What Is Bridging in Crypto? A Complete Overview + Analogy
Blockchain brings endless possibilities, ranging from decentralized finance to gaming and even AI applications. However, in most cases, assets on one chain can’t be used on another chain, making each chain a walled garden. A crypto bridge allows you to send assets through the digital ether and bridge crypto from one chain to another.
Several types of crypto bridges exist, including cross-chain, federated, sidechain, and Layer 2 bridges. In this guide, we’ll explain the different types of bridges, what each does, and the risks to consider before using a crypto bridge. Let’s dig in.
What Is a Blockchain Bridge?
A blockchain bridge is a tool for moving crypto assets from one blockchain to another. The most common of these are cross-chain bridges between Layer 1 and Layer 2 blockchains. A Layer 2 blockchain uses the main blockchain for security but allows faster and cheaper transactions.
For example, the Abritrum bridge uses the Ethereum network for security but offers an Ethereum Virtual Machine (EVM) compatible platform for decentralized applications (dApps), allowing a faster and more affordable way to bridge tokens. However, to use dApps on Arbitrum, you’ll need to send funds to the Arbitrum chain. One option is to use the Arbitrum Bridge to send ETH from the Ethereum chain to Abrbitrum. When you’re ready to use your funds on Ethereum again, you can use the same bridge to transfer funds from Arbitrum to Ethereum.
Toy Story Analogy
Imagine two children’s playgrounds, each with its own set of unique toys, separated by a highway. Each playground has its own set of toys that the children can play with. However, some children want to cross the street and play in the other playground — this is where we need to have a bridge that connects the two playgrounds. This bridge allows children to cross from one playground to the other.
However, children can’t take their toys with them. At each end of the bridge, children can hand over their toys to their parents and receive a ticket. They can then exchange the ticket for another set of toys on the other playground. Acting as security guards, parents hold the tickets to ensure the toys are correctly returned.
In this analogy, the bridge represents blockchain bridging technology, the toys represent tokens, and the children represent users. This system allows users to access and use assets across two different blockchain networks securely and efficiently, much like how the bridge allows children to enjoy a wider variety of toys from both playgrounds.
When Do You Need to Use a Bridge?
Bridges come in handy in several situations, ranging from reduced fees to airdrop farming. Let’s examine some of the most common reasons for using a crypto bridge.
Use Assets From Another Blockchain
Let’s say you have a few hundred dollars worth of ETH on the Ethereum chain. Then, you hear about a meme coin you want to buy on the Base network.
To do this, you can use an Ethereum bridge to send your ETH from Ethereum Mainnet to the Base network and make your meme coin swap on a decentralized exchange (DEX) like Uniswap. This process allows you to bridge crypto from where you have ETH to where you want to use your ETH.
Reduce Transaction Fees
Layer 1 chains like Bitcoin and Ethereum are tremendously popular. However, transaction fees on these networks can be costly. Using a Layer 2 or a sidechain can dramatically decrease transaction costs. Transaction costs vary based on network traffic, the gas token price, and the transaction’s complexity, but average transaction fees on Ethereum approach $1 as of this writing. By comparison, many transactions on Base or Arbitrum cost less than a penny.
Access Additional Applications
Some applications only support specific networks. For example, GMX, a popular decentralized futures trading platform, supports Arbitrum and Avalanche. To use assets you hold on the Ethereum network on GMX, you can use a bridge to send ETH (and possibly other tokens) from Ethereum Mainnet to Arbitrum.
Farm for Airdrops
is another common reason for bridging crypto between networks. This is where users try to qualify for potential upcoming airdrops on new blockchains or layer 2s across multiple wallets.
For example, the 2024 ZKsync airdrop used bridging to the ZKsync network as a criterion to determine eligibility for free ZK tokens.
Types of Blockchain Bridges
Bridging is a broad term, meaning several types of bridges exist. Each type of blockchain bridge may serve a slightly different purpose or work differently under the hood. Generally, bridges fall into two categories: trust-based and trustless. However, a third category of bridges, hybrid bridges, combines elements of both.
- Trust-Based Bridges: A trusted or centralized bridge uses an intermediary to provide custody of assets. For example, BitGo provides Wrapped Bitcoin (wBTC), a Bitcoin token that can be used on other chains. Bitcoin is deposited, and wBTC is minted. When wBTC is redeemed, the corresponding amount of Bitcoin is released. Other examples include the Ronin Bridge and Avalanche Bridge. Some trust-based bridges use a “trusted” set of validators.
- Trustless Bridges: A trustless or decentralized bridge uses smart contracts to facilitate transactions across blockchains. For instance, the Wormhole Protocol enables bridging between Ethereum and Solana. The Li.fi protocol acts as both a bridge and a decentralized exchange (DEX) aggregator, allowing users to swap supported assets on any supported chain for assets on other chains. For example, you could swap GMX on Arbitrum for ETH on the Base chain.
- Hybrid Bridges: Hybrid bridges utilize a two-tier architecture, employing both a centralized intermediary and smart contracts to transfer and settle assets sent from one chain to another.
Apart from this categorization, we can also examine the bridges from the perspective of the use case rather than the trust mechanism behind them.
Cross-Chain Bridges
As the name suggests, a cross-chain bridge lets you send assets from chain A to chain B. The most common use for a cross-chain crypto bridge centers on transferring crypto from a Layer 1 chain, such as Ethereum, to a Layer 2 chain, like Base. Many L1 to L2 bridges use trustless smart contracts.
Federated Bridges
A federated bridge facilitates chain-to-chain transfers by using a group of trusted entities or validators. For example, the Avalance Bridge uses trusted validator nodes to govern transactions between Ethereum Mainnet and the Avalanche network. By definition, federated bridges are trust-based, at least partly because they utilize a trusted group of entities or nodes.
Sidechain Bridges
Sidechains use their own consensus mechanism but can also access data from a Layer 1 chain. These differ from Layer 2 chains in that Layer 2 chains post transaction data back to the Layer 1 chain. Sidechains exist alongside Layer 1 chains but do not post data back to the Layer 1 chain.
To use a sidechain, you’ll need to bridge crypto from the Layer 1 chain to the sidechain.
Layer 2 Bridges
Layer 2 bridges let you send assets between the Layer 1 chain and a Layer 2 chain. For example, the Arbitrum Bridge connects the Ethereum chain to the Arbitrum Layer 2 chain, allowing users to send ETH from one network to another. Similarly, the Base bridge connects Ethereum Mainnet with the Base Layer 2 chain, letting users send ETH between networks.
Ethereum, Arbitrum, and Base all use ETH as a fuel token to pay for transactions. After bridging ETH, decentralized exchanges allow swaps to other assets on the destination network.
What Is a Bitcoin Bridge?
Several Bitcoin bridges let users send Bitcoin to other chains. However, these “bridges” operate differently than, for example, Ethereum bridges. Rather than sending Bitcoin and receiving Bitcoin on the destination chain, you send Bitcoin and receive an equivalent token on the receiving chain.
The most common of these bridges Bitcoin tokens is wBTC, a wrapped version of Bitcoin that can be used on networks like Ethereum or Arbitrum. wBTC works by depositing BTC and receiving wBTC in exchange. These wBTC tokens can be exchanged for native BTC on crypto exchanges, giving the wBTC token price parity with BTC.
Bitcoin Layer 2 networks use a similar strategy. For example, the Liquid Network, a Bitcoin sidechain with its own validation, uses bridged BTC (L-BTC).
How Long Does Bridging Crypto Take?
Transfer transfers can occur in mere seconds or longer than a day, depending on which bridge you use. In many cases, however, bridging takes 10 to 15 minutes. The Arbitrum bridge typically takes about 15 to 30 minutes to send ETH from Ethereum Mainnet to the Abitrum One network.
The direction of the bridged assets can also play a role. For example, bridging from Ethereum Mainnet to the Base network typically takes a few minutes using the superbridge dApp. However, bridging from Base to Ethereum takes up to seven days. Arbitrum works similarly, requiring up to seven days for funds to settle before you can claim your ETH on Ethereum Mainnet. By comparison, bridging from ZKsync to Ethereum takes up to 24 hours.
Alternatives like Jumper.exchange, which is powered by the Li.fi protocol, utilize liquidity pools to power cross-chain swaps. This method often allows you to bridge crypto between supported blockchains in seconds.
How Much Does It Cost to Bridge Crypto?
The cost of bridging crypto can vary greatly depending on the bridge you choose and the direction of the transfer. In many cases, gas fees are paid on the sending network and can be less than a penny or two on low-cost networks like the Base chain when sending to other low-cost chains.
However, some bridges, such as the Arbitrum bridge, require that you claim your assets on the receiving chain for Arbitrum in a separate transaction. This results in two transaction fees, with the Ethereum fee being much higher than the Arbitrum fee.
In the example below, it costs $6.28 to bridge ETH from Ethereum Mainnet to the Arbitrum One Layer 2 network. This amount can vary depending on network congestion. However, the amount of the transaction does not affect the cost in this case.
Many bridges that use liquidity pools can be less expensive, although these can be costly in other ways. The primary cost concern centers on slippage, which refers to a divergence in the input and output of a transaction. For example, you might lose some value in the exchange rate. In the example below, a transfer of 0.3 ETH could result in as little as 2.993 ETH on the receiving chain due to slippage.
Liquidity may be thin depending on the assets you swap across chains, resulting in higher slippage and lower transaction output value. Swapping to Ethereum Mainnet from a Layer 2 chain can result in considerable costs due to slippage. Always compare fees and output amounts to get the best value.
Risks of Bridging Crypto
Bridging crypto assets from one chain to another brings several benefits, such as lower fees and access to a new app ecosystem. However, bridging crypto also comes with some risks. In 2023, the industry lost $2 billion to hacks, exploits, and scams. While this amount is lower than 2022 by more than half, it’s likely also underreported. Knowing the risks before bridging crypto or connecting your crypto wallet becomes essential.
Bridging Between Incompatible Networks
While Layer 1 and Layer 2 networks support the same types of assets, sending assets across incompatible networks typically requires a tokenized version of the asset. For example, to send Bitcoin to the Ethereum network, you’d need to wrap Bitcoin or swap to wBTC (or an equivalent wrapped token).
Sending Bitcoin to Ethereum directly won’t work. Bitcoin isn’t natively supported by the Ethereum network, and any native Bitcoin sent to an Ethereum wallet will be lost forever. Fortunately, most crypto wallets provide a warning when sending to an incorrect address format.
Dependence on Nodes or Validators
Bridges often use a small network of nodes to validate transactions. This brings a risk of compromised validators. On a larger validation network, such as Ethereum, the risk from bad actors (validators) is minimal due to the size of the network and the slashing mechanism that can remove the staked ETH from validators that don’t follow protocol. However, smaller validation networks can be more easily compromised.
For example, the Ronin Network, an Ethereum sidechain used for the Axie Infinity game, was hacked by gaining control of five of the nine validators used to validate bridge transactions. The attackers withdrew 173,600 ETH, valued at well over a half billion dollars at today’s prices. In addition, the attackers took $25.5 million in USDC during the Ronin bridge hack.
Bridge Smart Contract Hacks
Smart contracts are computer programs that run on the blockchain network. Like all software, smart contracts can contain bugs. However, a more likely cause of smart contract hacks is better described as an exploit. In simple terms, someone figured out a way to make the smart contract do something the developers hadn’t intended or envisioned — but the software did exactly what its code told it to do.
In 2022, the BNB Bridge lost $566 million worth of BNB tokens due to a proof verifier bug. However, the loss was contained to about $100 million because the majority of the stolen tokens were blacklisted.
2022 was an eventful year for bridge hackers. The Wormhole bridge lost 120,000 ETH when an attacker discovered a way to make the smart contract mint wETH (wrapped ETH) tokens from the Solana side of the bridge. In a bit of good news, Jump Crypto and Oasis later launched a counter exploit and were able to recover the 120,000 ETH.
Cloned Bridge Websites
One of the most common risks in crypto is fake websites. Scammers can create a fake website in minutes that looks exactly like the real bridge site. However, using the “bridge” on a fake website will result in a loss of funds. Anything you send will not be transferred to the destination chain. Instead, it will go to the scammer’s crypto wallet.
Slippage
Bridges that use liquidity pools can result in losses (or gains) based on the amount of liquidity in the pool relative to the amount of your transaction. In some cases, the disparity can be significant. Check the numbers carefully before authorizing a transaction.
Conclusion
Crypto bridges offer a powerful way to access new dApps or reduce transaction costs when you send crypto or interact with smart contracts. The same transaction that costs several dollars on Ethereum might cost a few pennies on a Layer 2 network like Base or Arbitrum. However, to access these networks, you’ll need to withdraw from an exchange directly to those networks or use a bridge if you already have assets on another network you’d prefer to use.
Bridging comes with costs, however, including transaction fees and possible slippage. You should also be aware of the security risks and research the bridge you’re considering before sending any funds.
FAQs
What is the benefit of a crypto bridge?
A crypto bridge lets you transfer supported cryptocurrency from one chain to another. This might let you access additional decentralized applications or save on transaction fees.
What happens when a crypto bridge is hacked?
When a crypto bridge is hacked or exploited, the stolen funds are no longer available for bridging. This means users may not be able to withdraw from the bridge.
What is the difference between wrapping and bridging?
Bridging refers to sending compatible tokens to another chain. For example, you can send ETH from Ethereum Mainnet to the Arbitrum or Base chain. By contrast, wrapping refers to locking a coin or token and issuing a new token of equivalent value. The best-known example of wrapped coins is wBTC, which carries the same value as BTC because the custodian locks the BTC used to create wBTC until the wBTC is redeemed for native Bitcoin.
Are crypto bridges safe to use?
Crypto bridges have become a common target for exploits, with several high-profile hacks leading to billions of dollars in losses collectively. Look for bridges with a solid audit history by leading crypto security firms.
References
- Ethereum Average Transaction Fee (I:EATFND) (ycharts.com)
- Quickstart: Arbitrum bridge (arbitrum.io)
- Crypto Users Lost $2B to Hacks, Scams and Exploits in 2023, De.Fi Says (coindesk.com)
- Ronin Network: What a $600m hack says about the state of crypto (bbc.com)
- $570 million worth of Binance’s BNB token stolen in another major crypto hack (cnbc.com)
- Oasis Exploits Its Own Wallet Software to Seize Crypto Stolen in Wormhole Hack (coindesk.com)