Understanding cross-chain bridges

Among the common cross-chain methods currently used, the most common is various decentralized cross-chain asset bridges, in addition to cross-chain coin withdrawals in centralized institutions such as exchange wallets.

Understanding cross-chain bridges

“With DeFi’s lock-in on Ether alone exceeding $100 billion according to DeFi Llama, and other public chains such as BSC, Solana, and Avalanche attracting $49 billion in funding, DEFI can no longer be ignored.”

Although many public chains are already quite large in terms of funding, different chains are like silos, and assets on different chains cannot be freely exchanged. In addition, many emerging public chains are still missing a lot of infrastructure, such as stablecoins, neither native stablecoins collateralized by fiat currencies issued by strong centralized institutions like Tether and Circle, nor decentralized stablecoins like DAI, which are issued by overcollateralization with cryptocurrencies like ETH, which have relatively low price volatility, as collateral.

Therefore, it is necessary to introduce assets from other chains into its own public chain through cross-chain. Among the current common cross-chain methods, the most common is various decentralized cross-chain asset bridges, in addition to cross-chain coin withdrawals in centralized institutions such as exchange wallets.

Cross-chain Bridges
A cross-chain bridge is a connection to transfer tokens or data between blockchains. Two chains can have different protocols, rules and governance models, and a cross-chain bridge provides a compatible way to interoperate securely between them.

How do two separate blockchains know what is happening on the other chain?

This is really a prophecy machine problem. The simplest current solution is to have multiple nodes listening to contract events on the blockchain at the same time, and when the vast majority of nodes agree that they have seen the event, then the nodes can be considered to have reached consensus among themselves, triggering the next event in the sequence.

Cross-chain bridges can be classified into the following categories based on the way consensus is reached and whether or not they need to be hosted.

Escrow + centralization (e.g. centralized exchange cross-chain, WBTC, etc.)

Escrow + POA (proof of authority)

Hosted + PoS (proof of interest) (Matic, xDAI)

Hosted + MPC (Multiparty Computation) (Thorchain, Anyswap)

Non-custodial + MPC (Multichain)

Cross-chain bridges for centralized exchanges are the most user-friendly, but they can also have a single point of failure. Most cross-chain bridges host user assets, and how consensus is reached is also important for cross-chain bridges and relates to the security of the hosted assets. Current cross-chains are also gradually moving towards unescrowed.

Multi-chain tokens
To use assets from one chain on another chain, it is necessary to have the same asset on both chains, forming a multi-chain token. When a new asset is generated on the target chain, the asset on the old chain can be destroyed directly or pledged in a specific contract.

Each implementation of a multi-chain token can be built on top of any of the above escrow and consensus mechanisms.

Balance Float
If a token is to be bridged from the Ether to the Wisdom chain network, first the token on the Ether is locked and then the bridge is notified to transfer the corresponding token to the recipient on the Wisdom chain. The bridge contains the maximum supply of tokens, and the user’s usage process does not involve the minting and destruction of tokens.

Editor: DXJ

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/understanding-cross-chain-bridges/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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