What is Crypto Bridge?
It is the capacity to link and communicate with the many existing blockchains is made possible by the Crypto Bridges or Bridges, which also increase the utility and breadth of cryptocurrencies and the ecosystems that have been created around them.
A centralized or decentralized service called a bridge or bridge across chains enables token transfers between two blockchains that would otherwise be unable to interact with one another.
This is a utility that has become crucial as a result of the introduction of services like DeFi, which have propelled the crypto community to make significant advancements in the use of blockchain technology and Tokens that make life in the various block chains capable of offering this kind of service.
How does a Bridge function?
As a straightforward information converter between blockchains, a bridge may be thought of. To put it another way, a bridge’s primary purpose is to provide a link between blockchains A and B so that information may be exchanged in both directions.
It goes without saying that this is a simple approach to grasp how a bridge functions, but the fundamental point is that understanding it clearly will help you comprehend precisely how this information exchange occurs.
We can actually sum it up in just four simple steps:
- The bridge forms the fundamental structure for the operation of the chain by connecting chains A and B.
- If you want to swap tokens from A to B, you must go to the bridge, say how many you want to exchange at A, and say where you want the token to go at B.
- The correct number of tokens are created and transferred to the address you have specified in B when you complete the shipment in A and the bridge blocks this balance in a vault.
- As a guarantee for the tokens in B, the tokens in A are blocked, and the only way to get them back is by doing the reverse procedure.
Types of Bridges
Bridges come in two varieties:
- Centralized
- Decentralized
A centralized entity that manages the bridge and transfers tokens between the chains it supports is referred to as a centralized bridge. In essence, it functions like an exchange, but rather of swapping pairings, it just accepts a token and transfers it to you on the destination network of your choice. The OKex Bridge is an illustration of this kind of bridge.
While a decentralized bridge is one that is entirely managed by smart contracts, with no one central authority having any control over the cash. Multichain is a prime example of this kind of bridge.
Main functions of a bridge
- Facilitate chain interoperability. As a result, users of Ethereum may transmit their tokens directly to other chains like BSC without using an exchange.
- permits users to move between Layers 1 and 2. Users of the Ethereum network, for instance, can move their tokens from Layer 1 (the Ethereum network) to Layer 2 networks, such as Polygon, Arbitrum, Optimism, and xDai, among others.
- Since it enables the user to look for networks with better commissions to conduct their business, it helps to reduce operational expenses.
- Bring users from other networks to those with more promising potential. The value shift from BTC to Ethereum during the crypto winter is a fantastic illustration of this. The movement’s motivation was to make money at periods when BTC’s value was low by utilizing the developing DeFi ecosystem.
