Try Quests to earn cryptoOpen Analytics Bounty: ETH (October 9)
Let's analyze the assets, which are users that bridge from Ethereum.
What is Across Bridge?
Across Bridge is a cross-chain bridge that allows users to transfer their assets from L1 Mainnet ETH to L2 Solution, including Polygon, Boba, Optimism, Arbitrum and vice versa. It is a cross-chain bridging solution that supports fast, secure and cost-efficient transfers.
What Are Blockchain Bridges and Why Do We Need Them?
A blockchain bridge, otherwise known as a cross-chain bridge, connects two blockchains and allows users to send cryptocurrency from one chain to the other. Basically, if you have bitcoin but want to spend it like Ethereum, you can do that through the bridge. One of the biggest problems of blockchain was the inability to work together. While fluid and somewhat efficient as single entities, each blockchain is limited by the walls of its own domain. Most often this can lead to high transaction costs and congestion.
Blockchain bridges solve this problem by enabling token transfers, smart contracts and data exchange, and other feedback and instructions between two independent platforms.
These blockchains mint different coins and operate on different sets of rules; the bridge serves as a neutral zone so users can smoothly switch between one and the other. Having access to multiple blockchains through the same network greatly enhances the crypto experience for most of us.
This concept is a lot similar to Layer 2 solutions even though the two systems have different purposes. Layer 2 is built on top of an existing blockchain so while it does improve speed, the lack of interoperability remains. Cross-chain bridges are also independent entities that don’t belong to any blockchain.
How Do Blockchain Bridges Work?
Blockchain bridges can do a lot of cool stuff like converting smart contracts and sending data, but the most common utility is token transfer. For example, bitcoin and Ethereum are the two largest cryptocurrency networks and have vastly different rules and protocols. Through a blockchain bridge, bitcoin users can transfer their coins to Ethereum and do with them what they otherwise could not on the bitcoin blockchain. That can include purchasing various Ethereum tokens or making low-fee payments.
When you have bitcoin and want to transfer some of it to Ethereum, the blockchain bridge will hold your coin and create equivalents in ETH for you to use. None of the crypto involved actually moves anywhere. Rather, the amount of BTC you want to transfer gets locked in a smart contract while you gain access to an equal amount of ETH. When you want to convert back to BTC, the ETH you had or whatever’s left of it will get burned and an equal amount of BTC goes back to your wallet.
If you would do this regularly, you’d have to convert bitcoin to ETH on a trading platform, withdraw it to a wallet then deposit it again to another exchange. By the time it gets there, you’d have incurred more fees than probably what you planned to do in the first place.
To put this in perspective, think of how you can use your Visa to pay for your MasterCard bills; or how PayPal can pay for all your online purchases no matter where you’re buying from. Different systems with different protocols yet transactions are fast and seamless. That’s because interoperability has always kept the financial system in place long before cryptocurrency was a thing. As blockchain technology becomes more prominent and not just for crypto, solutions like cross-chain bridges are a big step toward normalization.
Trust-Based vs Trustless Blockchain Bridges
One implicit downside of blockchain bridges is centralization. Users need to give up control of their coins if they wish to convert them to other cryptos, essentially trusting it in the hands of someone else. If you’ve ever seen a wrapped token, such as wBTC, it’s the result of this process. The idea here is that they take your BTC and “wrap” it in an ERC-20 contract, giving it the functionality of an Ethereum token.
Trust-based bridges are fast and an economical option when you want to transfer a large amount of crypto, but the pool of reliable services is rather small. Venturing into the territory of less-known brands can increase risks, which makes it unattractive to smaller traders.
There are decentralized blockchain bridges, or trustless bridges, that intend to make users feel safer when transferring their coins. These solutions operate just like an actual blockchain with individual networks pitching in to validate transactions. If you’re worried about your coins falling in the wrong hands, using a trustless bridge will give you peace of mind in that regard. The problem with decentralized bridges is the service is freelance-based. That can be a liability when incidents happen since they’re only paid to process your request and not to fix them.
Need For Bridges
Bridges exist to connect blockchain networks. They enable connectivity and interoperability between blockchains.
Blockchains exist in siloed environments, meaning there is no way for blockchains to trade and communicate with other blockchains naturally. As a result, while there could be significant activity and innovation within an ecosystem, it is limited by the lack of connectivity and interoperability with other ecosystems.
Bridges offer a way for isolated blockchain environments to connect with each other. They establish a transportation route between blockchains where tokens, messages, arbitrary data, and even smart contract calls can be transferred from one chain to another.
Benefits Of Bridges
Put simply, bridges unlock numerous use cases by allowing blockchain networks to exchange data and move assets between them.
Blockchains have unique strengths, weaknesses, and approaches to building applications (such as speed, throughput, costliness, etc.). Bridges help the development of the overall crypto ecosystem by enabling blockchains to leverage the innovations of each other.
Choosing a Bridge
Here are some of the most talked-about blockchain bridges you can use to transfer crypto.
Binance Bridge. This decentralized bridge offers one of the largest selections of tradable cryptocurrencies. It supports popular blockchains like Ethereum, Solana, and TRON, among others.
cBridge. You can access this solution directly from Binance in case you don’t want to use its main bridge. Similar to any trustless bridge, there’s a variety of blockchains and cryptocurrencies you can interact with. One minor gripe you might have with cBridge is you need to connect a wallet before doing anything. AnySwap. This platform is popular for having features other than transferring crypto. Once connected to a wallet, you can see all of your balances across different types of coins. You can also freely transfer balances from one place to another. However, there are certain blockchains where, if you want to transfer from, you can only go to a specific destination.
🥇Conclusion
Decentralization has always been a defining factor of blockchain, which also makes it a priority over other operative improvements, such as scalability.
Naturally, developers are reluctant towards big changes, lest deviating from the decentralizing philosophy. Blockchain bridges are a sign they’re growing past that notion. We may be inching toward an innovative and normalized crypto economy, but any progress is better than limiting ourselves to what already exists.
FINDINGS
✅ The chart illustrates the daily volume in USD by assets on Across bridge over the past six months.
✅ There are nine assets that have been transferred via Across bridge, including WETH, USDC, DAI, BOBA, WBTC, BADGER, BAL, USDT, and UMA.
✅ The highest amount of WETH occurred on July 20th with approximately 4.2M.
FINDINGS
✅ The bar chart shows the daily volume in USD by asset on Boba over the past six months.
✅ The chart above illustrates the daily cumulative volume in USD by destination chain over the past six months.
✅ As you can see, the cumulative volume for Arbitrum grew at an exponential pace.
✅ Meanwhile, on Optimism, the volume grew relatively much slower compared to Arbitrum.
🏅The Optimism Bridge allows you to transfer assets between L1 and Optimism. A decentralized cross-rollup Layer 2 bridge with a contract only on the destination side. A groundbreaking interoperability protocol for heterogeneous blockchains. Optimism is a Layer 2 Optimistic Rollup network designed to utilize the strong security guarantees of Ethereum while reducing its cost and latency.
🏅Polygon Bridge is a cross-chain bridge between Polygon and Ethereum in order to enable transactions between the networks. Users can transfer ERC tokens and NFTs to the two-way bridge using smart contracts. Polygon Bridge V2, based on using the Proof of Stake chain, is the perfect option for transferring assets between networks through a compatible crypto wallet. Polygon is basically a framework tailored for the creation of Ethereum-supported blockchain networks and scaling solutions.
🏅The Arbitrum Bridge was launched as a scaling solution to streamline transactions on Ethereum's Layer 1 (L1) blockchain. Arbitrum uses the concept of optimistic rollups to offer lower gas fees for secure transactions. Optimistic rollups are smart contracts that “roll up” off-chain transactions into bundles. Arbitrum aims to reduce transaction fees and congestion by moving as much computation and data storage off of Ethereum's main blockchain (layer 1) as it can. Storing data off of Ethereum's blockchain is known as Layer 2 scaling solutions.
🏅Boba Network is a blockchain Layer-2 scaling solution and Hybrid Compute platform offering lightning-fast transactions and fees up to 100x less than Layer-1. BOBA is an Ethereum token that governs Boba DAO and can also be staked for rewards on the Boba Network. Boba Network is a Layer 2 Ethereum scaling and augmenting solution that lowers gas fees, enhances the capabilities of smart contracts and improves transaction throughput.