What is a cross-chain bridge?
A cross-chain bridge connects independent blockchains and enables the transfer of assets and information between them, allowing users to access other protocols easily.
Bridges are necessary because blockchains are like silos unable to communicate with each other. For example, you cannot use BTC on Ethereum or ETH on BTC. This contrasts with the legacy systems like banking, where your credit card can work for several providers.
Interest in blockchain bridges is a result of the expansion of the blockchain ecosystem. In the past, not many cared about using other blockchains; users would likely use Ethereum for dApps or Bitcoin for high-value transfers.
But the drawbacks of these popular blockchains, like Ethereum, encouraged the development of newer platforms. These new chains offered benefits like cheaper transaction fees, higher network throughput, and access to innovative yield-earning activities.
Still, problems remained: users couldn’t move assets seamlessly from older platforms to these newer blockchain networks.
Say you had funds on the Ethereum network (ETH) and needed to use a Layer 2 network like Polygon. Your best option would be to convert ETH to MATIC using a centralized exchange, like Coinbase or Binance.
Then you’d send the tokens to your wallet address on the Polygon chain to use the network. But what if you needed to move funds back to Ethereum? You’d need to repeat the same conversion process all over again.
A cross-chain bridge helped solve the problem by providing an easier way to move funds between different networks. One of the earliest cross-chain bridges, Wanchain, launched in 2018. Since then, dozens of bridges have gone live, sporting unique tradeoffs, strengths, and use-cases.