The cryptocurrency community is inherently fragmented thanks to multiple blockchains that operate independently of each other. The blockchain and decentralized finances (DeFi) are faced with a lack of interoperability. In addition, decentralized apps (DApps) are having difficulties when transacting between different blockchain networks because they are trapped in the Ethereum ecosystem. So, despite having the best infrastructure, Ethereum is losing its foothold.
Considered as a solution for implementing decentralized finance outside the Ethereum blockchain, interoperability promotes the idea of decentralization by facilitating a smooth communication between different blockchain networks. In this way, instead of competing with each other, different blockchains collaborate and are used in unison for a specific purpose. Without interoperability, the vast majority of DeFi protocols would lack the largest blockchain and cryptocurrency network, Bitcoin (BTC).
One of the solutions that were presented to try and solve this issue are the blockchain bridges.This technology solves the problem of interoperability between two different protocols, since they are built to span blockchains and facilitate communication.
Using blockchain bridges, tokens do not leave their respective blockchains during the transaction: the token is burned or locked on its blockchain, while its equivalent is minted or created on another blockchain. This solution reduces volatility and ensures a constant supply of tokens.
Simply put, a blockchain bridge is a connection that allows the transfer of tokens or arbitrary data from one chain to another. Both chains can have different protocols, rules and governance models, but the bridge provides a compatible way to interoperate securely on both sides.
There are two types of blockchain bridges: federated and trustless. The federated bridge works in a similar way to a private or enterprise blockchain. If a node wants to become part of the control network, it must meet a number of strict criteria before the bridge can be used.
On the other side, trustless bridges are those in which users don’t have to place trust in a single entity or authority. Rather, the trust is placed in the mathematical truth built into the code. This technology solves the problem of interoperability between two different protocols. By using trustless bridges, users can take advantage of the benefits of both blockchains.
There are many advantages to using trustless bridges: they are innately transparent, enable token interoperability between different networks, help reduce blockchain congestions due to large transaction volumes, allow blockchains to grow in unison, encourage developers to design DeFi apps that promote an open financial system, and many other benefits.