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 bridges, solve this problem.

You can understand the role of blockchain bridges by imagining two planets that want to exchange goods. They have entirely different languages and ways of conducting trade but don’t trust each other. 

They need a neutral system for accurately verifying transactions that can make sense to each planet separately, without relying on trust and which neither side can manipulate—an interplanetary information bridge. 

Why do we need crypto bridges?

A blockchain is a database maintained across a distributed network of global independent computers with no one in charge. They provide revolutionary new ways to manage any type of data without formal hierarchies, from digital payments to tokens or the latest state of a shared agreement. 

Though complicated, the core feature of blockchains is verifying the data they hold without trust. Each computer (known as a Node) runs a piece of software that describes how each point of the network can agree on the true state of the data stored in the chain without any central coordination. 

That agreement is known as a Consensus Mechanism. The Nodes are continually verifying new blocks of data based on that mechanism. That could be recent Bitcoin transactions or updated Ethereum account balances. 

As the crypto ecosystem has grown, users want to transfer their assets across different blockchains (such as from Bitcoin to Ethereum) in a trustless way. Given consensus works internally to each blockchain, how do you verify a cross-chain transaction?

This problem is described as the Interoperability Trilemma as verifying transactions between separate blockchains needs to reconcile three distinct requirements:

• Trustlessness: having equivalent security to the underlying chains
• Extensibility: able to be supported on any domain.
• Generalisability: capable of handling arbitrary cross-domain data