Blockchain/Bitcoin Bridges 101

While interoperability—the ability for different blockchain networks to interact with one another—continues to be a challenge when it comes to crypto's mainstream adoption, blockchain bridges are one of the primary ways that crypto protocols are attempting to overcome this issue.

We explore what "bridging" means and why it's important as part of our "Prosper 101" educational series.

What is Bridging in Crypto?

In crypto, bridging refers to the ability to transfer data and assets between different blockchain networks.

In its simplest form, crypto bridges are software protocols that establish a connection between two blockchains—almost like a physical bridge—allowing them to interact and communicate with one another.

How Do Blockchain Bridges Work?

Bridges don't actually move an asset from one blockchain to another. Instead, the bridge is used to create equivalent tokens that represent the original asset and are compatible with the target network.

Wrapped crypto tokens are digital tokens that are pegged 1:1 to the original asset, and therefore hold the same value. For example, you can use a bridge to request for an ERC-20 token (i.e., wrapped Bitcoin) in exchange for a Bitcoin, the wrapped Bitcoin is built using ERC-20 token standard and valued at the same price as a regular BTC.

Some bridges use liquidity pools as a bridging mechanism. The original crypto asset is deposited into a liquidity pool, allowing the owner to earn rewards while using the bridged assets on another chain.

Why is Bridging Important in Crypto?

Blockchain bridges play a crucial role in the growth of the decentralized finance (DeFi) sector, supporting the flow of liquidity in and out of different blockchain ecosystems, and therefore helping to expand the functionality and reach of a blockchain network.

In the early days of Web3, it was often difficult to share data across blockchains, with assets native to one blockchain often not being compatible with other blockchains. However, bridges can allow non-native cryptocurrencies—or at least synthetic derivatives—to be used on a different blockchain.

Crypto bridges also enable users to circumvent centralized exchanges and instead to transfer assets directly cross-chain. This can help to avoid transaction delays and expensive fees associated with centralized exchanges.

Different Types of Blockchain Bridges

There are different types of blockchain bridges:

• Trusted (Custodial) Bridges – Include an element of centralization, usually in the form of an entity that maintains the security of the bridge, to facilitate the transfer between blockchains
• Trustless (Non-Custodial) Bridges – Operate using smart contracts and algorithms to automate transactions, maintain security and ensure decentralization
• Unidirectional Bridges – One-way bridges that allow users to send assets to another blockchain but not back to the native blockchain
• Bidirectional Bridges – Two-way bridges that enable crypto assets to be freely exchanged back-and-forth between blockchains
• Sidechain Bridges – Allow assets and information to be transferred between a main chain and a sidechain, a separate blockchain pegged to the mainnet

Examples of Bitcoin Bridges

Bitcoin bridges are continuing to grow in popularity, enabling Bitcoin holders to use BTC on other networks, thus increasing the utility of the Bitcoin blockchain.

Here are some examples of  Bitcoin bridges:

• Coinbase – Coinbase Wrapped BTC is an ERC-20 token that is backed 1:1 by Bitcoin held by Coinbase. When users send their BTC from Coinbase to Base, Solana, or Ethereum, it will automatically be converted 1:1 to cbBTC (Read Wrapped Bitcoin 101 for more examples)
• Rootstock (RSK / RBTC) – A sidechain, essentially a Layer 2 scaling solution, secured by the Bitcoin network. RSK is a smart contract platform that makes Ethereum decentralized applications (dApps) compatible with Bitcoin
• Bool Network – Bitcoin Verification layer that turns all blockchains into Bitcoin’s Layer2
• OmniBTC – Decentralized cross-chain bridge and lending platform
• Avalanche – A bridge that allows the transferal of BTC to Avalanche's C-Chain. This is bridged through a non-custodial browser extension known as Core
• Polkadot – A two-way bridge between the Bitcoin and Polkadot blockchains. BTC holders can send their BTC to Polkadot in the form of iBTC, holders can then burn iBTC in exchange for BTC