Let''s say you live in India and are traveling to Singapore. In India, we use Singapore Dollars (SGD) whereas in Singapore, you may convert money from INR to SGD using a bank. Or you might use an international card that allows you to pay in SGD when you are in Singapore. This is simple in the world of banks but also a lot more difficult in the world of blockchains.
The two independent blockchains, Ethereum Mainnet and Terra, are governed by different rules and consensus mechanisms. While Ethereum Mainnet''s native token is ETH, the second token of Terra is LUNA.
Now imagine that you have a bunch of LUNA on Terra, but you want to use it on Ethereum Mainnet. How do you do this?
The Terra Bridge will be used to purchase Wrapped Luna (WLUNA), an ERC-20 token native to the Ethereum Mainnet.
Here''s how a coutume bridge works: In simple terms, here''s how it works.
LUNA is a cryptocurrency that can be used as a deposit. It''mints'' an equal amount of another cryptocurrency, like the Wrapped LUNA, and releases it on another blockchain, e.g. Ethereum Mainnet.
- Liechtenstein-Based Bank Offers Clients Direct Crypto Investments
Bridges that are trusted rather than trustless
When you use it, a ''Trusted Bridge'' depends on a central entity. You lose control of your cryptos.
On the other hand, a ''Trustless Bridge'' is operated with clever agreements, and you remain in charge of your cryptocurrency.
The Top Ten Bridges
The top bridges and their Total Value Locked (TVL) are:
$11.19 billion (roughly Rs. 86,067 crore) is the WBTC''s (WBTC).
Multichain (MULTI): $5.07 billion (roughly Rs. 38,995 crore)
Portal: $4.18 billion (roughly Rs. 32,149 crore)
$1.54 billion in hBTC (roughly Rs. 11,844 crore)
$1.2 billion (roughly Rs. 9,229 crore) is being used by JustCryptos (JST).
Terra Bridge: $1.08 billion (roughly Rs. 8,305 crore)
RenVM (REN): $928.46 million (roughly Rs. 7,139 crore)
$749.69 million (roughly Rs. 5,765 crore) has been issued by cBridge (CELR).
ChainPort: $207.42 million (about 1,595 crore)
$207.25 million from Allbridge (ABR) (about 1,593 crore)
Bridges on Hacking
Because bridges have a tumult of crypto assets, they are attractive targets for hackers. And because writing the code for bridges is hugely complicated, hackers are having a field day plundering them.
When a bridge is attacked, the hacker removes crypto from one side of the bridge, e.g. wrapped LUNA, without imposing anything on the other side, e.g. LUNA.
In March 2022, the Ronin bridge, built for Axie Infinity, was stolen for $625 million (roughly Rs. 4,729 crore) in ETH and USDC.
Ronin worked ''off-chain'' that it ties with the blockchain but existed on external servers that were not a part of the blockchain. It relyed on nine validator nodes, of whom five nodes were required to validate transactions. The hackers also used social engineering.
Another major Bridge hack targeted Wormhole, which supports six blockchains, Terra, Solana, Ethereum, Binance Smart Chain, Avalanche, and Polygon. The cost of the hack was $322 million (roughly Rs. 2,410 crore).
Rohas Nagpal is a plasticized asset developer and a licensed boxer. He has an extensive background in the business. He has been featured in the Future Money Playbook and is currently working on a Blockchain Developer program. He has been a prolific boxer and a retired hacker. He has also been published on Facebook.
Cryptocurrency is a non-regulated digital currency, not a legal tender, subject to market risk. The information provided in the article is not intended to be and does not constitute financial advice, trading advice, or other advice or advice of any kind, provided or approved by NDTV. NDTV will not be responsible for any loss arising from any investment based on any perceived recommendation, forecast, or other information contained in the article.