An Overview of the Cross-Chain Bridges Ecosystem: Current Status, Technology, and Development Trends

The blockchain ecosystem is experiencing rapid development, and the flow of assets between different public chains and layers has become an inevitable trend. As a key tool for enabling this cross-chain asset flow, cross-chain bridges are playing an increasingly important role.

Cross-chain ecosystem status

Cross-chain has become a common phenomenon, permeating all aspects of the blockchain ecosystem:

• There are many cross-chain bridges. The number of cross-chain bridges on mainstream public chains such as Ethereum, BNB Chain, and Polygon has reached dozens.

• The variety of cross-chain assets is rich. Not only are fungible tokens, but the cross-chain of NFTs is also developing rapidly.

• Cross-chain applications are widespread. Mainstream public chains and Layer 2 networks have adopted cross-chain solutions, and cross-chain assets are also widely used in applications such as DeFi.

Currently, the most active ecosystems in cross-chain include Ethereum, BNB Chain, Polygon, Avalanche, Fantom, etc. Among cross-chain assets, USDC, USDT, MATIC, ETH/WETH, and DAI have a high market share. From the perspective of TVL, Polygon Bridge, Arbitrum Bridge, Optimism Bridge, and other cross-chain bridges rank high.

Main Technical Solutions

The technical solutions for cross-chain bridges mainly fall into three categories:

1. Locking + Minting/Burning

A typical representative is WBTC. Users lock native assets on the source chain and mint equivalent cross-chain assets on the target chain. Upon redemption, cross-chain assets are destroyed and native assets are unlocked.

Advantages: Simple to implement Disadvantages: reliance on third parties, risk of single point of failure.

2. Liquidity Pool

Set up liquidity pools on the source chain and target chain respectively, allowing users to exchange assets directly from the pool when performing cross-chain transactions.

Advantages: cross-chain speed is fast Disadvantages: Liquidity pools may be attacked, and there is a risk of price volatility.

3. Atomic Swap

Atomic swaps are implemented based on the Hash Time-Locked Contract (HTLC) without the need for third-party intervention.

Advantages: High degree of decentralization, good security Disadvantages: Requires both chains to use the same algorithm, limited application scope.

Development Trends and Opportunities

1. Layer 2 official bridges focus on security and concentrate on connecting with the Ethereum mainnet.

2. Cross-chain aggregators improve user experience by providing multiple routing options.

3. Introduce a staking mechanism to attract users to provide liquidity.

4. NFT cross-chain becomes a new potential track

5. The combination of cross-chain liquidity pools and the DeFi ecosystem improves capital utilization.

6. Support more innovative features, such as CEX and cross-chain among chains, multi-currency cross-chain simultaneously, etc.

Despite the security risks, cross-chain is still an inevitable trend in the development of the blockchain ecosystem. In the future, cross-chain bridges still have great room for innovation in terms of security, capital efficiency, and other aspects. Notable opportunities include full-chain interoperability, cross-chain DeFi, NFT cross-chain, and cross-chain focused on specific ecosystems.