What are bridges?
Key takeaways
- Bridges allow you to explore the world of different blockchains by allowing you to transfer assets from one chain on the other.
- Bridges either use “wrapped” tokens, i.e., a representation of your original token or liquidity pools to bridge your tokens to the destination blockchain.
- With Phantom, you can easily bridge your assets between the Ethereum, Polygon, and Solana networks.
Web3’s decentralized nature has led to the emergence of many distinct applications and blockchains. For example, you can use advanced decentralized finance (DeFi) applications on Ethereum, play games on the fast Solana blockchain, or explore Polygon’s rich NFT ecosystem. However, these blockchains are independent of each other, i.e., they can’t talk to each other.
That's where bridges come in. Just like you exchange money while traveling to different countries, blockchain bridges allow you to transfer money across various blockchains. Web3 bridges are the key to a connected decentralized future, where assets and data flow freely across different platforms.
In this article, we’ll explain what bridges are, how they work, and how you can get started with bridges.
What are bridges?
Bridges are essentially software protocols that enable communication and interaction between different blockchains. Think of it as similar to building a bridge between two islands so people can travel back and forth. Bridges allow two different blockchain networks to share information and work together.
How do bridges work?
Bridges work by establishing a connection between two different blockchain networks, allowing the transfer of assets and data between them. To do this, they use either wrapped assets or 1:1 native swaps. Let’s look at each of them in detail:
Wrapped assets
Bridges commonly use "wrapped" or synthetic assets to perform swaps. Essentially, you lock up your original assets on the source blockchain, and the bridge creates a representation of that asset on the destination blockchain. Then, an equivalent amount of wrapped tokens is issued on the destination blockchain.
To explain, let’s say you want to transfer your ETH on the Ethereum blockchain to the Solana network. Here’s how it would work:
First, the bridge will send your ETH to a specific address on the Ethereum network. This locks up your assets so you don’t spend them while the transfer is taking place.
Once the blockchain bridge verifies that your assets are locked up, it creates a mirror image or representation of your assets on Solana. This representation is usually called a "wrapped" token or a "pegged" token — in this case, you’ll receive wrapped Ethereum on Solana.
Then, you can use the wrapped token as any other cryptocurrency — trade it, use it for transactions, or other applications on the chain.
When you want to return to the Ethereum network, the bridge will follow the same steps. It will send your wrapped assets to a Solana address to lock them up, and the equivalent value of Ethereum on the original chain is unlocked and deposited into your wallet.
1:1 native swaps
The second type of bridges are those that allow you to swap your cryptocurrencies natively without using wrapped assets. They do this by maintaining unified liquidity pools and unique resource balancing algorithms. These liquidity pools have native assets linked to all chains at the same time, allowing for efficient swaps.
Stargate, a cross-chain bridge, uses this technology to transfer and call assets on the destination chain, enabling seamless composability and interoperability. For the user, it means no longer having to exchange wrapped or synthetic tokens on the destination chain. They can directly use their bridged assets on the destination chain.
Why would you use a bridge?
Bridges are used for two reasons: (1) to transfer assets across blockchains without using a centralized exchange and (2) to explore other blockchains. Let’s look at how a bridge helps in both these cases:
Seamless interoperability
With a decentralized bridge, you can directly transfer your assets cross-chain with a few clicks. This helps you avoid the traditional process of sending assets to a centralized exchange, trading them for another asset and then withdrawing the asset.
Bridges, thus, eliminate any potential transaction delays and the need for trusting a centralized entity. Further, since centralized exchanges typically charge a percentage of your assets to trade on them, you will also likely save on fees while using a decentralized bridge.
Accessing other blockchains and ecosystems
Bridges provide a gateway to explore different blockchain ecosystems. This is especially useful when chains like Ethereum become congested due to high user activity. With bridges, you can simply move your assets to a Layer-2 solution like Polygon. By bridging your assets to Polygon, you can take advantage of the lower transaction costs and faster transaction speeds.
For instance, you can use decentralized apps (dapps), like Sushi, on Polygon instead of Ethereum after bridging your assets. This allows you to participate in DeFi activities, such as staking, liquidity provision, and trading, at a potentially reduced cost compared to the Ethereum network.
Get started with bridges
Polygon
The native Polygon bridge helps you transfer a variety of crypto assets between Ethereum and Polygon blockchains. Here’s how to use the Polygon bridge with Phantom:
- Choose the “Proof of Stake” Polygon bridge and connect your Phantom wallet.
- You'll then see a “Deposit” and “Withdraw” modal on your screen. Here, you can choose the crypto asset you wish to transfer to Polygon and its amount.
- Click on “Transfer,” confirm the transaction on your wallet by paying the fees, and your assets will be bridged to the Polygon chain.
- Similarly, in case you want to bridge back your assets to the Ethereum chain, you can use the “Withdraw” option and follow a similar process.
Stargate Finance
Stargate Finance helps you transfer assets between Ethereum and Polygon. Stargate Finance differs from other bridges because it cuts down on some steps.
With Stargate Finance, you can directly swap native cross-chain tokens, like USDC on Ethereum with USDT on Polygon, without needing to create any wrapped assets. That means you save on transaction fees.
Phantom users can use the Stargate Finance bridge to transfer tokens easily between Ethereum and Polygon. Connect your Phantom wallet to the Stargate Finance website, select the tokens you want to bridge, and confirm it on your Phantom wallet.
Portal
Portal is a token bridging application built on top of the Wormhole protocol. When you bridge tokens through Portal, the origin token gets locked in a smart contract, and a new Portal wrapped token gets minted on the target chain. You can swap those wrapped tokens for other native tokens on the target chain.
Phantom users can use Portal Token Bridge to transfer tokens between Ethereum, Polygon, and Solana. Here’s a quick demo showing how to move DUST from Solana to Ethereum:
Understanding risk
The ecosystems of blockchains are enormous, and thanks to bridges, you can now hop from one to another in a few clicks. But all good things have some drawbacks — bridges can be vulnerable to hacks and other cyber attacks.
Since bridges use smart contracts to facilitate transfers, bugs or vulnerabilities in the smart contract’s code can pose risks to the security and reliability of the bridge. Further, bridges also introduce the possibility of human error while transferring assets, software failures, spam, or malicious attacks. It’s important to always weigh the risks of using bridges before doing so.
At Phantom, we maintain top-notch security measures. Plus, our wallet works with all major bridges, ensuring a smooth experience. Still don't have it?
