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The blockchain space has grown exponentially since the Bitcoin whitepaper was released in 2008, with a vast number of networks being created to serve different purposes.
While this development is commendable, most of these blockchain networks remain isolated from each other — like islands with distinct communities and economies that don't have any external exchange capabilities. Such fragmentation goes against the spirit of decentralization as it conceives a Balkanized future for blockchains. For more information, you can go through Prime Bit Profit .
Blockchain networks sometimes suffer from limited decentralization due to a lack of interaction between them. This can impede the progression and relevance of technology, restricting innovation, economic growth, and free trade. In response, several projects are building “bridges” that link different blockchain networks so applications designed for one network can work in others as well— thus enlarging their potential user base and enabling wider adoption of blockchain tech.
What are Blockchain Bridges?
Connecting different blockchains is one of the biggest challenges in cryptocurrency. A blockchain bridge, commonly referred to as a cross-chain bridge, resolves this issue by enabling users to move digital assets from one chain to another. Essentially, if you want to trade your Bitcoin for Ethereum - or vice versa - then you can do it through the help of a blockchain bridge. This helps reduce costs and congestion associated with operating multiple blockchains independently since they are now connected seamlessly and securely.
Blockchain bridges treat this issue by allowing token transfers, smart contracts, and information exchange as well as other information as well as directions between two distinct platforms. These blockchains generate different coins and are governed by various sets of rules; The bridge operates as a neutral area, so that users may effortlessly switch between the two. The crypto experience for many people is significantly improved since we possess access to several blockchains within one network.
Although the two systems accomplish different uses, this concept is much like Layer 2 solutions. The layer 2 protocol is set up in addition to an existing blockchain, which means the speed enhancements do not translate into a shortage of interoperability. A cross-chain bridge will also be an independent entity which has no blockchain.
How does Blockchain Bridge operate?
The most prevalent use case would be token transfer, however, blockchain bridges can perform other awesome items such as converting smart contracts and also transmit information. Bitcoin and Ethereum, for example, would be the two biggest digital currencies and have significantly different rules and procedures. Bitcoin buyers can shift their funds to Ethereum via a blockchain bridge and also can do with them anything they could not do overall on the bitcoin blockchain. This might include making low-fee payments or buying many Ethereum tokens. A blockchain bridge is a thing you employ to keep your bitcoins if you need to move them to Ethereum. No one of the cryptocurrencies involved moves anywhere. Rather, you are going to get permission to access an equivalent quantity of ETH while locking the quantity of BTC you wish to transfer into a smart contract.
Whenever you transform ETH to BTC, you burn off the remainder of the ETH plus you receive back an equivalent quantity of BTC within your bank account. You will need to transform bitcoin to ETH on a marketplace, transfer it to some wallet then put it on a different exchange. Whenever it arrives there, you would have had to pay additional fees than most likely everything you intended to do in the very first place. To set it into perspective, you can make use of your Visa to pay your MasterCard payments. or how PayPal can pay for all of your internet purchases wherever you are purchasing from.