What exactly are cross-chain bridges, how do they work and why are blockchain bridges needed in the crypto industry? Find out below.
Cross-chain bridges seemingly appear to be constant targets of hackers, and with millions of dollars lost in these hacks, one might wonder — why the need for blockchain bridges?
Cross-chain bridges have emerged as one of the available solutions that are being used to connect different blockchains and ecosystems within the crypto space.
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What Are Cross-chain Bridges?
For instance, if you have Bitcoin and want to spend it on the Ethereum blockchain, a cross-chain bridge will make this possible, by wrapping BTC.
In general, having access to multiple blockchains through a single network enhances the experience of users, increases liquidity for DApps and enhances efficiency of assets.
How Does a Cross-Chain Bridge Work?
Although cross-chain bridges can be used for other cool stuff like converting smart contracts and sending data, the most common utility is token transfer.
Let’s assume you have some BTC on the Bitcoin blockchain and want to move these tokens to the Ethereum blockchain, which has a native ETH token. To make this happen, you will need to send your BTC to a cross-chain bridge, which will hold your coin and create equivalents in ETH for you to use.
Read: What Is Wrapped Bitcoin?
A cross-chain bridge would allow you to convert and use your BTC on the Ethereum network without going through a tedious process on a CEX. It works by wrapping tokens in a smart contract and then issuing native assets that can be used on another blockchain of choice.
Why Are Cross-Chain Bridges Important in the Crypto Ecosystem?
These are all different companies, operating different systems and protocols. Yet, transactions are fast and seamless.
The lack of interoperability between different blockchains has been touted as one of the hurdles preventing the mass adoption of cryptocurrencies. As a result, solutions like cross-chain bridges are a big step towards the wider adoption of blockchain technology.
Blockchain bridges also help to lower transaction costs while providing a better user experience. Imagine having to go through different exchanges each time you need to swap a token. Apart from the higher fees associated with doing this every time, the process is quite cumbersome.
In general, cross-chain bridges allow users to enjoy the best features from two different blockchains, such as lower gas fees with higher transaction throughput, and better utility in the form of DApps.
Notable Cross-Chain Bridge Hacks in 2022
To use the services of a cross-chain bridge, users face smart contract risks, amongst other things.
Decentralized bridges are trustless, using oracles and smart contracts to manage the bridging of assets. However, smart contracts are prone to vulnerabilities. Moreover, the nascency of the technology means that many new design models are still being built and tested, thereby presenting other novel attack vectors that can be exploited.
Here are some of the top cross-chain bridge hacks in 2022.
Ronin Bridge Hack
According to the company, the hackers gained entry through the private keys to validator nodes, resulting in the compromise of five validator nodes. There are claims that the North Korean Lazarus Group was responsible for the attack, with later reports showing how an advanced phishing attack was used to get the private keys to the validator nodes.
Two minutes after the attack, the attacker bridged 10,000 ETH to the Ethereum blockchain and another 80,000 ETH about 20 minutes later, effectively amounting to nearly $250 million. Interestingly, the funds are still sitting in the attacker’s wallets to this day.
Harmony Bridge Hack
Another recent cross-chain bridge hack is that of the Harmony chain, which happened at around 11AM UTC on June 23, 2022.
On the said say, the bridge between Harmony chain and Ethereum suffered multiple exploits. Some security experts were able to identify twelve attack transactions and three attack addresses. Surprisingly, the Lazarus Group, a well-known North Korean hacking syndicate, was identified as the primary suspect behind the incident.
The group used the login credentials of Harmony employees in the Asia Pacific region to gain entry into the protocol’s security system. Once in, the hackers deployed automated laundering programs that transferred the stolen assets late at night.
They netted a plethora of tokens on the bridge, including ETH, USDC, WBTC, USDT, DAI, BUSD, AAG, FXS, SUSHI, AAVE, WETH and FRAX, with varying values between $49,178 and $41,200,000. In total, the protocol lost around $100 million worth of assets.
Nomad Bridge Hack
In the beginning of August 2022, Nomad token bridge suffered a security breach that allowed the attackers to systematically drain a large portion of the protocol’s funds over a long series of transactions.
Over $190 million was removed from the bridge, leaving just $651.54 in the protocol’s wallet. However, the company told reporters that some of the funds were withdrawn by “white hat friends” who took the funds out to safeguard them. However, 24 hours later, only $9 million out of the $190.7 million had been returned.
Unlike other blockchain bridge hacks, the incident saw hundreds of addresses receiving tokens from the bridge, in what could be best described as a free for all.
Top Cross-Chain Bridges
Portal Token Bridge (formerly Wormhole)
It is worth mentioning that the bridge charges zero fees for transactions. Users are only required to pay the gas fees on the native and destination chains.
The protocol depends on Relayers to secure the bridge. These Relayers (Protofire, Hashquark, POA Network, Avascan) compare the proposal to swap assets against Avalanche’s data and approve or reject the proposal through a voting process. This additional voting process makes Avalanche one of the most secure crypto bridges in the space.
Fantom AnySwap Bridge
Like the Avalanche Bridge, Fantom’s AnySwap is a bi-directional solution that facilitates cross-chain transfers between the Ethereum Network and the EVM-compatible Fantom Network.
AnySwap provides a multi-chain liquidity solution and uses liquidity pools to enable cross-chain swaps. The liquidity pools deployed across various blockchain networks facilitate transfer to Fantom from Ethereum, Avalanche, Polygon and the BNB Chain.