New Generation of Blockchain Bridges Emerge from the Ashes of Past Exploits
Like the Oresund Bridge that links Denmark and Sweden, blockchain bridges connected divergent crypto ecosystems. Photo by Dursun Aydemir/Anadolu Agency via Getty Images.
Key Takeaways
- A series of hacks in 2022 undermined trust in blockchain bridges.
- However, a new generation of more secure, decentralized solutions has reignited the cross-chain torch.
- Not only are the new decentralized bridges more secure, they are also faster and cheaper.
After a series of exploits in 2022 resulted in the loss of hundreds of millions of dollars, blockchain bridges gained a bad reputation for security, and cross-chain liquidity suffered as a result.
However, two years after the infamous Nomad, Harmony-Horizon, and Ronin bridge hacks, a new generation of cross-chain solutions is emerging.
Cross-Chain Bridge Weaknesses
Traditional bridges suffer from several security vulnerabilities. Their reliance on multi-signature wallets or centralized validators introduces single points of failure for malicious actors to exploit.
For instance, Axie Infinity’s Ronin bridge was compromised in 2022 after hackers controlled five of nine validators. Similarly, Horizon bridge contracts connecting Harmony to other blockchains relied on a multi-signature wallet that required only two out of five validators to approve transactions—this spelled disaster when hackers managed to compromise validators’ private keys.
Decentralization and Security
New bridging solutions, like Router and Particle Networks, use a decentralized pool of validators rather than relying on a single entity to manage and verify transactions.
By effectively turning bridges themselves into blockchains, new approaches to cross-chain transfers make it harder for hackers to gain control.
While security is clearly important for contemporary bridge providers, so is speed and cost.
Solving Liquidity Fragmentation
In an interview with CCN, Router co-founder Shubham Singh outlined the need for efficient, secure bridges to tackle liquidity fragmentation.
He observed that using the canonical bridge, moving assets between Optimism and Ethereum Layer 1 takes seven days, and moving assets between L2s can take even longer.
Singh noted that Layer 2 developers have little incentive to build more efficient bridges themselves, which might release liquidity to rival platforms. “Why would they want a unified ecosystem?”
Because they are more secure, faster, and often cheaper than legacy bridges, the new generation of decentralized bridging protocols has gained traction quickly and is a key component of the chain abstraction trend.
In the five months since its launch, Router Protocol has already hit around $500 million in transaction volume across nearly 1,000 different assets.
Meanwhile, Particle Network has attracted the attention of Binance, which invested in the project through its venture capital arm.
From Bridges to Tunnels
One of the biggest challenges for bridges is ensuring the wiring fits seamlessly at each end since bridges must interact with divergent consensus mechanisms and security models.
Early solutions like Wrapped Bitcoin didn’t worry about interoperability much at all. A centralized custodian accepts BTC on one end and issues WBTC on the other. The two currencies have maintained their peg for five years because people trust the custody model. But without that trust, the entire system would break down.
Earlier this month, however, a team of Bitcoin veterans launched Hemi to integrate the two blockchains at a far deeper level.
“Hemi takes a fundamentally different approach that combines the power of Bitcoin and Ethereum,” explained co-founder and lead architect Max Sanchez. “We consider them components of a single supernetwork.”
Since the hVM maintains protocol-level awareness of Bitcoin’s and Ethereum’s respective states, it enables the trustless transfer of assets across chains.
“We call these Tunnels, and they provide a more secure and efficient method for cross-chain asset transfers compared to centralized bridge solutions,” Sanchez observed.
The technology has implications for the nascent Bitcoin DeFi movement, exploring ways to expand Bitcoin’s functionality with sophisticated smart contracts.
With so many new cross-chain solutions being developed, the hangover from 2022’s bridge hacks may finally be over.
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