Mindblown: a blog about philosophy.
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Advantages of blockchain bridges
Transaction Fee & Price Efficiency Without bridges each blockchain has a monopoly on what users of their supported assets can do. As more bridges connect to each of the layer 1 blockchains and their layer 2 applications, that monopoly is broken and users have more choice in how they transact. Users can search for lower…
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Are blockchain bridges safe?
The downside of trustless blockchain bridges is that the increased complexity increases the attack vectors, as illustrated by two massive hacks in early 2022. In February the Wormhole Bridge hack saw 120,000 Wrapped Ether (wETH) tokens, valued at $326million, stolen from the Solana side of a bridge to Ethereum. The Wormhole incident was quickly eclipsed by…
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What are the best blockchain bridges?
As challengers to Bitcoin and Ethereum have emerged so have solutions to bridge between the growing number of layer 1 chains. Solana Solana has huge appeal as a layer one chain given the significant throughput it can achieve, with 50,000 transactions per second, compared to Ethereum with just 30. As Solana and its ecosystem have…
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Ethereum Blockchain Bridges
Ethereum is the dominant blockchain for supporting decentralised applications, particularly in the sector known as DEFI – decentralised finance. DEFI includes a whole range of financial services for crypto users, such as lending/borrowing and swapping. Given the problem of blockchain interoperability a significant proportion of the value within the crypto system is locked out of…
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How blockchain bridges work
The solutions to the Interoperability Trilemma and verifying the flow of data between separate blockchains fall under two main categories: Centralised/Trusted Bridges Decentralised/Trustless Bridges Centralised Bridges Centralised bridges provide a solution to interoperability by compromising on the trustless component of the trilemma through External Verification; aka off-chain. Off-chain verification can be through a single traditional…
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What are Blockchain Bridges and how do they work?
Blockchain bridges are technical solutions for transferring data back and forth between two blockchains. Blockchains aren’t designed to be interoperable. They exist as isolated domains with unique operating logic, prioritising security and decentralisation. But there is a growing demand for users to move their information and assets between blockchains. Blockchain bridges, also known as cross-chain…
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What you`ll learn
What you’ll learn: Why do we need crypto bridges? How do they work? Ethereum bridges & industry examples Safety, security, potential pitfalls
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Are Wrapped Tokens Safe?
More concerning than slippage is the underlying risks posed by the wrapping process, which for Bitcoin, the biggest wrapped market, has to go through centralised Custodian. Because Bitcoin is not Turing Complete wrapping cannot be automated via Smart Contract, so wrapping happens through centrally controlled programs like BitGo. This means that a decentralised asset can…
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Disadvantages of token wrapping?
If we go back to Coinmarketcap and compare the prices for native BTC and wBTC you’ll find that the peg between them isn’t exactly 1:1, this is because the minting and burning process isn’t 100% efficient. That price difference is known as slippage which means that you will potentially lose value as you wrap and…
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Wrapped Ethereum
Strangely enough, you can wrap Ethereum to create wETH, and use that with ERC-20 compatible digital applications, because Ethereum’s native currency (ETH) was created before the ERC-20 token standard was introduced. One of the biggest challenges facing Ethereum is scalability. It has become a victim of its own success, with the cost of Smart Contract…
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