Blockchain Bridges: Connecting Different Chains

Intro

Imagine a world where different blockchains are unable to communicate or interact with each other. This would severely limit the potential of decentralized finance (DeFi) and hinder the growth of the crypto ecosystem. Fortunately, blockchain bridges act as digital gateways and enable seamless asset transfers between various networks. However, while crypto bridges offer immense convenience, they also come with significant risks. A series of high-profile hacks has highlighted the vulnerabilities of these digital infrastructures, emphasizing the need for robust security measures. 

What is a Blockchain Bridge?

Imagine trying to cross a river without a bridge; it would be nearly impossible. Well, in the world of cryptocurrencies, blockchain bridges, or as they're often called, cross-chain bridges, play a similar role. These digital gateways connect different blockchain networks, allowing users to effortlessly transfer cryptocurrencies between them. However, while crypto bridges offer convenience, they also come with significant risks. A series of high-profile hacks have highlighted the vulnerabilities of these digital infrastructures. According to research  from Beosin, bridge hacks accounted for a staggering 7% of all crypto thefts in 2023. By 2024, these attacks have led to  losses exceeding $2.8 billion, representing nearly 40% of the total value stolen in Web3, as reported by DefiLlama. While cross-chain bridges are essential for driving innovation in Web3, they also present  opportunities for malicious actors to exploit. And it's crucial to choose solutions with a strong track record of security. After all, you wouldn't want to risk losing your hard-earned digital assets to a bridge collapse, would you?

How Do Blockchain Bridges Work?

What you should probably learn from the get-go is that at the very core of most cross-chain bridges lies a simple yet powerful concept of blockchain interoperability: locking assets on one blockchain and minting corresponding assets on another. We'll discuss later how this mechanism might vary slightly from bridge to bridge, however, the general approach outlined above ensures that the total supply of the asset remains consistent across both chains. Here's a step-by-step breakdown of how blockchain bridges work:

1. Asset Locking: You initiate a transaction to lock your assets on the source blockchain, say, on Polygon. This involves sending the assets, say Polygon’s native tokens, MATIC, to a designated address controlled by the bridge.
2. Verification: The bridge verifies the transaction on the source blockchain to confirm that the assets are valid and owned by the user.
3. Proof Generation: Once the transaction is confirmed, the bridge generates a proof of the locked assets, serving as evidence of ownership.
4. Asset Minting: The bridge then creates an equivalent amount of assets on the destination blockchain, say, on Avalanche, using the proof generated in the previous step.
5. Asset Release: The newly minted assets are made available on Avalanche, allowing the user to utilize them within that ecosystem.

To move the assets back to the source blockchain, the user can initiate a similar process in reverse, locking the assets on the destination blockchain and minting them on the source blockchain. It's crucial to remember that the specific mechanisms and protocols used by cross-chain bridges can vary. Additionally, the security and reliability of a bridge depend on factors such as the consensus mechanisms of the involved blockchains and the reputation of the bridge operator. But let’s focus on that a little bit later, in the meantime, read on!

Types of Blockchain Bridges 

Earlier, we’ve mentioned that the token transfer mechanism can vary slightly from cross-chain bridge to cross-chain bridge. Let's take a closer look at how this might differ depending on the approach. Cross-chain bridges utilize three primary mechanisms:

Lock and Mint 

Think of lock and mint as a two-way street. When you want to move tokens from one blockchain to another, the bridge locks your tokens on the original chain and creates new, wrapped tokens on the destination chain. It's like exchanging currency at the border, but with crypto! To bring your tokens back home, you burn the wrapped tokens on the destination chain, and your original tokens are unlocked on the source chain. It's like returning a rental car and getting your deposit back.

Here are some examples of bridges that use the lock and mint mechanism:

1. Portal Bridge connects various blockchains, including Solana, Ethereum, Terra, and Avalanche. 
2. Avalanche Bridge: This bridge is built to transfer tokens from the Avalanche blockchain to Ethereum.

Burn and Mint

In addition to the lock-and-mint mechanism, another approach is known as burn and mint. This method works a bit differently. When you want to transfer tokens from one chain to another, you actually burn your tokens on the source chain. Think of it like destroying the old version of the token. At the same time, the bridge mints equivalent tokens on the destination chain. It's like creating a new version of the token. 

Here are some examples of bridges that use the burn and mint  mechanism:

3. Polkadot Parachain: With Burn and Mint mechanics, you can enable the transfer of tokens between different Parachains within the Polkadot network. For example, you can transfer tokens from Acala to Karura.
4. Near Protocol's Rainbow Bridge: This bridge connects Near Protocol to Ethereum. It uses a burn-and-mint mechanism to allow users to transfer assets between these two networks.

Lock and Unlock 

Tokens on the source chain are locked while equivalent tokens from a liquidity pool on the destination chain are released, ensuring consistent asset circulation. This mechanism often attracts liquidity through incentives like revenue sharing. 

5. Synapse: A popular cross-chain bridge that supports a wide range of blockchains, including Ethereum, Polygon, Avalanche, and Fantom. 
6. Celer Bridge: This bridge connects the Conflux blockchain to Ethereum. It uses  a lock-and-unlock mechanism, leveraging  liquidity pools to facilitate asset transfers between these two networks.

Examples of Popular Blockchain Bridges

Security Considerations 

According to Chainlink's developers, who have built their own bridge powered by oracles, there are at least seven bridge vulnerabilities to be aware of if you're planning to move funds across chains.

Weak private key practices

Cross-chain bridges come with some critical vulnerabilities, and one of the biggest concerns is how they handle private keys. These keys, often managed by bridge operators, are crucial for verifying and transferring assets between blockchains. If a private key gets compromised, it can lead to major security breaches—many of the biggest hacks in Web3 have happened this way due to poor key management.

To reduce these risks, it's smart to spread out the infrastructure. The more diverse the servers, providers, and operators involved, the better the protection against single points of failure and centralization risks. 

Major Cross-Chain Bridge Hacks Caused by Private Key Breaches: 
 

• Multichain Bridge Hack (July 2023) —The CEO of Multichain was responsible for the compromised private keys that enabled unauthorized withdrawals from the cross-chain bridge.

• Harmony Bridge (June 2022)—Hackers obtained control of two of the five private keys required for transactions on the Harmony Bridge multisig, enabling them to exploit the vulnerability.

• Ronin Bridge (March 2022)—Hackers gained control of five out of nine private keys used to manage transactions on the Ronin Bridge multisig. 

Unaudited Smart Contracts

Cross-chain bridges rely on smart contracts to handle token transfers between blockchains.  Smart contracts ensure proper minting, burning, or locking of tokens, but poorly written code can introduce significant security risks. Vulnerabilities in smart contract code have led to significant hacks in the past.

To minimize these risks, it’s essential to have experienced auditors thoroughly test the code before deployment and continuously monitor it for issues. Regular updates and multiple rounds of testing help keep the code secure.

When choosing a bridge, look for ones with a solid audit history and strong internal security measures, like emergency pauses and rate limits. This ensures better protection against potential exploits and bugs.

Smart Contract Vulnerabilities: A Focus on Cross-Chain Bridge Exploits: 
 

• Wormhole Bridge (February 2022)—Hackers exploited a flaw in the bridge's smart contract verification process to mint 120,000 wETH on Solana without providing the necessary collateral.

• Binance Bridge (October 2022)—A vulnerability in the IAVL Merkle proof verification system within the bridge's smart contract was exploited, leading to the theft of 2 million BNB. 

• Qubit (January 2022)—A coding error in the bridge's software allowed a hacker to withdraw tokens from BNB Chain without first depositing them on Ethereum.

Unsafe Upgrades

Upgrading a smart contract is like giving it a software update—it’s crucial for fixing bugs, adding new features, and tweaking settings. For cross-chain bridges, this means adapting to support new tokens, blockchains, and keeping up with tech advancements. But here’s the kicker: if the upgrade process isn’t secure, it opens the door to attacks.

To keep things safe, a solid approach involves spreading out key control among multiple entities, adding timelocks to give users a heads-up on changes, and letting bridge operators veto risky updates. But when quick fixes are needed, a fast-track approval from operators can help—just make sure security stays top-notch. Balancing safety and speed is the name of the game for upgradable cross-chain bridges.

Single Network Dependency: A Major Risk for Cross-Chain Bridges

Relying on a single validator network for cross-chain bridges is risky. If that network gets hacked, the breach impacts all connected blockchains. A safer approach is using independent, decentralized networks for each blockchain connection. This way, if one lane is compromised, others stay secure. The most secure bridges go further by securing each lane with multiple networks, making hacks much harder. Go and use a particular bridge if you can be sure that the developers have used independent networks for each lane, mixed coding languages, and implemented strong risk management to minimize vulnerabilities.

Unproven Validator Sets

The heart of any cross-chain bridge lies in its validator set, the individuals or organizations responsible for maintaining the bridge's infrastructure. When choosing a bridge, it's crucial to evaluate the quality and experience of its validators. A bridge with a team of seasoned professionals who have a proven track record in operational security (OPSEC) is more likely to operate reliably and securely.

Remember, a bridge is only as strong as its validators. A poorly managed validator set can lead to significant risks, such as transaction delays, security breaches, or even the complete failure of the bridge. Therefore, it's essential to research and compare different bridges to find one with a reputable and experienced validator set.

Additionally, consider the economic incentives for validators. Some bridges require validators to stake their own funds, which can create a strong alignment of interests between the validators and the bridge's users. This can help ensure that validators act honestly and responsibly.

No Active Transaction Monitoring 

Active transaction monitoring is the digital watchdog of cross-chain bridges. It's a vigilant security guard, constantly scanning for suspicious activity. When done right, it can spot anomalies early and prevent hacks before they happen.

Imagine someone trying to withdraw funds from a bridge without following the rules. With active monitoring, the system can flag this as suspicious and hit the emergency brake. CCIP, for example, has a network that keeps a close eye on transactions, ensuring everything is in order before releasing tokens. If something looks fishy, they can stop the show to prevent any damage.

Active monitoring isn't just a luxury—it's a necessity for keeping cross-chain systems safe and secure.

Lack of Active Monitoring Contributes to Ronin Bridge Hack
 

• A report by Halborn Blockchain Security revealed that the Ronin Bridge Hack in March 2022 went unnoticed for six days. This significant delay could have been prevented by implementing robust active transaction monitoring systems.

Lack of Rate Limits

Rate limits are a tried-and-true security measure, familiar to anyone dealing with websites or APIs. They’re used to prevent denial-of-service (DoS) attacks and keep servers from getting overwhelmed by too many requests. In the cross-chain world, rate limits work similarly by capping the amount of value that can be transferred between chains within a certain timeframe. It’s a straightforward concept: limit how much can move and how quickly.

This basic security feature is a powerful last line of defense for cross-chain bridges. Even if a hacker manages to slip past other security measures, rate limits ensure they can’t drain the entire bridge in one go. 

Real-world bridge hacks, where all the value was stolen in a flash, could have been significantly less damaging if rate limits and emergency halts were in place. It’s a simple fix that can make a huge difference.

The Future of Blockchain Bridges

The bridge technology has become an integral part of the DeFi landscape, connecting different blockchain networks and enabling seamless asset transfers. However, these bridges are not without their risks. Security breaches, often stemming from vulnerabilities in private key management, smart contracts, or upgrade processes, have highlighted the need for robust safeguards.

To mitigate these risks, it's essential to prioritize private key security, conduct thorough audits of smart contracts, and implement secure upgrade procedures. Additionally, active transaction monitoring and rate limits can serve as powerful defenses against attacks.

The Ronin Bridge hack, where a lack of active transaction monitoring allowed attackers to exploit vulnerabilities, is a stark reminder of the consequences of neglecting security measures. By learning from such incidents and implementing best practices, we can significantly reduce the risk of future attacks.

Despite the challenges, the potential benefits of cross-chain bridges are immense. They offer increased interoperability, improved liquidity, and new opportunities for developers and users. By understanding and addressing the associated security risks, we can harness the power of cross-chain bridges to create a more interconnected and innovative blockchain ecosystem.

In conclusion, cross-chain bridges are a valuable tool in the DeFi landscape. However, their success depends on a strong focus on security and a commitment to best practices. By addressing the vulnerabilities and challenges associated with these bridges, we can unlock their full potential and drive the future of decentralized finance.