The Cryptocurrencies relies completely on blockchain technology. In between Bitcoin’s inception in 2009 and now, more than 1,500 cryptocurrencies are coming in the ecosystem.
And the idea of blockchain is a singular data transfer type, research firm Alchemy claims that there are over 125 Layer 1 and Layer 2 blockchains.
Cross-chain bridges were introduce to bridge the gap between these different blockchains and the wide array of cryptocurrencies that are use for facilitating unique trade-offs, security gurantees, and scalability.
Cross-chain bridges raise the interoperability quotient in the crypto sector and allow users to send cryptocurrency from one chain to another.
Before cross-chain bridges came into being, people were unable to use Bitcoin on the Ethereum blockchain or vice versa.
This restrict cryptocurrency users from working on different blockchains like how credit cards work for various providers.
A cross-chain bridge report connects independent blockchains and enables the transfer of assets and information between them.
Which allows users to access other protocols easily.
If an ETH holder want to convert these assets into Polygon, the person would have had to use a centralise exchange like Coinbase or Binance to do so.
Cross-chain bridges work by “wrapping” tokens in a smart contract and issuing native assets that can be use on another blockchain.
Alchemy study explain :
“For instance, wrapped BTC (wBTC) is an ERC-20 token that uses BTC as collateral. Users must deposit BTC on the Bitcoin blockchain before receiving wBTC tokens on the Ethereum network,”.
Binance Bridge, Celer cBridge, Multichain, and Wormhole are among popular cross-chain bridges.
These cross-chain bridges have caught the attention of hackers and money launders swarming towards the crypto sector.
According to the Elliptic report, decentralise cross-chain bridges such as RenBridge provide an unregulate alternative to exchanges for transferring value between blockchains and hence pose a challenge.
Transactions on these cross-chain bridges are process by a network of thousands of pseudonymous validators known as “Darknodes”.
Malicious actors exploit these bridges by depositing their tokens from one chain to the bridge and then receiving the equivalent of a parallel token in another chain.
