What is the "Bridge" That Everyone Is Talking About? A Quick Overview of Mainstream Cross-Chain Bridges

The waves of DeFi, GameFi, and NFTs have opened up the world's imagination for Ethereum, bringing long-anticipated application scenarios from "castles in the air" to reality. Ethereum's narrative has become more mainstream and grand. The implementation of EIP-1559 and the future transition to Ethereum 2.0 have brought expectations of reduced supply, or even deflation, to Ethereum. Statements like "Ethereum will gain greater market share relative to Bitcoin in the longer trend" and "Ethereum's foundation and use cases are a powerful complement to Bitcoin's more macro value storage properties" have clearly increased. Ethereum enthusiasts even compare it to tomorrow's financial giant. As the digitalization of fintech accelerates, it will surely set off even bigger waves, and Ethereum's position will become more solidified.

However, while these three major waves have driven the development of the Ethereum ecosystem, they have also accelerated the contradiction between Ethereum demand and scalability. On one hand, this has provided certain opportunities for competing chains; on the other hand, Layer 2 is also in a stage of readiness. Over the past few years, the crypto world has obviously not been able to reach a conclusion on whether the future will be "one chain dominates" or "multiple chains flourish." But from our current perspective, we believe that existing blockchain performance and architecture are still difficult to adapt to the diversity of the internet. First, a platform's capacity is after all limited, and in extreme situations, a small number of applications will inevitably cause network paralysis. Second, there is a contradiction between universality and specificity, and it is difficult to use a universal standard to meet various needs. This is also why in the past two years, public chains/side chains specifically built for games or NFTs have emerged. We are in a multi-chain era where public chains, side chains, and Layer 2 are developing simultaneously.

But the coexistence of multiple chains means that assets will circulate on different chains, and the interoperability of assets between chains naturally becomes an urgent need for on-chain users. The emergence of various cross-chain bridges has reconnected the fragmented ecosystem into a whole. This article will explore what cross-chain bridges are, and briefly sort out existing cross-chain projects. If there are errors or shortcomings, or if readers have more topics they want to discuss, welcome to join the OKX official community to exchange and correct.

What is a Cross-Chain Bridge?

When talking about cross-chain bridges, let's start with the currently simplest and most mature asset cross-chain bridge solution—WBTC. WBTC, full name Wrapped Bitcoin, is a pegged currency of Bitcoin based on Ethereum that can be exchanged 1:1 with Bitcoin. Simply put, it's an ERC 20 version of Bitcoin, aimed at bringing Bitcoin's liquidity and stability as crypto assets into the Ethereum ecosystem.

WBTC's operation requires three participants: WBTC DAO, merchants, and custodians. Users send BTC to merchants to request WBTC exchange; merchants verify users through KYC/AML, then initiate a minting request to the WBTC smart contract, and send users' BTC to custodians; after custodians receive BTC, they issue a minting request to the smart contract; the contract approves the request and sends WBTC to merchants; merchants send WBTC to users.

In addition to WBTC, which was the earliest to launch, Bitcoin pegged currencies have made significant progress under the DeFi wave. OK Link has recorded 9 types of Bitcoin pegged assets on Ethereum. Calculating from 97,449 Bitcoin pegged currencies on September 18 last year, assets grew to 279,475 in one year, an increase of 187%.

After understanding WBTC, we have a preliminary understanding of bridges. Patrick McCorry, CEO of PISA Research, defined bridges as follows: A bridge is responsible for keeping assets on an L1 blockchain, while the same assets are issued on another (mainly external) service. The bridge defines who keeps the funds, and the conditions that must be met before assets are unlocked. Simply put, whenever an L1 blockchain like Ethereum connects to any other system, a bridge is used. All bridges have similar actions:

Deposit funds, users can deposit assets to the bridge, and the bridge will give proof representing this asset in another system;
Update account balance, information about the new account balance will notify the bridge, which can be used to assist the provision process;
Asset withdrawal, users can withdraw assets from the bridge based on their balance in another system and the tokens issued and destroyed in another system;

Currently, asset cross-chain is mainly achieved through two major approaches: First, through cross-chain aggregation application swaps, by aggregating liquidity of assets on different chains, building cross-chain trading pools, allowing users to complete asset exchanges on different chains in the pool, commonly such as Anyswap, Multichain.xyz, etc.

Second, build a bridge channel between two blockchains, keep native assets custodied on this bridge, while one chain obtains asset trading situations on another chain through oracles, and maps them to another chain at a 1:1 ratio, such as WBTC.

Cross-Chain Protocol Overview

1**) OKX Bridge**

OKX Bridge is the official cross-chain tool provided by OKX, currently providing asset cross-chain services for networks such as Ethereum, OKTC, TRON, etc. OKX Bridge supports over 20 mainstream assets for cross-chain including USDT, BTC, ETH, DAI, etc., meeting users' needs for asset interoperability.

When users' assets are within OKX, enter the withdrawal page, select the withdrawal network for withdrawal, and the system will automatically perform 1:1 exchange of cross-chain assets and withdraw to the corresponding public chain. When users' assets are in on-chain wallets or other platforms, they can choose to first deposit to OKX, select the network requiring cross-chain for withdrawal, or in the OKX Bridge interface, click "Connect Wallet" to directly exchange cross-chain assets.

2**) Avalanche Bridge**

Avalanche Bridge is the official cross-chain tool launched by the Avalanche Protocol in early 2021, mainly used to solve the problem of users transferring ERC 20 standard assets on the Ethereum chain to the Avalanche network. Through Avalanche Bridge, users can interoperate ERC 20 assets with Avalanche's C-chain. Currently, it only supports the transfer of ERC 20 assets between Ethereum and Avalanche, and does not support the transfer of native assets on the Avalanche chain to Ethereum. In addition, Avalanche Bridge does not support native ETH or BTC, but can transmit wrapped assets like WETH and WBTC through the bridge.

3**) Multichain.xyz**

Multichain.xyz mainly targets cross-chain between platforms supporting the Ethereum Virtual Machine, jointly developed by yearn.finance founder Andre Cronje and the Anyswap team based on Anyswap SMPC Network, and is currently the most widely used multi-chain cross-chain platform. Compared with other platforms, Multichain.xyz's biggest advantage is that it supports developers deploying their own cross-chain tokens. A while ago, the Loot-like game Rarity character minting developed by AC became very popular, and many users converted ERC 20 FTM to Fantom mainnet FTM through Multichain.xyz.

Recently, Layer 2 has made significant progress. L2Beat data shows that as of September 18, the total value locked (TVL) in Layer 2 has exceeded $3.5 billion, growing 257.61% in the past 7 days. Among them, Arbitrum's TVL increased 990.73% within 7 days, exceeding $2.6 billion, with a growth rate that is remarkable and has further promoted the popularity of the Layer 2 concept. From the perspective of fund inflow speed, Layer 2 networks supporting general smart contracts are more popular.

In our articles "After DeFi and NFTs, Will Layer2 Become Ethereum's Next Explosion Point? (Part 1)" and "After DeFi and NFTs, Will Layer2 Become Ethereum's Next Explosion Point? (Part 2)", we conducted series discussions from Ethereum EIP-1559 upgrade, hash rate hitting new highs and other important dynamics to Layer2 topics. Interested readers can move to these.

4**) Arbitrum Bridge**

Arbitrum Bridge is the cross-chain bridge officially launched by the Ethereum Layer 2 scaling protocol Arbitrum, mainly used to solve asset transfers between Ethereum Layer 1 and Arbitrum. Currently, Arbitrum Bridge supports the transfer of ETH and ERC 20 assets between Layer 1 and Layer 2, with fees settled in ETH.

It should be noted that withdrawing from Layer 1 to Arbitrum basically only takes a few minutes, but if withdrawing assets from Arbitrum, it requires waiting at least 7 days.

5**) Optimism Gateway**

Optimism Gateway is the cross-chain bridge officially launched by Ethereum Layer 2 scaling Optimism, mainly used to solve asset interoperability needs between Ethereum and Optimism. The cross-chain bridge currently supports the transfer of mainstream ERC 20 assets in the Ethereum ecosystem such as ETH, DAI, LINK, UNI, etc.

Optimism, which also uses Optimistic Rollup technology like Arbitrum, also requires waiting 7 days for asset withdrawal.

Conclusion

When a single blockchain cannot meet the needs of scale expansion, and new chains need time to build and improve their ecosystems, various cross-chain bridges operate between different blockchains, solving the problem of fund circulation and bringing great convenience to users,俨然 becoming a new trend.

In an ideal state, cross-chain bridges can both meet asset interaction needs and have extremely high security, while better compatible with various public chain protocols, applications, and trading, while ensuring cross-chain environment transparency. But in reality, in the past 2 months, there have been 3 security accidents where cross-chain applications were hacked. Although this to some extent confirms the "value" of cross-chain bridges, the increase in on-chain interaction needs and the growth of cross-chain fund scale have also made cross-chain protocols a new "hot target" in hackers' eyes. Although cross-chain products have begun to take shape in the market, they still face significant challenges in security. Considering that technology development is not achieved overnight, although cross-chain protocols have great development prospects, the test and trial of them still need to be left to the market and time.

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