Cross-chain Bridges Overview: Technology, Ecology, and Development Trends

In the current blockchain ecosystem, there are many public chains and scaling networks with different characteristics. Bitcoin, as an electronic cash system, has limited asset liquidity, while Ethereum faces network congestion issues. Against this backdrop, the flow of assets and information between different chains has become an inevitable trend, and cross-chain bridges have emerged.

Cross-chain ecosystem status

Cross-chain has become a common phenomenon in the blockchain ecosystem:

1. There are numerous cross-chain bridges. There are dozens of cross-chain bridges on mainstream public chains.

2. The types of cross-chain assets are diverse. In addition to fungible tokens, NFT cross-chain is also becoming increasingly popular.

3. Cross-chain penetration of various ecosystems and applications. Mainstream public chains and Layer 2 both adopt cross-chain solutions, and cross-chain assets are widely used in DeFi applications.

4. The cross-chain locked amount is enormous. The bridge locked amount in the Ethereum ecosystem has reached hundreds of billions of dollars.

5. Cross-chain interactions are becoming increasingly frequent and complex. The composability of DeFi enables cross-chain assets to flow between different ecosystems.

Overall, the cross-chain ecosystems of Ethereum, BNB Chain, Polygon, etc. are the most prosperous. Stablecoins like USDC and USDT are the main cross-chain assets.

Main Technical Solutions

There are mainly three technical solutions for cross-chain bridges:

Lock-up + Minting/Burning

Representing: WBTC, Polygon Bridge, etc.

Principle: Lock assets on the source chain and mint an equivalent cross-chain asset on the target chain. Upon redemption, the cross-chain asset is destroyed and the original asset is unlocked.

Advantages: Simple and intuitive Disadvantages: lower efficiency, reliance on third-party custody

liquidity pool

Represent: ThorSwap, Hop Exchange, etc.

Principle: Provide liquidity pools in advance on the source chain and target chain, allowing users to directly exchange for cross-chain assets.

Advantages: faster speed Disadvantage: liquidity risk

atomic swap

Representative: cBridge

Principle: Achieving atomic swaps of assets between the original chain and the target chain through hash time-locked contracts.

Advantages: high degree of decentralization, good security Disadvantage: High compatibility requirements for the chain.

Cross-chain Development Trends

1. The Layer 2 official bridge focuses on security and is dedicated to cross-chain between Layer 1 and Layer 2.

2. Cross-chain aggregators provide multiple routing options to optimize user experience.

3. Provide Staking functionality to attract users to provide liquidity.

4. NFT cross-chain becomes a new growth point.

5. Participate in the DeFi ecosystem with cross-chain liquidity pools to enhance capital efficiency.

6. Innovative features continue to emerge, such as support for CEX cross-chain and multiple currencies cross-chain at the same time.

The future development opportunities for cross-chain bridges lie in: achieving full chain interoperability, deep integration with DeFi, improving NFT cross-chain, and focusing on specific ecosystems such as Layer 2 cross-chain, etc. The cross-chain track still has immense space for innovation.