Cross Chain Bridging Explained – How It Works & Key Benefits

Cross Chain Bridging – Working and Benefits Explained in Detail

Cross chain bridging is a process that allows users to send assets and data between different blockchain networks, such as Ethereum and Polkadot or Polygon and Avalanche.  

Independent blockchains cannot, by definition, 'speak' to one another. They resemble people who speak mutually incomprehensible languages. Different networks employ various consensus techniques, smart contract architectures, address formats, and so on.

To give an example, you cannot directly transfer TRX on Tron to Ethereum blockchain, without a cross-chain bridge. In the best-case situation, the wallet will not allow you to complete the transaction; in the worst-case scenario, you will lose the funds.  

Why Cross Chain Bridging is Necessary in Web3

Blockchains are not designed to connect with one another; they typically lack the ability to monitor or understand what is going on in other networks. Each chain has its own set of rules regarding protocol design, money, programming language, and other factors, making communication between chains challenging. This absence of inter-blockchain communication restricts the amount of economic activity possible in the Web3 ecosystem; without blockchain interoperability, various networks represent effectively disparate separated economies with no interaction between them.

Hence, cross-chain bridges make different blockchains communicate with each other so the overall ecosystem may benefit from the unique characteristics of each network.  

How Do Cross-Chain Bridges Work?  

In Cross chain bridging, we use smart contracts to bridge tokens, allowing them to be used on another chain. For example, BTC can be made Ethereum-compatible by using smart contracts.  By doing so, for each BTC sent to the smart contract, a new wrapped Bitcoin (wBTC) is minted.

The BTC is kept safe by a custodian until you want it back, at which point the process is reversed--just like trading in any excess foreign currency after your vacation. This time, you send your wBTC to the smart contract, which "burns" it before returning your BTC to you.

The second way a cross-chain bridge works is via a liquidity pool, in which a cross-chain bridge provider maintains "pools" or an inventory of various cryptocurrencies, allowing you to exchange one coin for another.  

Depending on the implementation, cross chain bridging can function in a variety of ways, including "lock & mint", "burn & mint", and other processes.

Throughout the process, cross-chain bridges use a combination of cryptographic algorithms, consensus mechanisms, and interoperability protocols. These bridges frequently use advanced cryptographic techniques, such as zero-knowledge proofs or threshold signatures, to build trust and verify transactions between chains.  

Cross-chain Bridge Types  

Following are some types of the cross chain bridges:

Lock and Mint Bridges  

In this cross-chain token bridge, the native tokens are locked on the source chain, and wrapped tokens are minted on the destination chain. Wrapped tokens are tied to the value of native tokens and can be transferred and used within the destination blockchain environment. Some examples of Wrapped tokens include Bitcoin (WBTC) and Ethereum (WETH).  

Burn and Mint Bridges  

Burn and mint bridges are defi cross chain bridges that use a "burn and mint" mechanism to permit asset transfers between blockchains. During this procedure, native tokens from the source chain are burned on the chain, thereby removing them from circulation. Simultaneously, an equivalent number of tokens are minted or generated on the destination chain to represent the transferred assets.

Hash Locks and Time Lock Bridges

This form of cross chain token bridge uses cryptographic hash locks and temporal locks to permit asset transfers. In this procedure, a hash lock on the source chain is established, which requires the recipient on the destination chain to meet the necessary conditions to unlock the assets. Time locks are also used to ensure that assets may only be claimed after a certain period. This form of cross-chain bridge is widely employed in atomic swaps.

Cross-chain bridges can also be paired with arbitrary data messaging capabilities, which allow for the transfer of any form of data across blockchains, not only tokens. These programmable token bridges use a combination of token bridging and arbitrary messaging, followed by a smart contract call on the destination chain after the tokens are delivered.  

Programmable token bridges provide more complex cross-chain capability after the bridge function is completed. These include trading, lending, staking, or depositing tokens in a smart contract on the destination chain within the same transaction as the bridging function is executed.

Trusted versus Trustless

Blockchain bridging can also be categorized as centralized (federated) and trustless. Differences exist in how bridge transactions are confirmed and locked-up assets are stored.

In a federated system, a network of pre-selected validators monitors token deposits on the source chain, locks them, and mints tokens on the target chain; examples include Binance Bridge, which is the best cross chain bridge.

In a trustless system, anyone can be a validator. To reduce the possibility of manipulation, a random number of validators from the pool are selected for each bridging transaction.  

Such a trustless system will often contain a relay mechanism that listens for bridge-related events on the source chain, generates cryptographic proofs of these events, and sends them to the bridge smart contract on the target chain. This way, the bridge 'knows' that tokens were submitted to the source chain and that minting tokens on the destination network are secure.  

Benefits of Cross Chain Bridges

Now that we have learned the workings of cross-chain bridges, it’s time to check out the benefits they bring to the DeFi world.  

Increased Productivity

Defi cross chain bridges are designed to enable speedy and secure connectivity between multiple blockchain networks. The bridge connects many blockchains, allowing users to move assets in minutes rather than days or weeks.

Accessibility

Because of the interoperability provided by cross-chain bridges, users on different chains can access each other's services and platforms. In this way, more and more people, regardless of geography or technology, can interconnect. A Polygon-based DeFi system, for instance, could make use of an Ethereum-minted stablecoin.

Higher ROI for Users  

Cross chain bridging allows you to "wrap" your cryptocurrency so that it can be put to work and earn passive money on DeFi apps rather than sitting there collecting dust. It also allows you to utilize an NFT produced on Polygon as collateral for a loan on, say, Ethereum or to trade an ERC20 token on a Solana DEX if the prices are lower.

Wrapping Up  

Cross chain bridging plays an important role in improving blockchain interoperability. Apart from that, these platforms also enable smooth asset transfers to expand DeFi opportunities. As these bridges facilitate communication between independent chains, they not only offer accessibility, and efficiency, but they also help make the blockchain ecosystem more interconnected and user-friendly.