Blockchain technology has been a big addition to the financial system of the world presently. The invention of blockchain and it’s prominent product, bitcoin, has been a revolution in finance.
With this a lot of crypto coins have emerge, with few having their own blockchains. This blockchain will be able to track and verify all transaction made by the particular cryptocurrency in question.
A known shortcoming of crypto blockchain was the lack of interoperability, where a currency of another blockchain cannot be transferred to that of another blockchain. This gave blockchain developers a lot of concerns, as cryptocurrencies sent to different blockchains are void and lost.
With this, blockchain bridge was created to curb this known shortcoming, and make it easy for cryptocurrencies to be transferred between blockchains of different types.
In this article, we are going to understand blockchain bridge, with binance smart chain bridge as a case study.
What is blockchain bridge?
Blockchain bridges are decentralized platforms that offer blockchain interoperability. A bridge utilizes decentralized connections to enable transfer of coins from one blockchain to another.
The introduction of blockchain bridge has made different blockchain platforms to enjoy other blockchain goodies. Before, any decentralized platform made is built on a particular blockchain, and cannot be able to leverage on the benefits of other blockchains.
The Ethereum blockchain known to have full potential also have scalability issues, resulting to high gas fee charges. Instead of leaving the Ethereum blockchain because of the issues and missing out on its offerings, you can utilize other blockchains through a good blockchain bridge.
NOTE: Scalability of a blockchain is about how fast transactions are made in the blockchain and how much transaction can be handled by the blockchain. It is often achieved by increase in blockchain nodes.
A good blockchain bridge can be able to send tokens and Nft’s from one blockchain to another, to authenticate interoperability.
The operating mechanism of blockchain bridge is that they use a mechanism tagged “burn, mint and send”, where the coin transferred from the primary blockchain will be burnt, and an equivalent amount of token is minted and sent from the other blockchain.
Blockchain bridge operation modes
Blockchain bridges are decentralized, but after a coin is burnt/locked, approval and authentication need to be done before minting and sending the equivalent token from the other network can be sone. With this, an operation mode is needed for safe inter-transactions. Blockchain bridges are operated in two ways namely;
Federated and trustless operation modes.
Federated: This is like a blockchain built on human permission or authorization. In this mode, a consensus protocol is created for someone to verify, coordinate, and authorize bridge transactions. The federation bridge cannot be joined by everyone. Wachain bridge utilize this method, cointelegraph revealed.
Trustless: This type of bridge operates through a decentralized connection of multiple agents. In the trustless mode, any one proficient enough can join the bridge protocol, unlike the federated mode. Agents who do their best to ensure transparent and authentic bridge transactions are given incentives from fees gotten through bridge transactions. Syscoin bridge utilize this method.
Blockchain bridges available in the crypto space
There are few functioning bridges in the crypto space, but all work with same operating mechanism. Some blockchain bridges are listed below;
- RSK ETH token bridge: This bridge helps to transfer ERC-20 tokens between different blockchains. To achieve this, a bridge is created on each network(blockchain), the bridge on blockchain one will receive the token and lock/burn it, while another equivalent token will be minted and sent from the other network bridge.
- Syscoin-Ethereum bridge: Allows you to send tokens between Ethereum blockchain and Syscoin blockchain.
- Binance smart chain bridge: Discussed below.
Binance smart chain bridge
Binance bridge was created to enable inter-chain transactions through the Binance chain ecosystem. With this, valuable assets like USDT,BUSD, and ETH are brought to the binance ecosystem.
Currently, binance bridge 3.0 offers interoperability between 78 popular crypto assets, helping you to move them between different blockchains.
Binance bridge helps to move binance listed and unlisted tokens from ethereum blockchain to Binance blockchains(binance chain and binance smart chain).
Importance of Binance bridge
- User friendly interface and easy to understand and use
- No need for 3rd party application, everything is done on your Binance account
- Not limited to listed tokens, you can still transfer selected limited tokens and save them on your own safe crypto world(SCW).
- Flexible network configuration
NOTE:SCW is SwapCrypto (SCW) ERC20 Token
NOTE: A wrapped token is a token pegged to the value of another token. It is the same token as the other, but in a different blockchain. E.g WBTC, is an Ethereum blockchain pegged Bitcoin.
Why Wrapped tokens?
Wrapped tokens as said earlier, are the tokens pegged to the value of another token. Normally, Bitcoin has nothing to do with Ethereum, but some crypto operations(like bridging operations) needs a token from a blockchain to interact with tokens from another blockchain. To achieve this, the token is wrapped, so it can function in another blockchain. Therefore, we call it wrapped because it is the same token, but it is covered with a protocol that makes it function in another blockchain. The blockchain was designed to offer operations to the concerned currency it was created for, so if it is bitcoin, it has nothing to do with any other coins. But wrapped tokens will help to interact with tokens of different blockchains to enable interoperability.
Binance smart chain bridge makes use of wrapped tokens just like all other bridges.
Right from the launch of bridges, the crypto blockchain utility has increased massively. The importance of blockchain bridges cannot be overemphasized. Blockchain bridges creates interaction between several blockchains. With it, you can be able to enjoy the benefits of several blockchains, without necessarily holding their native tokens. Although, blockchain bridges are still evolving, so they are susceptible to bugs and operational issues. As time goes on, bridges will clear all bugs, and be able to stand the test of time.