What are Bridges and Cross-Chain Swaps? Follow
What is a bridge?
A cryptocurrency bridge is an application that enables the transfer of digital assets between different blockchain networks or ecosystems.
Cryptocurrencies are typically built on their own independent blockchain networks, which means that they cannot easily interact or communicate with other blockchain networks. However, cryptocurrency bridges allow for interoperability between these different networks by creating a connection or "bridge" between them.
Source: coinguides.org
Ethereum addresses are interoperable, meaning you can use the same address across all EVM-compatible networks, but your transactions and assets are specific to each network.
For example, if you have some ETH on the Ethereum network and you want to use it on the the EVM-compatible network Arbitrum (ARB), you'll need to bridge your ETH over to the Arbitrum network. You can do this through a crypto bridge, which would take your ETH and transfer it to Arbitrum.
There are various types of bridges and it's important to understand the risks before using one.
Trusted Bridges | Trustless Bridges |
---|---|
Trusted bridges depend upon a central entity or system for their operations. | Trustless bridges operate using smart contracts and algorithms. |
They have trust assumptions with respect to the custody of funds and the security of the bridge. Users mostly rely on the bridge operator's reputation. | They are trustless, i.e., the security of the bridge is the same as that of the underlying blockchain. |
Users need to give up control of their crypto assets. | Through smart contracts, trustless bridges enable users to remain in control of their funds. |
Source: ethereum.org
What is a cross-chain swap?
A cross-chain swap is similar to a bridge in that it allows for the transfer of a digital assets between different networks. However, instead of of transferring the same asset over to a new network, you are trading a token issued on one network for a different token on a new network.
For example, if you have some ETH on the Ethereum network and you want to have SOL on the Solana network instead, you'll need to use a cross-chain swap application. These types of swaps carry the same risk as bridges and risk tolerance should be considered when bridging/swapping assets.
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