Why do we need blockchain bridges?
Looking at the benefits of bridging to different networks
Blockchain, a distributed ledger technology, employs cryptography to ensure the security and integrity of data and transactions. Different blockchain networks support a galaxy of services such as secure databases, immutable ledgers, decentralised applications (dApps), decentralised finance (DeFi), non-fungible tokens (NFTs) and cryptocurrencies. The increasing demand for various blockchain-based applications has fuelled a corresponding need for interoperability. Cross-chain bridges play a pivotal role in enabling this interoperability.
The degree to which a user can seamlessly engage with various dApps across different networks/chains depends on how easy it is to transfer crypto assets between those networks. Historically, onboarding users to networks beyond Ethereum posed a significant challenge, particularly in terms of cost and speed. However, that is changing…
Umbria’s Narni Bridge
The Umbria Network bridge is a capital-efficient, multi-chain asset bridge which enables the cheap and fast migration of fungible assets between cryptocurrency networks. It uses a novel liquidity provision protocol that greatly decreases the cost of transferring funds between chains in comparison to traditional validator-driven mint/burn, lock/unlock bridges.
Find out more here: https://bridge.umbria.network/
Why do we need to bridge crypto assets?
Bridging crypto assets serves several crucial purposes in the cryptocurrency space. Let’s look at some of these in a little more detail:
- Access to diverse ecosystems: Different blockchain networks have unique features, functionalities and ecosystems. Users may want to access decentralised applications, yield farming opportunities or specific assets that are available on a blockchain other than the one they primarily use.
- Asset portability: Bridging allows users to transfer their assets seamlessly between different blockchains. This is particularly important when users want to move assets from one blockchain to another for various reasons, such as taking advantage of specific features, lower transaction fees or participating in token sales on a different platform.
- Scalability and speed: Some blockchains are designed to handle a higher volume of transactions with faster confirmation times. Users may bridge assets to a blockchain that offers better scalability and quicker transaction speeds, especially during times of network congestion on their primary blockchain.
- Arbitrage opportunities: Cryptocurrency markets can have price disparities between different exchanges and blockchains. Traders may bridge assets to capitalise on arbitrage opportunities, taking advantage of price differences between assets on different blockchains.
- Diversification: Bridging allows users to diversify their crypto portfolios by holding assets on multiple blockchains. This can be a risk management strategy, as it reduces dependency on a single blockchain’s performance and security.
- Cross-platform token swaps: Users may bridge assets to participate in decentralised exchanges or liquidity pools that operate on different blockchains. This facilitates token swaps, liquidity provision and other DeFi activities across multiple platforms.
- Blockchain-specific features: Each blockchain has its own set of features and functionalities. Users may bridge assets to access specific capabilities offered by a particular blockchain, such as smart contract functionality, privacy features, or compatibility with certain token standards.
- Community engagement: Crypto projects and communities often span multiple blockchains. Bridging allows users to engage with different communities and contribute to projects that operate on various blockchains.
Bridging crypto assets enhances flexibility, accessibility and functionality for users within the dynamic and evolving cryptocurrency ecosystem. It enables them to navigate the diverse landscape of blockchains and leverage the unique opportunities each network presents.
