The initial days of development of any new technology bring the assurance of simple ways to use the technology. For example, crypto users had no problems without the knowledge of using more than one specific ‘home’ chain. On the contrary, cross-chain or multi-chain has become a prominent paradigm. The web3 landscape includes hundreds of unique blockchain networks with unique features, goals, and aims. However, interactions among different chains create cross-chain bridge security concerns. At this point of time, you must consider the growing complications in the world of web3 with the addition of multiple layers. How could standalone blockchains solve the problem of cross-chain interoperability? The answer would lead you to cross-chain bridges. Cross-chain bridges are unique smart contracts tailored to enable the transfer of assets between different chains. However, cross bridges vulnerabilities can create concerns regarding the adoption of cross-chain bridges. It is important to remember that the technical aspects of each bridge could differ from the other. On top of it, cross-chain bridges should also have a high amount of total value locked in the bridges to ensure liquidity in all conditions. The concentration of value in the bridges makes them a quick and high-risk target for exploitation or theft. At the same time, Ethereum head Vitalik Buterin, has stated that cross-chain technology has formidable limitations in security. Let us learn more about the security of cross-chain bridges and the best practices to protect assets in cross-chain bridge interactions.
What are Cross-Chain Bridges and How Do They Work?
Cross-chain bridges crypto bridges or blockchain bridges are an application that enables cryptocurrency transfer across different blockchain networks. The bridges ensure that different blockchain networks can interact with each other and exchange data alongside fulfilling other instructions. With the help of cross-chain bridges, developers from different crypto ecosystems could collaborate with each other and create new interoperable applications.
You can determine the answers to “Is cross-chain bridge safe?” by diving deeper into the details of their working mechanism. Cross-chain bridges work like dApps for moving assets between different blockchain networks. The bridges lock or burn tokens by using a vault smart contract on the source chain and unlock or issue the tokens on the destination chain by using a peg smart contract. The working mechanism of cross-chain bridges also involves a set of ‘guardians’ for monitoring the process of asset transfer. As a result, it can ensure that only the specified amount of tokens are released on the destination blockchain. Most of the cross-chain bridge hacks revolve around discovering loopholes in the vault smart contract and peg smart contract. Upon identification of such bugs in cross-chain bridges, hackers could withdraw funds from any side of the bridge without investing any assets in the source chain.
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Why Should You Worry About Cross-Chain Bridge Security?
The next important question about cross-chain bridges points to the necessity of learning about security for crypto bridges. What are the prominent factors that call for learning about cross-chain bridge security? As of now, the blockchain landscape has more than 1000 different blockchain networks, with some of them being Ethereum forks. On the other hand, you can find many standalone blockchain platforms with their unique version of the consensus model and other features. However, users seek seamless and intuitive user experiences in the crypto landscape. Any crypto owner would search for the flexibility to swap their tokens into other tokens. The transfer of valuable assets between two blockchain networks must be seamless and easy, like converting USD to any other fiat currency.
Crypto bridges can provide friction-free customer journeys by facilitating interoperability between different networks. On the other hand, it is impossible to ignore a cross-chain bridge attack or other criticisms of cross-chain bridges. For example, Vitalik Buterin has expressed concerns regarding security of multi-chain transactions. In addition, some of the largest hacks in the world of cryptocurrencies have happened through cross-chain bridges. Furthermore, users would have to pay higher transaction fees with cross-chain bridges. On top of it, cross-chain bridges lead to conflicts between developer tools on different platforms. Therefore, it is reasonable to believe that cross-chain bridges can present a massive point of vulnerability for the blockchain ecosystem.
Apart from the threats of cross-chain bridge security risks, it is also important to focus on the functionality of cross-chain bridges. Cross-chain bridges can help different blockchain networks in sharing data, transferring assets, and accessing contracts from other blockchain networks. As a matter of fact, cross-chain functionalities could help in encouraging large-scale crypto adoption. On the contrary, some people also point out that cross-chain bridges reduce the barriers to accessibility. It is important to note that the security issues in cross-chain bridges could offer lessons for improving blockchain technology.
Are Cross-Chain Bridges Really the Future?
Ethereum founder Vitalik Buterin has criticized cross-chain bridges for different reasons. First of all, Buterin believes that asset transfers on a different chain could not offer the same security as native chain transfers. On top of it, he also stated that the risks of cross-chain bridge hacks can increase exponentially when the interdependencies exceed two bridged chains. On the other hand, Vitalik Buterin has also pointed out that different blockchain communities have distinct values. Therefore, it is important to develop a future with multi-chain solutions that could allow the co-existence of different types of communities. As of now, layer zero protocols or independent blockchains could provide interoperability with each other. Layer 0 blockchains serve as a security layer for all connected networks, alongside enabling interactions between chains. All blockchains could transfer assets through their layer 0 ecosystem and leverage the security benefits of the main chain.
Some of the leading layer 0 networks include Cosmos, Polkadot, and Kusama, which also serve as the main blockchains in their distinct ecosystems. Why do you need a cross-chain bridge security strategy when you have layer 0 networks? Layer 0 chains could have hidden vulnerabilities that could make them more vulnerable to security attacks. In addition, cross-chain bridges offer user-friendly interfaces, which are not available with layer 0 blockchains. With layer 0 blockchains, you would have to reconfigure different wallet connections. On top of it, you would have to work with new gas tokens that could create friction for new users. Therefore, the demand for cross-chain protocols has consistently dominated the market. You can find proof of the same in the continuously increasing amount of the TVL of Ether being transferred to cross-chain bridges.
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Threat of Cross-Chain Bridge Hacks
The importance of cross-chain bridges for encouraging the adoption of blockchain and web3 could not overshadow their security risks. Anyone searching for answers to questions like “Is cross-chain bridge safe?” should note that bridge hacks are responsible for over 50% of losses in DeFi. Hackers have successfully stolen $2.53 billion from dApps, which support cross-chain transactions. It is important to note that different blockchain networks use different technologies, albeit with similarities in smart contract vulnerabilities and private key theft. Now, imagine how the threats would multiply when you connect multiple blockchain networks with a bridge. For example, assume that a cross-chain bridge connects 50 different blockchain networks. If one of the blockchains is affected by a 51% attack, then the bridge would put the security of other 49 blockchain platforms at risk.
Why would you come across cross bridges vulnerabilities when you try to achieve interoperability between blockchain networks? In simple words, you can compare different crypto tokens with different units of money. Every crypto token is scripted using a unique coding language, and they operate in unique virtual environments. Cross-chain bridges are special smart contracts, and developing the logic for such applications is considerably challenging. The smart contracts have to support the conversion between different crypto tokens. In the case of cross-chain bridges, you could not use a universal compiler like Babel for JavaScript programming language. Without a universal compiler, you cannot convert code from the source chain automatically into a different version supported on another blockchain with qualitative differences.
As you can notice, it is difficult to imagine the world of web3 growing at scale in the future without cross-chain bridges.
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