What is a cross-chain bridge in the crypto ecosystem?
These bridges are essentially used to transfer cryptocurrencies, and therefore value, between the different blockchains to solve the challenge of interoperability in the cryptosphere. To put it simply, the protocols that aim to ensure the interoperability feature aim to allow blockchains to communicate with each other.
Analogously, interoperability would, among other things, allow a user with a phone based on the Android operating system to still send a message to another user who has an Apple phone based on IOS. Imagine having an iPhone and only being able to message people who have an iPhone without being able to message a Samsung phone. It’s not very practical you say. Well in Web3, these bridges try to get blockchains to communicate so that they can exchange with each other and thus avoid isolating them. And therefore, analogously, prevent iPhone owners from communicating only with iPhone owners and vice versa for those with a Samsung. We could define these bridges as a communication channel between different systems, here blockchains.
There are different bridge which fulfills the function of communication channel between blockchains: Harmony Bridge, Wrapped Bitcoin Bridge, Avalanche Bridge, Solana Wormhole, Cosmos IBC….
For example, Wormhole is a cross-chain protocol for transferring ETH from the Ethereum network to its counterpart on the Solana network. To do this, the user, from Ethereum, sends their ETH on this wormhole bridge, where they are locked in a smart contract (smart contract). Once locked, the user receives Wrapped ETH (“wrapped ETH” with the algorithmic standard of the receiving blockchain, here Solana) on Solana. After this process, the user no longer sees his ETH on Ethereum, but on the Solana blockchain. He can now spend his “ETH” on Solana.
But these bridges are vulnerable…
These cross-chained protocols have been victims of several hacks in recent months.
Percentage of hacks (orange) on cross-chained bridges
Chainalysis is a company that provides data, software, services and research to government agencies, stock exchanges, financial institutions and insurance and cyber security companies in over 70 countries..
This company recently released an article indicating that $2 billion in cryptocurrency has been stolen from cross-chain bridges this year. These attacks represent 69% of the total stolen funds so far. Why are these bridges the target of hackers?
These bridges are regularly targeted by 3.0 hackers because they represent a storage point that saves money secured on the receiving blockchain. With these funds locked away by a piece of code in a smart contract, they become an attractive target. Hackers are thus concentrating their efforts to find a loophole to steal the funds blocked in smart contracts. For now, given the total amount hacked, the smart contract infrastructure encoded in these cross-chained bridges remains ineffective. For example, in early 2022 Wormhole was the target of hackers who stole the equivalent of $326 million. Not very reassuring for users.
An inevitable step?
The oldest in the cryptosphere will remember that centralized platforms were the target of many hackers in their beginnings, between 2015 and 2017. However, to ensure their sustainability, platforms such as Kraken or Binance have invested heavily in security. systems to create a safe environment. We can believe that over time these cross-chain bridges will ensure the security of the smart contracts in their protocol. An inevitable step to ensure their adoption. Otherwise they are doomed to die.
But fundamentally, these tools are essential to ensure mass adoption of decentralized applications on the various blockchains by ensuring the interoperability feature. Like the user who wants to send messages on both an Android-based phone and an IOS, blockchains will most likely become interoperable. These cross-chain bridges are great tools to ensure interoperability, but developers should prioritize security before creating new tools. For now, as a user, it is important to assess the risks of these chain bridges and not to transfer all your capital at once via the protocols that allow it.