Blockchain bridges, also known as cross-chain bridges, are designed to connect different blockchain networks and allow assets to be transferred between them. However, developers must address some basic security concerns to ensure these bridges are safe and secure.
One of the main concerns is the potential for hacking and asset theft. When assets are transferred between different blockchain networks, they can become vulnerable to attacks from malicious actors. This can lead to loss of assets and damage to the blockchain network’s reputation. It is therefore imperative to implement robust security measures such as encryption and multi-signature transactions to mitigate this risk.
By the end of 2022, more than $2 billion was lost in cross-chain bridge hacks, demonstrating the seriousness of bridge attacks in the industry. In August 2022, he had about $190 million stolen from Nomad Bridge before a white hat hacker returned the user with his $9 million worth of funds.
Axie Infinity’s Ronin bridge lost over $615 million when its protocol was hacked in March 2022. Additionally, Binance recently helped him recover $3 million from the hacked Harmony bridge.
Another concern is the risk of smart contract bugs. For example, blockchain bridges often rely on smart contracts to facilitate the transfer of assets between networks. However, smart contract bugs can have unintended consequences, such as loss of assets. Thorough testing and auditing of smart contracts before deployment is essential to address this risk.
Blockchain bridges have the potential to significantly improve the interoperability of various blockchain networks, but ensuring the safe and secure operation of these bridges poses fundamental security concerns. Recognizing and dealing with it is important.
There are two main types of cross-chain bridges: trusted bridges and trustless bridges.
Trusted Bridge is a cross-chain protocol that manages users’ tokens during the bridging process. These protocols are also called custodial bridges. When a user wants to bridge from one blockchain to another, the tokens are locked onto the bridge and under the responsibility of the organization behind the bridge.
When using a trusted bridge, it may be easier for hackers to compromise the protocol, as the user has to hand over cryptographic management to a centralized entity. Again, this is because it is a central control point that malicious actors can target. Avalanche’s Avalanche Bridge (AVAX) is a common example of a trusted bridge. The Ava Labs organization manages protocol-locked tokens.
A trustless bridge is a decentralized bridging protocol that uses smart contracts to manage locked tokens and complete cross-chain transfers on behalf of a centralized authority. As a result, a trustless bridge gives users more control over their tokens and eliminates a central point of failure.
However, trustless bridges are imperfect, and if there are vulnerabilities in the smart contract code, malicious actors can compromise the bridge.
Trustless bridges are considered more secure than trusted bridges, despite possible code flaws.
An example of a trustless bridging protocol is Pendulum, a decentralized network of smart contracts that connects statutory railways to the environment of decentralized finance (DeFi). The bridge will increase fiat liquidity for the DeFi industry by linking currency-pegged tokens compliant with various ecosystems within the decentralized financial space from major blockchain networks.
What Blockchain Platforms Can Do to Prevent Further Abuse
Blockchain platforms can learn from cross-chain bridge hacks by analyzing exploited vulnerabilities and implementing countermeasures to prevent similar attacks in the future. One approach is to employ trustless or minimal trust operations in building the bridge architecture.
Trustless or minimal trust operations refers to designs that do not rely on centralized authorities or intermediaries to facilitate the transfer of assets between different chains. Instead, these designs use smart contracts and cryptography to ensure the security and integrity of transferred assets.
An example of a trustless cross-chain bridge is an atomic swap. This allows assets to be exchanged between different chains without the need for centralized intermediaries. This process works using a smart contract that holds assets in escrow and releases them to the correct party once the exchange terms are met.
Another example is the use of sidechains, which are separate chains pegged to the main chain. This process allows assets to be transferred to sidechains, where they can be traded or processed with a different set of rules, and then returned to the mainchain in a secure and trustless manner.
Blockchain platforms can improve the security of cross-chain bridges and make them less vulnerable to attacks by implementing trustless or minimal trust operations.