Understanding Blockchain Bridges: Building a Truly Interconnected Crypto Network

Bridges are unifying the increasingly fragmented public blockchain ecosystem.

After years of research and development, we've entered a multi-chain market structure. Currently, there are over 100 active public blockchains, each with unique applications, users, geographical distributions, security models, and design tradeoffs. While individual communities may have their beliefs, the reality is: the universe tends toward entropy, and the number of these networks will likely continue growing.

This market structure requires interoperability between different networks. Many developers have recognized this, leading to an explosion of blockchain "bridges" last year aimed at unifying the increasingly fragmented public blockchain landscape. At the time of writing, there are over 40 different bridge projects.

As of September 8, 2021; Demonstration chart / Incomplete demonstration

In this article, I will:

• Explain why bridges matter
• Outline various bridge design mechanisms and their pros/cons
• Provide an overview of the current bridge project landscape
• Describe what the future of bridges might look like

Table of Contents

Interoperability Unlocks an Explosion of Innovation

As ecosystems develop, they cultivate unique advantages like higher security, faster throughput, cheaper transactions, better privacy, specialized resources (e.g., storage, computation, bandwidth), and regional developer/user communities. Bridges are crucial because they:

Enhance Productivity and Utility of Existing Crypto Assets

Bridges enable existing crypto assets to flow to new networks and perform new functions. Examples:

• Sending DAI to Terra to buy synthetic assets on Mirror or earn yield on Anchor
• Sending NBA TopShot NFTs from Flow to Ethereum for use as collateral on NFTfi
• Using DOT and ATOM as collateral to obtain DAI loans on Maker

Empower Existing Protocols with Stronger Capabilities

Bridges expand the design space for protocols. Examples:

• Yearn vaults incorporating yield farming on Solana and Avalanche
• Shared order books for NFTs on Ethereum and Flow via Rarible Protocol
• Launching Proof-of-Stake indices through Index Coop

Unlock New Features and Use Cases

Bridges provide more choices for users and developers. Examples:

• SUSHI price arbitrage across DEXs on Optimism, Arbitrum, and Polygon
• Paying for Arweave storage with Bitcoin
• PartyBid bidding for NFTs on Tezos

Bridge Encyclopedia

At an abstract level, bridges can be defined as systems that transfer messages between two or more blockchains. "Messages" can refer to assets, contract calls, identity proofs, or state. Most bridge designs include these components:

1. Monitoring: Typically handled by "oracles," "validators," or "relayers" watching the source chain's state.
2. Message Passing/Relaying: After detecting events, information must be relayed from the source to the target chain.
3. Consensus: Some models require consensus among participants before relaying messages.
4. Signing: Participants cryptographically sign messages sent to the target chain.

There are four primary bridge types, each with distinct advantages:

Asset-Specific Bridges

These bridges provide access to specific external chain assets, usually "wrapped" versions fully collateralized by the original asset. Bitcoin is the most commonly bridged asset, with seven different bridges on Ethereum alone. While easy to implement, they offer limited functionality and require separate deployments per target chain. Examples: wBTC, wrapped Arweave.

Chain-Specific Bridges

These bridges connect two blockchains, typically involving locking/unlocking tokens on the source chain and minting wrapped assets on the target chain. Though simpler and faster to market, they're less scalable. Example: Polygon's PoS bridge between Ethereum and Polygon.

Application-Specific Bridges

An application provides access to two or more blockchains but only within that app. Advantages include a smaller codebase and network effects via modular "adapters." However, functionality is hard to extend beyond the app. Examples: Compound Chain (cross-chain lending) and Thorchain (cross-chain trading).

General-Purpose Bridges

Protocols designed for cross-blockchain message transfers. These enjoy strong network effects with "single-point integration" but may trade off security/decentralization for scalability. Example: IBC (Inter-Blockchain Communication) for heterogeneous chains.

Bridge designs also fall into three validation mechanism categories:

External Validators and Federations

A validator set monitors source chain "mailbox" addresses and executes actions on the target chain via consensus. Asset transfers usually involve locking assets on the source chain and minting equivalents on the target. Validators often stake tokens as collateral for security.

Light Clients and Relays

Participants monitor source chain events and generate cryptographic proofs of past events. These proofs and block headers are relayed to target chain contracts ("light clients") that verify events before executing actions. This design ensures trustless delivery but is resource-intensive due to per-chain smart contract deployments and high gas costs for proof verification.

Liquidity Networks

Peer-to-peer networks where nodes act as "routers" holding inventories of source/target chain assets. These networks leverage underlying blockchain security through lock-up and dispute resolution mechanisms. Ideal for large-value transfers, they provide native target chain assets rather than derivatives. Example: Connext.

As of September 8, 2021

Hybrid models like Gravity, Interlay, and tBTC combine light clients in one direction with validators in another.

Bridge designs can be evaluated by:

• Security: Trust assumptions, tolerance for malicious actors, fund safety, and reflexivity.
• Speed: Transaction latency and finality guarantees (often trading speed for security).
• Connectivity: Target chain options and integration difficulty.
• Capital Efficiency: Required security capital and transaction costs.
• Statefulness: Ability to transfer complex state or execute cross-chain calls.

Security mechanisms span a spectrum:

• Trust-Based: Reliant on operator reputation with no collateral.
• Collateralized: Staked assets deter misuse, but users may not recover funds if bridges fail.
• Insured: Malicious actors are disincentivized by slashed collateral compensating users.
• Trustless: Security equals the underlying chains', barring consensus attacks.

As of September 8, 2021. Several projects will move out of "trusted" categories after upgrades.

Design Mechanism Tradeoffs Summarized

External validators excel in statefulness and connectivity but sacrifice security by relying on bridge security rather than chain security. While many current validators are trust-based, some use collateral—though often reflexively (e.g., protocol tokens whose value could crash). These bridges are capital-inefficient, requiring proportional collateral scaling.

Light clients are stateful and secure (trustless with liveness assumptions) but connectivity-limited, requiring new smart contracts per chain pair. Optimistic models with fraud proofs add latency (e.g., 4+ hours).

Liquidity networks are fast and secure (local validation) with better capital efficiency (scaling with transaction flow). However, they're state-constrained, handling data interactions but not ownerless data transfers.

Outstanding Questions

Building robust bridges remains challenging. Key unresolved issues:

• Finality and Rollbacks: How do bridges handle probabilistic finality and chain reorganizations?
• NFT Transfers and Provenance: How is provenance maintained for NFTs bridged across multiple chains?
• Stress Resistance: How do bridges perform during congestion or protocol/network attacks?

The Future of Blockchain Bridges

While bridges enable innovation, cutting corners on R&D poses severe risks. The Poly Network hack demonstrated potential economic losses. Teams must prioritize security over speed to market.

No single "best bridge" may exist; different types suit specific applications (e.g., asset transfers vs. contract calls). The ideal bridges will maximize security, connectivity, speed, capital efficiency, cost-effectiveness, and censorship resistance.

Research directions include:

• Reducing Block Header Verification Costs: Making light clients more efficient (e.g., deploying Tendermint clients on zkSync).
• Transitioning from Trusted to Collateralized Models: Enhancing security for billions in user funds.
• Moving from Collateralized to Insured Models: Compensating users for unexpected losses.
• Expanding Liquidity Network Liquidity: Exploring trust/liquidity tradeoffs (e.g., threshold multisigs with staked liquidity).

Author: Dmitriy Berenzon, Research Partner at 1kx

Translated by: Perry Wang

👉 Explore more about blockchain interoperability

FAQ Section

Why are blockchain bridges important?

Bridges enable interoperability between isolated blockchain ecosystems, allowing assets and data to flow seamlessly across networks, unlocking new use cases and improving capital efficiency.

What are the main types of blockchain bridges?

The four primary types are:

1. Asset-specific (e.g., wBTC)
2. Chain-specific (e.g., Polygon PoS bridge)
3. Application-specific (e.g., Thorchain)
4. General-purpose (e.g., IBC)

How do liquidity networks differ from other bridges?

Liquidity networks use peer-to-peer routers holding asset inventories, enabling fast native asset transfers without wrapped tokens. They're capital-efficient but limited in handling complex state data.

What security risks do bridges face?

Centralization risks (trusted validators), smart contract vulnerabilities, and chain reorganization issues can lead to fund losses, as seen in the Poly Network hack.

What's the future of blockchain bridges?

Expect hybrid models combining light clients, collateralized validators, and insured mechanisms, alongside research into reducing verification costs and expanding liquidity.

👉 Discover cutting-edge bridge solutions

This Markdown-formatted article adheres to SEO best practices with:
- Structured headings and subheadings  
- Natural keyword integration ("blockchain bridges," "interoperability," "crypto assets")  
- Engaging anchor texts linking to https://www.okx.com/join/BLOCKSTAR  
- FAQ section addressing reader queries