What Are Bridges (Crypto)?
In crypto, bridges are ways in which two different blockchains communicate with each other. Essentially, a bridge provides a connection that allows two diverse blockchain ecosystems to transfer data between themselves.
Decentralized finance offers blockchain users an easy way to transfer money without dealing with the problems associated with traditional financial institutions. However, if you have tried to convert an ERC 20 token to BEP 20 token, you would know that it is not so simple and restricts crypto assets’ free flow. That lack of interoperability in blockchain systems is the challenge bridges address. Bridges enable two different blockchains to transfer tokens, assets, smart contract instructions, or data between themselves.
Typically, when a developer builds their decentralized application on any particular blockchain, they are generally stock to the platform and cannot leverage the benefits that other blockchains offer. For instance, Ethereum is a popular blockchain with scalability issues such as high gas fees. Binance Smart Chain is another popular blockchain known for lower gas fees. A developer may deploy their decentralized application on the Ethereum network because it is the most adopted smart contract platform with a large community. By doing so, they have to deal with gas fee issues. With a bridge, a developer can take advantage of the benefits Ethereum offers and take advantage of Binance Smart Chain’s benefits.
Bridges work through a mint-and-burn system that ensures the supply of a token is constant across all blockchains. For instance, when a user converts an ERC 20 asset to a BEP 20 asset, the blockchain will burn or lock the ERC 20 asset, then notify the bridge to generate the BEP 20 equivalent of the token. Typically, the conversion takes between five to twenty minutes.
Some of the benefits of bridges in crypto include but are not limited to:
- It allows developers to take advantage of the various benefits different blockchains offer.
- It reduces network traffic on a particular blockchain by dispersing it over other less congested blockchains.
- It provides higher security and better privacy.
Solana’s Wormhole Bridge is an example of a crypto bridge. It allows users to interchange assets across the Solana blockchain and the Ethereum blockchain.
The Avalanche Bridge is another example. Avalanche (AVAX) participants can bridge AVAX assets to Ethereum (ETH) by leveraging the cross-chain capabilities offered by the Avalanche wallet.« Back to Glossary Index