Blockchain technology and the crypto ecosystem have evolved rapidly over the last decade. Since the Bitcoin whitepaper was released in 2008, there has been tremendous innovation in the space and we’ve seen widespread adoption. While every year in crypto is unique, 2021 changed the ecosystem in ways that have people questioning where we’re headed in the future. This is because 2021 was the year of the L1s which resulted in many predicting a multi-chain future for crypto as opposed to a winner take all stance that many had prior to the rise of these blockchain ecosystems. However, with an increase in the number and size of different blockchain ecosystems, there came a need for key infrastructure that could connect them. This is where bridges come in.
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The Crypto ecosystem has evolved rapidly over the last decade. Since the Bitcoin whitepaper was released in 2008, there has been tremendous innovation in the space and widespread, almost mainstream, adoption. While every year in crypto is unique, 2021 changed the ecosystem in ways that have people interested in crypto’s seemingly limitless future.
2021 was the year of the L1s – which resulted in many predicting a multi-chain future for crypto, as opposed to a winner take all stance that many had prior to the rise of these blockchains. However, with the drastic increase in the number and size of different blockchain ecosystems, there is now a need for key infrastructure to connect them. This is where bridges come in.
Here, we will talk about:
Let’s dive in!
Blockchain bridges work similarly to real bridges in the physical world. However, instead of connecting physical locations, blockchain bridges connect two different blockchain networks in crypto. This connection is important because, without a bridge, blockchain networks would remain siloed environments that cannot communicate with each other. This is because each network has its own set of rules and governance mechanisms, due to which their native assets and data are incompatible with the other blockchain. However, with a bridge between two blockchain networks, it becomes possible to transfer crypto assets and arbitrary data between them. Thus, bridges are key for interoperability in the ecosystem and we need them to make different blockchain networks compatible with each other.
Let’s take an example:
Alice has ETH on Ethereum Mainnet and wants to use it on Avalanche. These two chains have their own protocols, rules, communities, and consensus mechanisms and thus, interoperability between them is not possible. In such a case, something needs to go in the middle and offer a way to take information from the Ethereum Mainnet to Avalanche. To do so, Alice would most likely transfer assets via a blockchain bridge in order to securely move the ETH from Ethereum Mainnet to Avalanche. Using the bridge, Alice will be able to convert ETH on Ethereum for wETH on Avalanche.