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Best cross-chain bridges of 2022

Best cross-chain bridges of 2022

In recent years, the development of the crypto industry has shown unprecedented growth and development. There are already more than a hundred Layer 1 and Layer 2 blockchains, driving up the need to develop technology so that they can interact with each other. Cross-chain bridges turned out to be such a technology. Let's find out more about this development, its features, and its advantages.

What cross-chain bridges are used for

Each blockchain is unique, so there is no way to make them compatible and interoperable with each other. The technical parameters of each network do not allow launching one crypto-exchange or a decentralized application simultaneously on several blockchains.

But all the above is a thing of the past. The emergence of cross-chain bridge technology allows different networks to interact with each other and provides a fast and hassle-free exchange of cryptocurrencies.

A cross-chain bridge is a specialized service (decentralized application) that transfers assets between different blockchains. It allows combining related networks (for example, Ethereum has many of them) and radically different networks by their technical properties (e.g., Bitcoin and Dogecoin, Ethereum and Litecoin, etc.).

Another unique feature in cross-chain bridge operation is the relocation of tokens of different standards to networks that do not support them. For example, Binance Smart Chain lacks support for the ERC-20 standard, which is considered the most popular. Cross-chain technology, however, can easily overcome such incompatibilities.

As the blockchain industry evolves, more and more working networks have emerged, but each one features its own closed infrastructure, which prevents transactions from going out of the native chain. This causes the problem of forming a single cryptocurrency space since each blockchain exists independently. However, not so long ago, all cryptocurrency community members accepted such a situation. There was no need to change anything since every network was trying to dominate the market, while for asset purchasing, it was enough to use the services of a cryptocurrency exchange.

Still, this approach failed in long-run use, while the crypto-industry continued to lack a single blockchain that would suit everyone. Each network has its own set of features, and users are forced to choose the appropriate blockchain to realize particular goals. At the same time, the constant exchange of cryptocurrencies through trading platforms involves a lot of expenses on fees.

Today, given the active development of the decentralized finance sector, the use of cross-chain bridges becomes an urgent need.

How cross-chain bridge works

A typical cross-chain bridge consists of the following basic elements:

  • smart contract in the source blockchain – in order to send tokens from network 1 to network 2, we need to use a bridge, making the transaction organized through a smart contract of network 1, assigning the address of network 2 as the recipient. The contract freezes the coins and then the oracles are notified that a transaction with the specified number of coins has been sent to a specific address;
  • oracle is any structure that confirms the implementation of the transaction from the network. They are divided into two types. Decentralized oracles represent a network of independent nodes in a separate blockchain, while centralized oracles represent a cryptocurrency exchange. The oracle must confirm the transaction has taken place, whereupon a smart contract in the destination blockchain is invoked to complete the entire procedure;
  • a smart contract in the destination blockchain - this contract receives information about the transaction in network 1, creates a copy of the frozen asset in network 2, which is called a wrapped token. Next, the coins are sent to the recipient.

Types of cross-chain bridges

All bridges for the interaction of different blockchains are divided into three groups based on the way user assets are managed:

  • escrow usage – it is assumed that there is a centralized structure in the cross-chain bridge structure that handles user funds, i.e., accepts assets and makes sure they are transferred accurately;
  • custodial – coins are taken from the user for transfer before freezing and issuance of wrapped tokens;
  • non-custodial – coins are blocked in the user's wallet, meaning they cannot be used until the transaction is completed, while the bridge and developers have no access to the assets, thus eliminating the risk of theft at the transfer stage.

Depending on how consensus is reached, cross-chain bridges can be:

  • centralized – the structure involves an operator, which is responsible for whether the transaction occurred, whether it is completed, etc.;
  • decentralized – it provides internal classification by consensus algorithm (Proof-of-Stake, Proof-of-Authority, Proof-of-Interest).

Actually, non-custodial bridges are always categorized as decentralized, but many bridges feature a combination of custodial type and distributed consensus of oracles.

Pros and cons of cross-chain bridges

The key advantages of bridge technology include:

  • accelerating the transfer of digital assets;
  • increased privacy;
  • support for high speed and scalability due to the principle of division into segments;
  • reduced network traffic;
  • functional division of registries.

But there are also drawbacks:

  • they are still an experimental technology, which has not yet been perfected for mass use;
  • lack of versatility, they act only as a superstructure, which makes the system more complicated;
  • risk of inter-network errors;
  • high resource contribution (manpower and time) to make the bridge between blockchains work properly.

Why cross-chain bridge technology is not always easy to implement

Despite the boom in the popularity of applying bridge technology for the interaction of different blockchains, its development implies various difficulties and large-scale challenges:

  • the need to create smart contracts, conduct preliminary testing and audit simultaneously in two blockchains. If we are talking about creating a full-fledged cross-chain platform, it will require a lot of such bridges, hence a lot of time for technical organization of processes;
  • complex compatibility of different networks, so even a simple contract invocation creates risks associated with problems and bugs;
  • it requires an external oracle that can be a reliable and secure intermediary to confirm transactions;
  • ensuring stable communication and interoperability of all cross-chain bridge components;
  • the problem of organizing energy efficiency and economic justification of transactions.

The most popular cross-chain bridges of 2022

cBridge

This project is based on an L2 solution (Layer 2 blockchains) using smart contracts to arrange transfers between networks. It is possible to send stablecoins and tokens based on Ethereum, BSC, and HECO. Second-level blockchain transactions such as Arbitrum and Polygon are also available.

Transaction time takes 5-20 minutes, it is allowed to transfer amounts up to 120 thousand dollars.

Cross-chain bridge type: decentralized, non-custodial

Interaction with blockchains: Ethereum, BSC, HECO, Arbitrum, Polygon

Cryptocurrencies for exchange: sending stablecoins and tokens based on Ethereum, BSC, HECO

Binance Smart Chain Bridge

It is compatible with Ethereum, offers a high capacity of smart contracts at a reduced fee in the BSC network. Users of Binance Chain can switch between BNB and BSC chains according to the BEP20 standard, as well as use the Binance blockchain interaction bridge.

Cross-chain bridge type: centralized, custodial

Interaction with blockchains: in-house blockchains Binance, Ethereum

Cryptocurrencies for exchange: BTC, ETH, USDT, LTC, XRP, LINK, ATOM, DOT, XTZ, ONT

Solana Wormhole

This is a cross-chain bridge for interaction between Solana and Ethereum. It involves decentralized cross-chain oracles and other stakeholders in the ecosystem, allowing for rapid exchange of assets.

Cross-chain bridge type: decentralized, non-custodial

Interaction with blockchains: Solana, Ethereum

Cryptocurrencies for exchange: SOL, ETH

SmartBCH

It ensures Bitcoin Cash and Ethereum blockchain interoperability, making it possible to use tokens in decentralized finance protocols.

Cross-chain bridge type: decentralized, non-custodial

Interaction with blockchains: Bitcoin Cash, Ethereum

Cryptocurrencies for exchange: BCH, ETH

 

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