Why Blockchain Bridges Are Not a Valid Solution
This article is not about different blockchain bridge types, how they work, or the advantages and limitations of each. I am absolutely sure most people have had awful experiences bridging assets from L1 to L1 or between L1 and L2.
This piece is about why blockchain bridges themselves, as a technology, are an awful solution that needs to be replaced in the future for blockchains to become truly communicative.
Why We Are Using Blockchain Bridges
More and more blockchains emerge every month; consequently, liquidity becomes isolated because Layer 1 blockchain, by design, is an isolated architecture intended to operate within the network.
With each new blockchain, new features arise (not with every blockchain, but let’s assume we live in a perfect world of innovations). Obviously, some users wish to explore how the technology differs from the blockchain they use daily.
Most users employ bridges to transfer assets, accessing new yield opportunities (yield farmers are always searching for something new), or they are interested in purchasing new tokens that exist solely on a particular blockchain.
Other use-cases may involve providing assets that exist only on Blockchain A as collateral in a lending protocol on Blockchain B or depositing liquidity in a general liquidity pool (e.g., WBTC/ETH pool on Uniswap).
Nevertheless, it all boils down to one thing — transferring information and assets from one chain to another (either Layer 1 or Layer 2). We will discuss why exactly a bridge is not suitable for these operations; however, let’s start by exploring current architectures and their limitations.
Architectures and Limitations
There are mainly three different types of bridges: Node(s) Execution Type, Light Client Type, and Liquid Type. Each of them has significant disadvantages.
Node(s) Execution Type — you have to trust a particular entity, which does not represent the whole idea of a blockchain where solutions should be trustless. If there are multiple nodes, the total value of bridged assets can exceed the value of the staked token. In that case, attackers might be incentivized to target the bridge as the potential rewards outweigh the risks.
Light Client Type — each blockchain requires its own Relay Contract to hold a light client. Also, the Relay contract may need to be updated in response to major consensus protocol changes on the source blockchain, and the validation requires lots of gas. You can call that the fragmentation of smart contracts (more smart contracts → more implementation costs).
Liquid Type — works akin to AMM, but instead of one blockchain, the communication happens on two blockchains. The concern here is, what if I want to send an unknown shitcoin that does not have liquidity on the destination chain? I won’t be allowed to do that because the liquidity pool can only exist on a single chain, and for each asset, there must be a different liquidity pool.
Each type has its advantages and disadvantages, but in general, there is one big limitation a bridge has — it works like an intermediary between two particular chains.
Why Bridge Is a Horrible Solution
Seamlessness Does Not Exist
The number of blockchains is growing daily, as mentioned before, and will continue to expand, especially with new modular solutions emerging (e.g., Celestia). However, this still doesn’t address the issue of seamless interoperability.
Firstly, most bridge protocols only allow transferring through a limited number of chains. I cannot bridge the assets to the chain I just created because no protocols support it, indicating a lack of flexibility. Moreover, some bridges may only support the transfer of specific tokens.
Secondly, bridged assets are not real assets; they are representations, introducing additional risks. For example, BTC is a coin on Bitcoin, but WBTC is an ERC-20 token on Ethereum, “supposed” to maintain its peg to BTC (like a stablecoin). In reality, the price of wrapped/bridged assets almost always differs from the original price.
Liquidity Fragmentation is a concern that many are currently worried about, and most people attribute it to the creation of new blockchains. However, what if I tell you that Liquidity Fragmentation is created by bridges, not the blockchains? If you allow for seamless interoperability among different chains, liquidity wouldn’t be fragmented because it would move seamlessly. Liquidity Fragmentation can be renamed “Liquidity Isolation.”
Complexity and High Costs
Most users find it easier to transfer assets from Optimism to a Centralized Exchange (CEX) and then to Ethereum, rather than directly from Optimism to Ethereum. In the case of optimistic rollups, there is a long challenge period (around a week) to ensure all transactions are valid (fraud proofs). You might argue that this is addressed by zk rollups, and indeed it is, but it doesn’t solve the issue of seamlessness.
Bridging is an expensive process that requires a higher gas fee than simply sending assets from one address to another. People find it less costly to pay for two transactions (transfer to and from CEX) than for a single, expensive transaction.
At the time of writing (with $4000 per ETH), the difference is substantial, especially if you want to bridge from Ethereum to Optimism. Let’s consider an example for the withdrawal:
- Ethereum → Optimism (Official Bridge): $300–400
- Ethereum → Optimism (Hop Exchange): $70–80
- Ethereum → CEX → Optimism (Binance): $10–12, but requires multiple steps
The situation gets better with transitioning from Ethereum to Solana:
- Ethereum → Solana (deBridge Finance): $50–100
- Ethereum → CEX → Solana (Binance): $10–12, but requires multiple steps
Overall, you have to choose 2 options, and both are bad: either click 10 buttons and pay X fee or click 1 button and pay 5x–30x fee.
Future of Communications
Highly likely, there won’t be a single design for a bridge that connects everything, but that’s what we all appreciate about crypto — the diversity of applications. Bridges often become targets for blackhat hackers (shoutout to Nomad, Harmony Horizon, Ronin), so considering additional security measures like EigenLayer for Ethereum or Cambrian for Solana and developing new security standards is a crucial point. Eventually, we could arrive at a standard akin to HTTPS on the web.
As Dmitriy Berenzon stated in his article about bridges, they should be secure, interconnected, fast, capital-efficient, cost-effective, and censorship-resistant. Maximizing these parameters will allow for seamless communication combined with a friendlier UX/UI for users.
Third parties should be removed, and the word “trust” should be replaced with “trustlessness.” Costs should be decreased, liquidity should be unified in a seamless way, and more “anychain” frameworks should be developed. The entire process of moving assets should be hidden for retail users. Imagine explaining to every person who uses the Internet what TCP/IP is and how it works.
Conclusion
Certainly, the blockchain bridge is a necessary technology in the blockchain world, but the ultimate aim is to create a seamless crosschain, multichain, omnichain, anychain protocol for communication and the transfer of assets, given that the number of blockchains will continue to grow every day, and it is inevitable.
This article solely reflects my opinion on the particular topic and does not constitute investment advice.
