6 Best Cross-chain Bridges In 2022

What is a cross-chain bridge?

A cross-chain bridge enables an exchange of information, cryptocurrency or NFTs from one blockchain network to another. It enables the flow of data and tokens across what would otherwise be siloed sets of data on different blockchains.

With fiat currency there are many established ways for individuals and businesses to exchange money, creating a globally available and interoperable system of financial payments. Those systems include financial institutions, banks and credit cards that handle foreign exchange. In the world of blockchains, a cross-chain bridge serves an analogous purpose.

Exchange across different blockchains for cryptocurrency is possible without a cross-chain bridge, but it is expensive and more time-consuming. Without the use of a cross-chain bridge, users must first convert a cryptocurrency token into a fiat currency, which often involves fees. They then use currency to get the other desired type of cryptocurrency, incurring more fees and taking time.

One characteristic of a cross-chain bridge is that it enables users to exchange one cryptocurrency for another without first changing it to fiat currency. Cross-chain bridges aren't limited to just cryptocurrency value transfer either. An effective cross-chain bridge can also enable the transfer of smart contracts and NFTs from one blockchain environment to another.

There are several approaches to enabling transfers with a cross-chain bridge. One common approach is using a wrapped token issued by the cross-chain bridge provider platform. With a wrapped token, the value of one token from a specific blockchain network can be encapsulated inside another token. Wrapped tokens are typically based on the ERC-20 technical specification for an Ethereum network. For example, WBTC is a Bitcoin token wrapped with an ERC-20 Ethereum smart contract.

Another approach to enabling cross-chain bridge transfers is by using a liquidity pool. With a liquidity pool, a cross-chain bridge provider holds inventory -- or pools -- of various coins where one can be exchanged for another.

Cross-chain bridges can also be a lucrative target for hackers. One of the largest attacks occurred in February 2022, when cross-chain bridge platform Wormhole was the victim of an attack in which the threat actor stole 120,000 wrapped Ethereum tokens -- worth an estimated $320 million at the time of the theft. BNB Chain, also known as Binance Smart Chain, was the victim of an attack in October 2022 that resulted in losses estimated at $570 million. Blockchain bridge analysis vendor Chainalyis has estimated that 69% of cryptocurrency funds stolen in 2022 have been attributed to attacks on cross-chain bridges.

Learn more about how cryptocurrency cyber attacks are on the rise.