All about cross-chain bridges and their importance

While DeFi promises a world where anyone can transfer money without the hassle and high transaction fees of banks, anyone who has tried to convert ETH to BNB recently knows what it is. it’s not that simple.

Gas fees make cross-chain transactions expensive, hindering the free flow of cryptocurrencies. So it comes as no surprise that cross-chain bridges have grown at an unprecedented rate – 89% increase in total value locked (TVL) in October – as DeFi transaction volume booms. boom in a bull market.

However, did you know that cross-chain bridges solve other problems besides (essential) cryptocurrency transaction fees?

As multi-chain projects and interoperability become a key part of the industry, DeFi investors need to understand how these cross-chain bridges work.

What are cross-chain bridges and why are they important?

TVL in DeFi as of January 2021 | Source: Footprint Analytics

What are cross-chain bridges and why are they important?

DeFi TVL Rating by BlockChain as of January 2021 | Source: Footprint Analytics

This article will look at the nature of cross-chain bridging, specifically:

  1. How does cross-chain bridge work?
  2. Market performance of cross-chain bridges.
  3. The problems are solved by cross-chain bridges.
  4. Select a cross-chain bridge.

What is a cross-chain bridge?

A cross-chain bridge or blockchain bridge allows the transfer of assets, smart contract directives, or data between blockchains. Two chains may have different protocols, rules, and governance models, but a cross-chain bridge connects different blockchains by securely interacting.

A cross-chain bridge allows users to:

  • Deploy digital asset transactions quickly and easily.
  • Enjoy low operating difficulty.
  • Take advantage of lower transfer fees on non-scalable blockchains.
  • Deploy dApps on multiple platforms.

Here’s an example of how cross-chain assets are passed with a bridge:

When a user needs to convert an asset like ERC20 A token on Ethereum into another asset like BEP20 A token on BSC chain via AnySwap, ERC20 A will be locked on the source chain and then notify the bridge to generate BEP20 A on the BSC chain before sending it to the user.

In this example, the entire operation of the cross-chain bridge takes about 5 to 20 minutes, with an estimated gas fee between $10 and $20, depending on the pre-congestion state. ) in the Ether network at the time.

What are cross-chain bridges and why are they important?


Market performance

The market is currently dominated by Layer-2 scaling cross-chain bridges, mostly built on Ethereum for better connectivity and interoperability.

According to Footprint, the TVL of cross-chain bridges was $16.2 billion as of October 26, an increase of more than 72.25% over the past 30 days. The four largest cross-chain bridges are Avalanche Bridge, Polygon Bridge, Arbitrum Bridge and Fantom Anyswap Bridge, accounting for 95.61% of all cross-chain bridges, with the highest monthly increase of 401.23% last month.

Data from CoinTofu’s Cross-ChainBridge tool reveals that these four cross-chain bridges also have excellent user experience ratings.

What are cross-chain bridges and why are they important?

TVL distribution & cross-chain bridge market share as of April 2021 | Source: Footprint

What are cross-chain bridges and why are they important?

Ethereum Bridge TVL Rating & Change | Source: Footprint Analytics

The chart above shows that Optimism has the most active deposits since the beginning of September, followed by Avalanche. Remittance fees are currently as low as $0.25 (as per L2 Fees), and their transfer fees are subject to change, but with relatively small changes.

What are cross-chain bridges and why are they important?

Single daily depositor for Ethereum bridge as of June 2021 | Source: Footprint Analytics

The main asset traded on cross-chain bridges is ETH (WETH), with a total of ETH locked across 15 cross-chain bridges worth $6.882 billion as of Oct. 26. This represents approximately 42.6 % of total value locked and assets most used by investors, followed by WBTC and stablecoin USDC.

What are cross-chain bridges and why are they important?

Asset Distribution – Tree Map | Source: Footprint Analytics

Cross-chain bridging solves nWhat’s the problem??

Cross-chain bridging generates growth across chains (reflected by Fantom and Avalanche prices – which saw 12% and 18% gains respectively in the first week of November) offering other asset interoperability each other, high security level and better performances.

Without a bridge, investors have to go through different exchanges and instead incur larger fees.

Cross-chain bridges also solve the following problems:

  • Reduce gas costs with increased transaction speed.
  • User assets can be freely interacted with for a better user experience.
  • Improve productivity and usefulness of existing crypto assets.
  • Higher security, better privacy.

Cross-chain bridging is suitable in the following situations:

  • Transfer tokens between the Ether network and the Layer-2 network, with interoperable assets across chains, such as faster and easier deposits, asset withdrawals and exit times to reduce operational complexity .
  • High fees and usage during Ether congested times.
  • High volatility assets are backed by single chains and more assets are backed by cross-chain bridges.
  • Investors can use a cross-chain bridge when investing in a new chain to get to the first mine faster, but it is necessary to evaluate the whole mechanism of the new chain and its security.
  • Arbitrage trading on DEX based on Optimism, Arbitrum and Polygon etc.

How to choose the right cross-chain bridge

Consider the following criteria when choosing a cross-chain bridge:

  • TVL’s stability above $1 billion with a streamlined cross-chain mechanism and a reliable execution environment is reflected in gradual changes rather than sudden fluctuations. Cross-chain information verification method and cross-chain fund management method must also be taken into account.
  • Reasonable conversion costs (from $1 to $5) throughout the chain and engagement speed with an estimated 10 to 30 minute arrival time.
  • The level of security guaranteed against hackers taking advantage of vulnerabilities.


With the development of the DeFi industry, cross-chain bridges have become more popular than traditional exchanges. They enable interoperability and interoperability in blockchain applications to support project owners, different blockchains, and investors, while solving capital flow problems and reducing transaction costs. translate for users.

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