Blockchains can be thought of as virtual islands or separate ecosystems that have historically had limited ability to interact with each other. This has made it difficult for users to freely transfer assets between different blockchain platforms.
To address this issue, blockchain bridges have emerged as a solution. These bridges enable the seamless movement of funds across chains, allowing for cross-chain compatibility. This simplifies the process of transferring digital assets between different chains and gives users the freedom to move their funds without being tied to a single blockchain.
Bridges are not limited to asset transfers. They can also facilitate complex executions, such as allowing decentralized applications (DApps) to utilize resources or functions from multiple blockchains simultaneously.
Let’s take a look at how a bridge to Solana works as an example. If a user wants to transfer Binance USD (BUSD) from the BNB Chain to Solana or vice versa, the bridge will facilitate this transfer. The process typically involves a lock-and-mint system, where the assets are locked on the source chain and a wrapped version of the asset is minted on the destination chain. This wrapped version has its own supply metrics, while the original asset’s circulating supply remains unaffected. The reverse process, called burning and minting, involves burning the wrapped asset and releasing the locked token back into circulation on the native blockchain.
There are several bridges to Solana, but the most popular ones based on total value locked are Portal (previously known as Wormhole) and Allbridge.
Now let’s explore the process of bridging on a decentralized bridge platform like Portal.
Step 1: Select the blockchains. The user needs to select the source blockchain (where the assets are coming from) and the target blockchain (Solana).
Step 2: Connect the wallet. The user must connect their Web3 wallet to the bridge by clicking the “Connect” button. They will be prompted to choose from a list of supported wallet providers and connect it to the bridge.
Step 3: Select an asset to transfer. After connecting the wallet, the user must select an asset from the “Select a Token” drop-down menu. They can choose from the list of supported assets or search for the specific asset they want to transfer. The interface will display the balance of the selected asset, allowing the user to confirm the correct token and enter the amount they wish to transfer.
Step 4: Connect the Solana wallet. Clicking the “Connect” button will display a list of supported Solana wallets. The user can choose the relevant option and follow the prompts in the wallet to connect it to the bridge.
Step 5: Create associated token account. Once the origin and target wallets are linked, the user needs to create a token account in the Solana wallet by clicking the “Create associated token account” button. If they already have an associated token account, they can skip this step.
Step 6: Bridge the funds. The user must approve the token transfer through the bridge interface and confirm the transaction in the connected wallet. They can send assets to the bridge by clicking the “Transfer” button.
Step 7: Redeem the funds. After the bridging process is complete, the user can use the “Redeem” button to claim the tokens from the bridge using their Solana wallet.
The process for bridging on a centralized bridge platform, like the OKX crypto exchange, is slightly different. Let’s go through the steps.
Step 1: Transfer the funds to the wallet. The user needs to transfer the funds they want to bridge to their OKX wallet and go to the “Bridge” section.
Step 2: Connect the wallet. Clicking “Connect wallet” will display a QR code that the user needs to scan to link their OKX wallet. They can add a wallet extension to the browser or select “Other” if using a different wallet like MetaMask. After entering the OKX wallet password and confirming the connection, the OKX wallet will be linked to OKX Swap.
Step 3: Complete the process. The user selects the source blockchain and destination wallet (Solana) and chooses the tokens they want to bridge. The interface will display the amount of tokens the user will receive. By selecting “Swap across chains” and confirming the transaction, the transfer via the bridge is completed.
Before using bridges, it’s important to understand the terminology and fee structures involved. Here are some key concepts:
– Slippage: Slippage refers to the difference between the expected price of a transaction and the actual executed price. It’s important to consider minimum slippage to avoid transaction aborts due to price changes.
– Trading route: In the context of asset bridging, a trading route refers to the path an asset takes during a swap or bridge transaction. Not all centralized exchanges function as bridges, but some allow users to choose the bridge manually.
– Network fee: This refers to the cost of using the blockchain network for bridging. There are typically four types of fees: source network fees, destination network fees, bridge fees, and conversion fees.
– Transaction time: The time it takes for a transaction to complete depends on source network confirmation time, bridge processing time, and destination network confirmation time. Solana is known for its quick processing, but the efficiency of the bridge used also affects transaction time.
Lastly, it’s important to be aware of the risks associated with blockchain bridges. These risks include centralization, operational risks like downtime or maintenance, and smart contract bugs or flaws. Some bridges rely on centralized authorities, which goes against the decentralized nature of blockchain. Reputable bridges are designed to handle stuck transactions, but it’s still important to conduct due diligence and use separate wallets for bridges to minimize risks.
In conclusion, blockchain bridges have emerged as a solution to overcome limitations in transferring assets between different blockchain platforms. They enable cross-chain compatibility and simplify the process of moving digital assets. Users can bridge assets using decentralized or centralized bridge platforms, depending on their preferences. However, it’s crucial to understand the terminology, fee structures, and risks associated with bridges before using them.