The future of decentralized blockchain networks demands simple interaction and interoperability. Since the inception of Bitcoin in 2009, the number of blockchain networks with varying designs and functionalities has increased dramatically.
As the blockchain community has grown, there have been limitations in inter-network communication and data exchange, calling the concept of decentralization into question, given that blockchain networks are intended to be managed by millions of stakeholders rather than a single entity. Because applications designed for a specific network can only use on that network, adoption has been reduced.
Various projects to connect networks have been developed over time, allowing for easy data flow/exchange from one network to another while also increasing adoption.
So, what is blockchain bridge, and how is cross-chain sharing with blockchain bridge?
1. What is a blockchain bridge?
A blockchain bridge (also known as a cross-chain bridge) connects two points, much like a physical bridge. It aids in transferring data and digital assets between two blockchain networks, facilitating communication. Both chains may have distinct rules, protocols and governance structures, but the bridge allows both chains to inter-operate safely (i.e., communicate and share data). Blockchain bridges can build to exchange data, including smart contract calls, decentralized identities, off-chain data such as stock market price feeds, and much more.
2. Guide to cross-chain data sharing with blockchain bridge
Each network has a unique approach to blockchain interoperability to facilitate transactions without third-party connections. Here are some methods for isolating transactions across multiple chains:
Atomic swaps
Atomic swaps are exchange intermediaries that enable two parties to transfer tokens across multiple blockchains. This method does not require using a centralized third party to facilitate transactions. Instead, it allows users to exchange tokens on a peer-to-peer basis. It isn’t perfect cross-chain communication, but it is a system that allows transactions between chains.
An atomic swap occurs when a token on the first blockchain is moved to make it unavailable, and another token is created on the second blockchain. Here, the token on the second blockchain must only create if the token on the first blockchain is confirmed to be unavailable.
Relays
Relays enable blockchain networks to track transactions and events on other chains. Relays operate from chain to chain, without the participation of dispersed nodes, allowing a single contract to act as a central client for nodes on multiple chains. Relays can thus validate the entire history of transactions and specific central headers on demand. Relay solutions, such as BTC Relay, require a significant investment to run and provide operational security.
Merged consensus
Merged consensus approaches are robust and offer two-way interoperability through the relay chain. Merged consensus is used by the Cosmos and Ethereum projects. Merged consensus is powerful, but it is usually necessary to incorporate it into a chain from the beginning.
Federations
Federations enable trusted groups to validate events on one chain on another. This is another powerful approach but relies on third parties or mediators, which can be problematic sometimes.
Stateless SPVs
Compared to relays, stateless simplified payment verifications (SPVs) are less expensive to run, and smart contracts can validate a portion of the proof-of-work genesis history. The now-defunct Summa was the first to propose this approach.
Stateless SPV sends only the transaction’s necessary headers. The receiving chain is not required to keep a complete record of headers, which significantly reduces storage requirements. This strategy only applies to PoW systems. It is assumed that the amount of work required to construct a sequence of acceptable headers proving a fraudulent transaction exceeds the value of the transaction.
A fraudulent transaction is one that did not happen on the origin chain. The origin chain generates sequences of headers for free as part of the proof-of-work consensus for honest transactions.
Wrap up
Blockchain technology can significantly improve a wide range of information systems. However, the evolution of cross-chain technology is directly responsible for its widespread adoption.
We hope this article has explained clearly what a blockchain bridge is and how blockchains share data. If you want advice about blockchain development, contact SmartOSC.
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