One of blockchain’s many benefits is that it is a secure, self-contained ledger. However, this means that the networks do not typically interact with each other. Cross-chain bridges create a much broader blockchain ecosystem by allowing cryptocurrency owners to exchange digital assets across the different blockchains. For example, if a user only has bitcoin but wants to buy an NFT on the Ethereum network they would use a cross-chain bridge to complete the transaction.

In this example, the user may use ‘Wrapped Bitcoin’ (WBTC) to send bitcoin to an Ethereum wallet. Wrapped Bitcoin is a cross-chain bridge that creates a new WBTC token on the Ethereum network and holds a bitcoin in a smart contract on the Bitcoin network. The number of WBTC is always equal to the number of bitcoin in the WBTC cross-chain bridge smart contract. After this conversion, the user has Bitcoin-backed ERC-20 tokens to buy the NFT on the Ethereum network. This is an example of a lock and mint cross-chain bridge, others include burn and mint and lock and unlock.

While cross-chain bridges help to promote blockchain interoperability, they also pose security risks. These apps have played a part in multiple hacks in the past, as we have seen with Nomad, Wormhole and Ronin, the latter of which was hacked for 650 million dollars. Therefore, it is best practice, as with most things crypto and DeFi, to do your research before using cross-chain bridges.