Cross-chain Bridges Overview: Current Status, Technology and Trends

According to statistics, there are currently at least 126 Layer 1 blockchains. Each of these blockchains has its own characteristics; for example, Bitcoin focuses on electronic cash transfers, while Ethereum has a rich application ecosystem but is often congested. There is a demand for asset and information flow between different chains, which is why cross-chain bridges have emerged.

Cross-chain ecosystem status

Cross-chain has become a common phenomenon:

1. There are many cross-chain bridges. There are numerous cross-chain bridges on chains such as Ethereum, BNB Chain, and Polygon.

2. There are many types of cross-chain assets. Taking BTC as an example, it has derived various cross-chain assets such as WBTC and anyBTC.

3. Cross-chain penetration into various ecosystems and applications. Mainstream public chains and Layer 2 both adopt cross-chain solutions, and cross-chain assets are widely present in DeFi applications.

The most active ecosystems for cross-chain currently are Ethereum, BNB Chain, Polygon, etc. Among cross-chain assets, USDC has the highest share, followed by USDT, MATIC, etc. The cross-chain bridges with the largest locked amounts include Polygon Bridge, Arbitrum Bridge, etc.

Main Technical Solutions

There are mainly three technical solutions for cross-chain bridges:

1. Lockup + Minting/Burning A typical representative is WBTC. The security depends on the smart contract or third-party custody.

2. Liquidity Pool Increase liquidity pools based on lock-up, improving cross-chain speed. Security risks are mainly borne by LP.

3. Atomic Swap Based on hash time-locked contracts, the security is the highest, but it requires strong compatibility between chains.

Development Trends and Opportunities

1. Layer2 official bridge focuses on security.

2. Cross-chain aggregators enhance user experience

3. Provide staking to improve capital utilization rate

4. NFT cross-chain has become a new track

5. Cross-chain liquidity pool participation in the DeFi ecosystem

6. Other innovations such as support for CEX cross-chain, multiple currencies cross-chain simultaneously, etc.

Cross-chain bridges still face challenges such as security, but they also contain opportunities. In the future, there may be breakthroughs in areas such as full-chain interoperability, NFT cross-chain, and specific ecosystem cross-chain. The cross-chain paradigm has yet to be determined and remains a track full of potential.