A blockchain bridge allows the seamless transfer of data or tokens between two different blockchain projects.
While
blockchain technology is undeniably a huge advancement, there are still numerous areas left for improvement. One of the main challenges blockchain projects face is their limited interoperability. For example, a decentralized application (
DApp) created on the Ethereum blockchain would not work on the Bitcoin blockchain.
A blockchain bridge is a
protocol that outlines minting and burning procedures so that the token supply can be constant between two different platforms. Bridges serve as a transition between the different blockchain protocols. When a token is locked up in one of the blockchain protocols, its equivalent is minted on the second blockchain, allowing interoperability between two completely different protocols. This transfer happens under the mint-and-burn protocol.
Blockchain bridges are extremely useful for developers because they allow them to benefit from faster processing speeds on less overloaded blockchains. One of the most popular examples of a recent successful blockchain bridge is between Tezos and Ethereum. One of the easiest ways to make blockchain protocols interoperable is by creating wrapped tokens. For example,
Wrapped Bitcoin (WBTC) tokens are ERC-20 compatible and can be used in the Ethereum ecosystem. In the case of Tezos, the blockchain bridge allows Ethereum-based tokens to go through a Wrap Protocol, so they become compatible with the Tezos FA2 token standard.
While blockchain bridges usually aim to connect two completely different blockchains, there are also instances where
side chains are bridged to their source blockchain. This is done when the parent and child blockchains are operating based on different
consensus mechanisms. A well-known side chain bridge of the Ethereum blockchain was created to host the game Axie Infinity. The side chain called Ronin and the original Ethereum blockchain were bridged so that users of the Ronin blockchain can use
ERC-20 tokens and
NFTs deposited on Ethereum.
Stablecoin protocols are predominantly interested in creating bridges for their blockchains, and especially tokens like Tether (
USDT), which is rapidly growing in popularity. For the moment, stablecoins have only been able to expand the number of exchanges that support them; however, through successful bridges, they will rapidly expand their services.
Blockchain bridges are extremely valuable, and they bring a number of benefits to users. Interoperability between different blockchains can allow developers to delegate tasks and optimize the performance of their applications. While some blockchains are better at handling transactions faster, other protocols are designed to handle more smart contracts simultaneously. Blockchain bridges are the perfect tool that lets developers combine these functionalities and reach interoperability.