Crypto Bridges and their risks
What are Crypto Bridges?
Over a billion dollars – that’s Billion with a B- has been stolen by hackers in the past few months from crypto bridges. But what are Crypto Bridges?
There are many different crypto tokens and most exist on their own networks, which are called Blockchains. A bridge works exactly as it sounds: it allows tokens to transfer between two different blockchains.
Picture Blockchains as a group of islands. Normally, each user can only transfer tokens to other users on their own island, but a bridge can be built.
Our TikTok team has made a short video about this:
@easedefi What is a#crypto bridge? #learnontiktok #learnwithtiktok #cryptocurrency #blockchain #hack #tech
So, tokens move across bridges?
Tokens don’t actually move across bridges however, instead they are locked up on one chain and an “IOU” with the same value is given to the user on the other.
Users can trade their IOUs on the second blockchain exactly as they would with the original token.
To transfer back, they simply redeem the IOU and the original tokens are released to them on the original chain. That is: if the bridge still has funds to repay the IOUs! [backwards of maybe same diagram]
Hackers love bridges because bridges can have a huge amount of funds locked up, and hackers often only have to compromise a few individuals to fake IOUs and steal all of the locked-up tokens.
There have been some damn interesting bridge hacks recently, check out our last video to learn about the largest one ever!
It works exactly as it sounds: a bridge allows tokens to transfer between two different blockchains.
For more info about bridges and the recent hacks, you can also check this interesting article in the Washington Post.