while maintaining a security model.

Types Of Blockchain Bridges

There are four primary types of blockchain bridges, each with their own pros and cons: asset-specific, chain-specific, application-specific, and generalized. There are also cross-chain, sidechain, and off-chain bridges. 

How Do Blockchain Bridges Work?

Blockchain bridges exchange information, data, assets, and more across multiple blockchains for various reasons. Bridges communicate with blockchains in different ways. These processes can be broken down further into trustless or federated bridges. Trusted or federated bridges typically have a federation of relayers that communicate information and move assets from one chain to another. In a trustless system, users do not need the trust of a federation and instead rely on the protocol.

When a user transfers assets from one blockchain to another utilizing a decentralized bridge, the assets are not actually sent or moved to the new chain. Instead, the bridge functionality involves a two-stage process involving smart contracts and minting. 

The assets intending to be sent or moved are frozen on the blockchain where they are living using a smart contract or another similar mechanism. New tokens are then minted representing the newly tokenized and bridged asset. When a user intends to redeem the original asset, the tokenized asset is then burned. This process prevents the underlying token from being spent. Each protocol offers a unique solution for locking up and minting assets.

The Benefits Of Blockchain Bridges

Blockchain bridges offer a number of benefits to users of all kinds. For the average cryptocurrency user or token holder, it means greater connectivity and interoperability between various ecosystems. For businesses, it means better scaling and a far greater reach.  Blockchain bridges offer a number of benefits to users of all kinds.

To put things into perspective, we’ll use some more commonly used and understood examples. Imagine a world where users of Gmail could only send and receive emails from Google’s email service. Users of Yahoo, ProtonMail, or anything else couldn’t communicate or send data to those users on Google’s system.

The full power of email would never be realized, as it would segregate communities and users onto specific platforms. Now imagine that a bridge is suddenly introduced that allows all these email providers to interact and interoperate with one another. The value and power is easy to understand. Another scenario involves Apple or Android smartphones. If users could only call or text users who owned the same model phone, it would vastly reduce the value of the global cellular network and create communication issues worldwide.

So why in that case, weren’t blockchains designed from the ground up to be compatible with one another? The reason is security. When Satoshi Nakamoto was creating Bitcoin, they weren’t thinking about how to include hundreds of coins and blockchains that didn’t yet exist at all. What they did care about was security and making certain the blockchain wasn’t able to be hacked, compromised, and the assets and value stored there would also be safe. That was the most important problem at the time to solve. The technology, like email and cell phones, is now proven, and ready to scale toward mass adoption. The only way for this to occur, however, is through blockchain bridges.

Examples Of Blockchain Bridges

Blockchain bridges are still very early and in constant development. Existing bridges make new breakthroughs regularly and new bridges are being developed all the time. Here is just a small sampling of some of the more wider known blockchain bridges across the industry today.

The Future Of Blockchain Bridges

Because of Bitcoin, blockchain technology is everywhere and will eventually be the foundation of all of finance. Blockchain technology has applications in all forms of business, and developers are always experimenting with new ecosystems and solutions that will also require more bridges to connect. Think of the early days of society. As cities and towns began to scale in size and communities needed to grow for economies to also scale, bridges, canals, and other ways to travel and move goods were created. Over time, the massive interconnected global economy of today blossomed, and so will the blockchain eventually.

Blockchains today are like tiny cities or towns with quickly growing communities. As these communities grow and their needs evolve, the need for bridges to connect one ecosystem with another becomes more important.

Using just Bitcoin and Ethereum alone as an example, one can see the benefits of what blockchain bridges can provide. Bitcoin is a groundbreaking development in finance, but slow due to its security and unable to work natively with DeFi applications. However, Bitcoin can be wrapped in Ethereum to create WBTC, which allows Bitcoin to interact with DeFi applications as an ERC-20 token. Tokenizing other assets, such as stocks, securities, real estate, bonds, and more are all possible. 

Bitcoin is a groundbreaking development in finance, but slow due to its security and unable to work natively with DeFi applications. This is only the case with just two of the top blockchains today, and there are thousands more that currently exist, much like there are hundreds of thousands of tiny towns and cities out there, that aren’t as well known as New York City, London, Moscow, or Tokyo.

Most of finance exists in those big cities, but beyond their borders all kinds of business exists. It is the bigger cities that tend to provide the most liquidity, so all of the most important bridges will always connect to these cities – Bitcoin, Ethereum, etc. – before they connect to smaller towns in more obscure locations.

Again, using the smartphone and email examples, anyone can see why connecting such ecosystems digitally is critical to mass adoption. With more users across a unified blockchain industry, it will create more price stability, better liquidity, and a more robust experience for all users here on out. Blockchain bridges and related assets are also among the hottest crypto assets to trade today. PrimeXBT recently added Polkadot, alongside several other altcoins, next to Bitcoin, Ethereum, and Litecoin. 

Polkadot is one of the most innovative blockchain bridges today, and also offers the DOT token. PrimeXBT offers long and short positions on DOTUSD, so traders can speculate on price action and potentially profit from the rapid proliferation of blockchain bridges in the future.

Are you ready for the future of the blockchain?

The future of the blockchain industry is massive, and it will all be connected by blockchain bridges like the ones mentioned in this guide. Are you ready for the future of the blockchain? Blockchain technology alone is still in its infancy, and not fully understood. Developers are constantly creating new types of chains and ecosystems, which has created an urgent need for bridges to connect each separate infrastructure. With the technology itself so new, there are often many questions related to blockchain bridges that remain. Here are some of the most commonly asked questions related to blockchain bridges today.

FAQ: Frequently Asked Questions

What Are Bridges In Blockchain? Blockchain bridges are a way for two unique blockchain networks to communicate and interact with one another. Blockchain bridges allow information, tokens, assets, and more to be sent across one chain to another.

Top Cryptocurrencies with Price Predictions

# Crypto Prediction Accuracy CVIX Price 24h 7d Market Cap 7d price change
1 Bitcoin (BTC) BTC Bitcoin predictions 72.4% 61 $41 312.94 -1.79% -2.97% $782 208 393 376 BTC 7 days price change
2 Ethereum (ETH) ETH Ethereum predictions 65.6% 74 $3 057.90 -4.13% -4.99% $364 557 204 266 ETH 7 days price change
3 Tether (USDT) USDT Tether predictions 92.8% 1 $1.000957 0.03% 0.07% $78 389 539 616 USDT 7 days price change
4 Binance Coin (BNB) BNB Binance Coin predictions 71.6% 61 $454.95 -4.03% -0.74% $75 119 228 033 BNB 7 days price change
5 Cardano (ADA) ADA Cardano predictions 71.2% 51 $1.37 -11.53% 13.83% $45 869 836 376 ADA 7 days price change
6 USD Coin (USDC) USDC USD Coin predictions 90.8% 1 $0.999548 -0.04% -0.05% $45 742 193 035 USDC 7 days price change
7 Solana (SOL) SOL Solana predictions 62.8% 81 $134.45 -3.98% -3.06% $42 237 959 711 SOL 7 days price change
8 XRP (XRP) XRP XRP predictions 66.8% 64 $0.728701 -3.80% -4.17% $34 732 162 139 XRP 7 days price change
9 Terra (LUNA) LUNA Terra predictions 69.6% 57 $76.09 -1.12% 0.67% $27 219 693 512 LUNA 7 days price change
10 Polkadot (DOT) DOT Polkadot predictions 72% 51 $23.84 -5.97% -7.36% $23 544 579 275 DOT 7 days price change
11 Dogecoin (DOGE) DOGE Dogecoin predictions 77.6% 46 $0.160728 -5.76% 5.59% $21 323 857 260 DOGE 7 days price change
12 Avalanche (AVAX) AVAX Avalanche predictions 62.4% 79 $81.61 -6.07% -9.81% $19 942 092 907 AVAX 7 days price change
13 SHIBA INU (SHIB) SHIB SHIBA INU predictions 68.8% 63 $0.000027 -4.93% -3.67% $15 025 615 032 SHIB 7 days price change
14 Polygon (MATIC) MATIC Polygon predictions 69.2% 59 $2.02 -8.18% -12.60% $14 789 690 265 MATIC 7 days price change
15 Binance USD (BUSD) BUSD Binance USD predictions 96% 1 $0.999731 -0.10% -0.13% $14 211 573 940 BUSD 7 days price change

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