What’s a Blockchain Bridge?

By Kirsty Moreland

Blockchain is about decentralization – and blockchain bridges are one of the key innovations to make sure decentralization is here to stay. Here we find out “what’s a blockchain bridge?”

We love a good blockchain: distributed, decentralized, digital technology, designed to give control back to the people. But while a lot is going for blockchains as we know it, there are still kinks that need ironing out. One of the biggest ones is that many of the blockchains we know and love are self-contained ecosystems that can’t operate with other networks. It’s a problem of interoperability. But it’s not a problem without a solution. Let’s jump in.

What Exactly is Interoperability? 

When systems can talk to each other, we say they’re interoperable. We see interoperability at play when two networks can interact with each other seamlessly and transfer data and value, even if they’re not the same network. 

Imagine different banks worked in silos with no integration between any of them. If you operate with one bank and your friend operates with another, trying to move money across to the other would not only be a headache, but it might be downright impossible. Without interoperability, working across networks would simply fail. In the world of banking, money would be almost unusable. For this reason, interoperability – and the lack thereof – is one of the biggest problems blockchains are facing at the moment.

Why do BLockchains Need to Communicate? 

When a developer builds a decentralized application (or a dApp) on a particular platform, they generally lock in to using that platform and enjoying all of its benefits. The only problem is that they lock the project out of the benefits of other blockchains – each one speaks its own language, so to speak, so data from one blockchain can’t be read by another.

Let’s look at Bitcoin as an example. As the leading cryptocurrency and OG blockchain-based asset, Bitcoin has users across the world. But its network doesn’t have the functionality to work and interact with other blockchains

This becomes especially problematic when one blockchain serves as the base for large parts of the system. A perfect example is Ethereum: its blockchain serves as the mainnet for the entire DeFi system, as well as dApps and NFTs. This has meant an amazing variety of new projects and platforms for users – but only if you hold tokens that are also Ethereum-based. In this ecosystem, we don’t speak Bitcoin.

Decentralization, away from banks and middlemen, is the defining mission of blockchain – but if users need to lock themselves into a specific network to access the full ecosystem of platforms and services, we’ll once again be centralized. Only this time around a blockchain instead of a bank.

So at first glance, interoperability is a straightforward question of being able to move between different blockchain systems. But on closer inspection, it’s really about the future of this decentralized system.

Bridging the Gap Between Blockchains

This is where blockchain bridges come in. A blockchain bridge solves the problem of inter-network communication by offering a way to connect island-like blockchains with each other. Like any physical bridge, a blockchain bridge acts as the missing link between two blockchain ecosystems, making the transfer of information, data and tokens across them fairly easy. 

It’s a huge deal in the world of decentralized finance (which is based almost entirely on Ethereum) because it introduces connections between previously isolated networks.

“But why is this actually important? Surely one could just swap their tokens for another currency on an exchange?”

Valid questions. The answer comes down to a couple of factors: convenience, and cost. It’s not only inconvenient for users to swap tokens around on exchanges, but it also gets expensive too. Gas and exchange fees can be high, and since transaction fees are required not just for making the swap, but also for moving tokens around between various wallets or platforms as you do so, the cost adds up. Using a blockchain bridge instead makes the process seamless, and means you can convert your crypto into a blockchain compatible wrapped coin in just one transaction.

There’s also a question of privacy. Using a blockchain bridge means you can transform your existing crypto into something capable of operating on other networks from the security and privacy of your own, custodial wallet. Goodbye native exchange wallets! Instead the power to operate across networks can be achieved on a decentralized basis.

How Does a Blockchain Bridge Work?

Let’s start by explaining some terminology – a blockchain bridge is the medium through which your coin or token passes to enter another blockchain. And once it’s on that other blockchain, your crypto is called a “wrapped” token.

Let’s take a look at an example:

The Workings of a Blockchain Bridge – Wrapped Coins 

At the heart of it, a wrapped coin is basically a token that represents one network (such as Bitcoin) but lives on another (like Ethereum). 

If you want to use Bitcoin on Ethereum’s blockchain, for example, Wrapped Bitcoin (WBTC) is the way to do it. To create WBTC, you’d send your BTC to the Bitcoin/Ethereum bridge. Your BTC would get locked up at the bridge and the same amount of Wrapped Bitcoin would be minted on Ethereum’s network (the Ethereum side of the bridge). 

Once your WTBC is on the Ethereum network, you can use it as you would any other of Ethereum’s tokens. This is because WBTC is essentially an ERC20 token and operates seamlessly with Ethereum’s ecosystem. Your WBTC can buy any other Ethereum-based tokens, including NFTs and other cryptocurrencies that are built on the Ethereum network. 

You can also use it on projects and platforms that are built on Ethereum, which opens the door for you to explore DeFi platforms without having to go through the process of exchanging.

If you want to get your BTC back, you send your WBTC back to the bridge (where it is burnt to protect the supply and value) and the BTC you locked in at the bridge is unlocked and comes back to you for use.

Blockchain Bridges in Action

Bitcoin isn’t the only token that can be wrapped. People make use of blockchain bridges to wrap other cryptocurrencies to be used on other networks.

For example, some devs will use a blockchain bridge to explore other blockchain systems to try out native dApps or to take advantage of better interest rates on other networks.

Investors might take advantage of bridges to gain exposure to other tokens without needing to go through the process of swapping. Buying wrapped tokens might not mean you own the native token on a network, but the 1:1 pegged ratio means an investor can still have all the same benefits they would have had with the real currency.

Rubic Bridge – Soon to be Integrated with Ledger Live

While we’re here, we have exciting news! Rubic Bridge, a decentralized bridge, will be launching soon on Ledger Live. It means Ledger users will have seamless access to decentralized finance from multiple blockchains, including staking, swapping and providing liquidity on some of the most popular platforms in the space. And because the bridge will be integrated with Ledger Live, users will gain access to it within the security of the Ledger ecosystem, meaning your Ledger device will keep your private keys private during all transactions AND you won’t need to worry about blind signing.

What do blockchain bridges mean for the future?

For a fluid blockchain future, interoperability is not only important – it’s a necessity. Being able to work and move assets across networks will be a driving force in the digital world, from cryptocurrency networks to Metaverse platforms.

Blockchain bridges will connect the gap between platforms that can’t talk to each other, making online transactions and digital travel seamless, simple, and stress-free – and they are just one example of the industry’s overall commitment to decentralization. So enjoy your crypto freedom and spare a thought for the dev teams behind these projects – they’re working to make sure we stay free!

Knowledge is Power.

Blockchain bridges are just one of the many ways developers have created to further the decentralization of the system as a whole – layer 2 blockchains are another important example. School of Block is here to check it out!