Cross-chain Bridges Overview: Trends and Opportunities

In recent years, the blockchain ecosystem has grown increasingly large, with various public chains and Layer 2 solutions emerging one after another. According to statistics, the number of Layer 1 blockchains has now exceeded 126. Although these blockchains each have their own characteristics, they also have some limitations. For example, Bitcoin, as an electronic cash transfer network, has a relatively scarce application ecosystem; while Ethereum has a rich array of applications, it suffers from severe network congestion issues.

In this context, the flow of assets and information between different blockchains has become an inevitable trend. Cross-chain bridges have emerged as a key tool to achieve this flow and have developed rapidly. Currently, there are over 70 cross-chain bridge projects on the market, covering mainstream public chains and Layer 2 networks.

Cross-chain ecosystem status

Cross-chain has become a common phenomenon in the blockchain field:

1. There are numerous cross-chain bridges. Mainstream public chains such as Ethereum, BNB Chain, and Polygon all have dozens of cross-chain bridges.

2. There are various types of cross-chain assets. In addition to fungible tokens, NFT cross-chain is also on the rise.

3. Cross-chain penetration into various ecosystems and applications. From DeFi to NFTs, cross-chain assets are everywhere.

4. The cross-chain scale is enormous. Just the locked value of cross-chain bridges in the Ethereum ecosystem has reached 7.8 billion USD.

5. Cross-chain networks are complex. Some cross-chain bridges like Multichain have connected 55 blockchain networks.

Overall, the cross-chain ecosystems of Ethereum, BNB Chain, Polygon, Avalanche, and Fantom are the most active. USDC, USDT, MATIC, ETH/WETH, and DAI are the main cross-chain assets. In terms of TVL, Polygon Bridge, Arbitrum Bridge, and Optimism Bridge are the leaders.

Mainstream Technology Solutions Analysis

The existing cross-chain bridges mainly adopt the following three technical solutions:

Lock-up + Minting/Burning

Representative projects: WBTC, Polygon Bridge, etc.

Principle: Lock assets on the source chain, mint equivalent tokens on the target chain; when redeeming, destroy the target chain tokens and unlock the source chain assets.

Advantages: Simple and intuitive Disadvantages: lower efficiency, reliance on third-party custody

liquidity pool

Representative projects: ThorSwap, Hop Exchange, etc.

Principle: Set up liquidity pools in advance on the source chain and target chain, allowing users to directly exchange cross-chain assets.

Advantages: fast speed, high degree of decentralization Disadvantage: liquidity risk

atomic swap

Representative Project: cBridge

Principle: Achieve peer-to-peer asset exchange through the hash time-locked contract (HTLC).

Advantages: highest degree of decentralization, good security Disadvantages: High inter-chain compatibility requirements, limited applicability.

Development Trends and Opportunities

1. Official bridges focus on security, such as Polygon Bridge which specializes in Ethereum-Polygon cross-chain.

2. Cross-chain aggregators enhance user experience, such as XY Finance

3. An increasing number of bridges offer staking mining, such as Multichain.

4. NFT cross-chain has become a new potential track

5. Participate in DeFi ecosystem with cross-chain liquidity pools, such as Chainswap.

6. Other innovations: support for CEX cross-chain, multi-currency cross-chain, etc.

Although cross-chain bridges still face challenges such as security, the demand for cross-chain solutions will continue to exist as the blockchain ecosystem diversifies. In the future, cross-chain bridges are expected to achieve breakthroughs in areas such as full-chain interoperability, NFT cross-chain, and integration with DeFi, making it a field full of opportunities.