{"id":205329,"date":"2021-11-21T22:00:53","date_gmt":"2021-11-21T22:00:53","guid":{"rendered":"https:\/\/cryptoslate.com\/?p=205329"},"modified":"2021-11-28T12:58:20","modified_gmt":"2021-11-28T12:58:20","slug":"what-are-cross-chain-bridges-and-why-do-they-matter","status":"publish","type":"post","link":"https:\/\/cryptoslate.com\/what-are-cross-chain-bridges-and-why-do-they-matter\/","title":{"rendered":"What are cross-chain bridges and why do they matter?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Gas fees make cross-chain transactions very expensive, hindering the free flow of crypto assets.\u00a0 <\/span><span style=\"font-weight: 400;\">So it\u2019s not surprising that cross-chain bridges have grown at an unprecedented rate\u2014a TVL increase of 89% MoM in October\u2014as DeFi transaction volume booms in the bull market.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, did you know that cross-chain bridges solve other problems besides (what are essential) crypto transaction fees?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As multi-chain projects and interoperability become key components of the industry, DeFi investors need to understand how cross-chain bridges work.<\/span><\/p>\n<figure id=\"attachment_205331\" aria-describedby=\"caption-attachment-205331\" style=\"width: 1228px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-205331\" src=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-01.jpg\" alt=\"DeFi TVL since January 2021 (Data source: Footprint Analytics)\" width=\"1228\" height=\"388\" srcset=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-01.jpg 1228w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-01-300x95.jpg 300w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-01-1024x324.jpg 1024w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-01-768x243.jpg 768w\" sizes=\"(max-width: 1228px) 100vw, 1228px\" \/><figcaption id=\"caption-attachment-205331\" class=\"wp-caption-text\">DeFi TVL since January 2021 (Data source: Footprint Analytics)<\/figcaption><\/figure>\n<figure id=\"attachment_205332\" aria-describedby=\"caption-attachment-205332\" style=\"width: 1216px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-205332\" src=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-02.jpg\" alt=\"DeFi TVL Ranking by BlockChain since Jan 2021 (Data source: Footprint Analytics)\" width=\"1216\" height=\"388\" srcset=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-02.jpg 1216w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-02-300x96.jpg 300w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-02-1024x327.jpg 1024w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-02-768x245.jpg 768w\" sizes=\"(max-width: 1216px) 100vw, 1216px\" \/><figcaption id=\"caption-attachment-205332\" class=\"wp-caption-text\">DeFi TVL Ranking by BlockChain since Jan 2021 (Data source: Footprint Analytics)<\/figcaption><\/figure>\n<p><span style=\"font-weight: 400;\">This article will look into the nature of cross-chain bridges, specifically:<\/span><\/p>\n<ol>\n<li><span style=\"font-weight: 400;\"> How does a cross-chain bridge work<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> Cross-chain bridges\u2019 market performance<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> Problems addressed by cross-chain bridges<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> Selecting a cross-chain bridge<\/span><\/li>\n<\/ol>\n<h2><b>What is a cross-chain bridge?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">A cross-chain bridge or a blockchain bridge enables the transfer of tokens assets, smart contract instructions or data between blockchains. Two chains may have different protocols, rules and governance models, but a cross-chain bridge connects these disparate blockchains together by interoperating securely.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A cross-chain bridge allows users to:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Deploy digital asset transactions fast and easy\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Enjoy low operational difficulty\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Take advantage of lower transfer fees on non-scalable blockchains<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Implement dApps across multiple platforms<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Here\u2019s an example of how cross-chain assets are transferred with a bridge:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When a user needs to convert an asset such as an ERC20 A token on Ethernet into another asset such as BEP20 A token on the BSC chain via AnySwap, the ERC20 A will be locked on the source chain and then notify the bridge to generate the BEP20 A on the BSC chain before sending it to the user.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In this example, the entire operation of the cross-chain bridge takes about five to 20 minutes, with an approximate gas fee in the range of $10 to $20, depending on the pre-congestion conditions in Ether at the time.<\/span><\/p>\n<figure id=\"attachment_205333\" aria-describedby=\"caption-attachment-205333\" style=\"width: 500px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-205333\" src=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-03.jpg\" alt=\"Data source: Anyswap.exchange\" width=\"500\" height=\"243\" srcset=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-03.jpg 1200w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-03-300x146.jpg 300w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-03-1024x498.jpg 1024w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-03-768x374.jpg 768w\" sizes=\"(max-width: 500px) 100vw, 500px\" \/><figcaption id=\"caption-attachment-205333\" class=\"wp-caption-text\">Data source: Anyswap.exchange<\/figcaption><\/figure>\n<h2><b>How has Crosslink Bridge performed recently?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The market is currently dominated mostly by Layer 2 scale-out cross-chain bridges, which are mainly built on Ethereum for better interconnection and interoperability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">According to Footprint, the TVL of cross-chain bridges was $16.2 billion as of Oct. 26, an increase of over 72.25% in the last 30 days.. The four largest cross-chain bridges namely, Avalanche Bridge, Polygon Bridge, Arbitrum Bridge and Fantom Anyswap Bridge, account for 95.61% of the entire cross-chain bridge, with its highest monthly increase of 401.23% last month.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Data from <\/span><a href=\"https:\/\/www.cointofu.com\/cross-chain-bridge\"><span style=\"font-weight: 400;\">CoinTofu Cross-ChainBridge<\/span><\/a><span style=\"font-weight: 400;\"> tool, reveal that these four cross-chain bridges also have excellent user experience ratings.<\/span><\/p>\n<figure id=\"attachment_205334\" aria-describedby=\"caption-attachment-205334\" style=\"width: 678px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-205334\" src=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-04.jpg\" alt=\"TVL & share distribution across- chain bridges since Apr 2021 (Data source: Footprint) Analytics\" width=\"678\" height=\"211\" srcset=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-04.jpg 1208w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-04-300x93.jpg 300w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-04-1024x319.jpg 1024w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-04-768x239.jpg 768w\" sizes=\"(max-width: 678px) 100vw, 678px\" \/><figcaption id=\"caption-attachment-205334\" class=\"wp-caption-text\">TVL & share distribution across- chain bridges since Apr 2021 (Data source: Footprint) Analytics<\/figcaption><\/figure>\n<figure id=\"attachment_205335\" aria-describedby=\"caption-attachment-205335\" style=\"width: 666px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-205335\" src=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-05.jpg\" alt=\"Ethereum Bridges TVL Ranking & Change (Data source: Footprint Analytics)\" width=\"666\" height=\"418\" srcset=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-05.jpg 1200w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-05-300x189.jpg 300w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-05-1024x643.jpg 1024w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-05-768x483.jpg 768w\" sizes=\"(max-width: 666px) 100vw, 666px\" \/><figcaption id=\"caption-attachment-205335\" class=\"wp-caption-text\">Ethereum Bridges TVL Ranking & Change (Data source: Footprint Analytics)<\/figcaption><\/figure>\n<p><span style=\"font-weight: 400;\">The above chart shows that Optimism has had the most active deposits from the beginning of September to today, followed by Avalanche. Current transfer fees are as low as $0.25 (according to L2 Fees) and their transfer fees are variable, but with relatively small changes.<\/span><\/p>\n<figure id=\"attachment_205336\" aria-describedby=\"caption-attachment-205336\" style=\"width: 579px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-205336\" src=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-06.jpg\" alt=\"Ethereum Bridge Daily Unique Depositors since June 2021 (Data source: Footprint Analytics)\" width=\"579\" height=\"320\" srcset=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-06.jpg 1206w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-06-300x166.jpg 300w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-06-1024x565.jpg 1024w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-06-768x424.jpg 768w\" sizes=\"(max-width: 579px) 100vw, 579px\" \/><figcaption id=\"caption-attachment-205336\" class=\"wp-caption-text\">Ethereum Bridge Daily Unique Depositors since June 2021 (Data source: Footprint Analytics)<\/figcaption><\/figure>\n<p><span style=\"font-weight: 400;\">The main asset traded on cross-chain bridges is ETH (WETH), with total ETH lock-ups on the 15 cross-chain bridges valued at $6.882 billion as of Oct. 26. This represents approximately 42.6% of total lock-ups and the most used asset by investors, followed by WBTC and stablecoin USDC.<\/span><\/p>\n<figure id=\"attachment_205337\" aria-describedby=\"caption-attachment-205337\" style=\"width: 587px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-205337\" src=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-07.jpg\" alt=\"Asset Distribution- Tree Map (Data source: Footprint Analytics)\" width=\"587\" height=\"484\" srcset=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-07.jpg 1174w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-07-300x247.jpg 300w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-07-1024x844.jpg 1024w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-07-768x633.jpg 768w\" sizes=\"(max-width: 587px) 100vw, 587px\" \/><figcaption id=\"caption-attachment-205337\" class=\"wp-caption-text\">Asset Distribution- Tree Map (Data source: Footprint Analytics)<\/figcaption><\/figure>\n<h2><b>What problems do cross-chain bridges address?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Cross-chain bridges create growth across chains (reflected by <\/span><a href=\"https:\/\/docs.google.com\/document\/d\/1KMPFVP9TOvOZ9OpmGHXCfICZZXDI0gTAWHg-vuFCN5E\/edit#\"><span style=\"font-weight: 400;\">Fantom<\/span><\/a><span style=\"font-weight: 400;\"> and <\/span><a href=\"https:\/\/docs.google.com\/document\/d\/1zy754XYJOQnXHaNZOiGE2hCSU1mYcUUX4aRmdeiSsY0\/edit#heading=h.er52wdbsvto5\"><span style=\"font-weight: 400;\">Avalanche<\/span><\/a><span style=\"font-weight: 400;\"> prices\u2014which hit gains of 12% and 18%, respectively, in the first week of November) that offer disparate asset interoperability, high level of security and better asset rendition.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Without a bridge, investors have to go through different exchanges and incur larger fees instead.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Cross-chain bridges also address the following:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Lower gas costs with increased transaction speeds<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">User assets can be freely interacted with for a high user experience<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Improved productivity and usefulness of existing crypto assets<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Higher security, better privacy<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The use of cross-chain bridges is appropriate in the following scenarios:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Token transfers between Ether and a Layer 2 network, with assets interoperable across chains, such as faster and easier deposit of funds, withdrawal of assets and exit times to reduce operational complexity<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">High fees and use in times of Ether congestion<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Thin assets supported by single chains and more assets supported by cross-chain bridges<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Investors can use cross-chain bridges when investing in new chains to get to the head mine faster, but need to assess the full mechanics of the new chain and its security.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Arbitrage trading across the DEX on Optimism, Arbitrum and Polygon, etc.<\/span><\/li>\n<\/ul>\n<h2><b> How to choose the right cross-chain bridge<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Consider the following criteria when selecting a cross-chain bridge:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A stable TVL exceeding USD$1 billion with sound cross-chain mechanism and a credible execution environment reflected by gradual changes instead of abrupt fluctuations. Verification method of cross-chain information and management method of cross-chain funds must also be taken into account.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Reasonable transfer costs (from USD$1 to USD$5) across the chain and interaction speeds with an estimated arrival time of 10 to 30 minutes<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Security to ensure against hackers that take advantage of vulnerabilities<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">In addition, there are also a number of aggregation tools that offer a one-stop cross-chain bridge solution, of which <\/span><a href=\"https:\/\/www.cointofu.com\/cross-chain-bridge\"><span style=\"font-weight: 400;\">CoinTofu<\/span><\/a><span style=\"font-weight: 400;\"> has a better overall experience in terms of reaching the cross-chain page with one click and displaying the advantages of supported cross-chain bridges, estimated arrival times, transaction fees, and user experience ratings.<\/span><\/p>\n<figure id=\"attachment_205338\" aria-describedby=\"caption-attachment-205338\" style=\"width: 599px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-205338\" src=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-08.jpg\" alt=\"Data source: cointofu.com\" width=\"599\" height=\"313\" srcset=\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-08.jpg 1202w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-08-300x156.jpg 300w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-08-1024x534.jpg 1024w, https:\/\/cryptoslate.com\/wp-content\/uploads\/2021\/11\/footprint-cross-chain-bridge-08-768x401.jpg 768w\" sizes=\"(max-width: 599px) 100vw, 599px\" \/><figcaption id=\"caption-attachment-205338\" class=\"wp-caption-text\">Data source: cointofu.com<\/figcaption><\/figure>\n<h2><b>Conclusion<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">With the development of the DeFi industry, cross-chain bridges have become more popular than traditional exchanges. They enable interoperability and mutual integration of blockchain applications to support project owners, various blockchains and investors and address the problem of capital flow and lower transaction costs to users.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The above content above is for reference only and does not constitute investment advice. If you spot any errors, feedback is welcome.<\/span><\/p>\n<p class=\"p1\"><em><b>This report was brought to you by Footprint Analytics.<\/b><\/em><\/p>\n<p class=\"p1\">Footprint Analytics is an all-in-one analysis platform to visualize blockchain data and discover insights. It cleans and integrates on-chain data so users of any experience level can quickly start researching tokens, projects and protocols. With over a thousand dashboard templates plus a drag-and-drop interface, anyone can build their own customized charts in minutes. Uncover blockchain data and invest smarter with Footprint.\u00a0<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<ul>\n<li class=\"p1\"><a href=\"https:\/\/www.footprint.network\/\">Footprint Website<\/a><\/li>\n<li class=\"p1\"><a href=\"https:\/\/discord.gg\/3HYaR6USM7\">Discord<\/a><\/li>\n<li class=\"p1\"><a href=\"https:\/\/twitter.com\/Footprint_DeFi\">Twitter<\/a><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Gas fees make cross-chain transactions very expensive, hindering the free flow of crypto assets.\u00a0 So it\u2019s not surprising that cross-chain bridges have grown at an unprecedented rate\u2014a TVL increase of 89% MoM in October\u2014as DeFi transaction volume booms in the bull market. However, did you know that cross-chain bridges solve other problems besides (what are [&hellip;]<\/p>\n","protected":false},"author":828,"featured_media":205330,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[120,46940],"tags":[],"prediction_market_topic":[],"post_folder":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v21.9 (Yoast SEO v21.9.1) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What are cross-chain bridges and why do they matter?<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/cryptoslate.com\/what-are-cross-chain-bridges-and-why-do-they-matter\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What are cross-chain bridges and why do they matter?\" \/>\n<meta property=\"og:description\" content=\"Gas fees make cross-chain transactions very expensive, hindering the free flow of crypto assets.\u00a0 So it\u2019s not surprising that cross-chain bridges have grown at an unprecedented rate\u2014a TVL increase of 89% MoM in October\u2014as DeFi transaction volume booms in the bull market. 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