In March 2022, over $625 million worth of cryptocurrencies were stolen from the Ronin Bridge protocol as a result of a malicious attack from hackers, marking the event as one of the biggest cryptocurrency heists ever. In June, Harmony One’s Horizon Bridge lost over $100 million in an attack. In August, another $200 million was lost from the Nomad Bridge as a consequence of an exploit of a vulnerability in its underlying technology — smart contracts.
In total, Chainalysis estimates that over $2 billion worth of digital assets have been stolen from blockchain bridges in 2022 alone. This figure accounts for approximately 69% of all stolen crypto funds in the year.
The frequency of these bridge hacks has become a warning signal for users and a significant threat to building trust in blockchain technology. As adoption of cryptocurrency accelerates, the industry is facing growing pressure to fix the flaws that have allowed these exploits.
In this article, we’ll look at why blockchain bridges have become an essential part of the crypto ecosystem, the difference between trust-based and trustless bridges, and the potential weaknesses in each model that enabled hackers to siphon funds in each one.
What are blockchain bridges?
Blockchain bridges, also known as network bridges or cross-chain bridges, are a tool designed to solve the challenge of interoperability between blockchains. Bridges have become a necessary component of the blockchain industry because, as it stands, blockchains operate in silos and cannot communicate with one another.
For example, users cannot use bitcoin (BTC) on the Ethereum blockchain or ether (ETH) on the Bitcoin blockchain. So if one user (let’s call him Billy) who holds all his funds in BTC wants to pay another user (let’s call her Ethel) for an item but Ethel only accepts ETH, Billy hits a wall. He can’t send BTC directly to Ethel. He can take extra steps to buy ETH or trade a portion of his BTC for ETH, but BTC cannot be sent directly to Ethel. This can be seen as a major disadvantage in comparison to fiat currencies and credit cards, which can be used across several providers.
Blockchain bridges aim to eliminate this issue.
While each blockchain bridge is designed differently, these bridges typically allow users to lock in a certain amount of digital assets on one blockchain. In exchange, the protocol will then credit or mint the same amount of assets on another blockchain, equivalent to the funds that are locked in.
These new assets are known as “wrapped” versions of a token. For example, a user who locks in their ether (ETH) on one blockchain will receive a “wrapped” ether (wETH) on another blockchain. This allows Billy to use a bridge to send wrapped bitcoin (wBTC), which works on the Ethereum blockchain, to Ethel in a more seamless fashion.
Trust-based vs. trustless blockchain bridges
From a security viewpoint, bridges can be classified into two main groups: trusted (also known as custodial) and trustless (noncustodial). Trusted platforms are essentially platforms that rely on third parties to validate transactions while acting as custodians of the bridged assets. For example, all wrapped bitcoin is held in custody by BitGo. Having one company control all of an asset means it is a single point of failure. If the company is corrupt, goes bankrupt or has other fundamental problems, the crypto that it has in custody is at risk.
To illustrate, the Ronin Bridge protocol relied on nine validators — four of which were held by the Sky Mavis team. To maintain its security, the Ronin Bridge requires the majority of these validator nodes (five or more nodes) to initiate any withdrawal or deposit. However, because the attackers were able to compromise all four nodes the Sky Mavis team controlled, they only needed a single additional node to take control. They did this and it allowed them to drain the protocol of $625 million under the cover of a “verified” withdrawal.
On the other hand, platforms that rely purely on smart contracts and algorithms to store custody assets are referred to as trustless bridges. Its limitations lie with the integrity of its underlying code.
For instance, Solana’s Wormhole is a platform that facilitates cross-bridge transactions between Solana and Ethereum. Wormhole is a blockchain bridge protocol that suffered an exploit in February 2022 due to a bug in the smart contract. This allowed the attackers to bypass its verification processes and resulted in a hack worth over $326 million.
Other examples of trustless bridges are Rainbow Bridge, Polkadot’s Snowbridge and Cosmos IBC.
Are blockchain bridges safe?
Both trusted and trustless approaches can have fundamental or technical weaknesses. To be more precise, the centralization aspect of a trusted bridge presents a fundamental flaw, and trustless bridges are vulnerable to exploits that stem from the software and the underlying code. Simply, if there is a flaw in the smart contract, it is almost certain that parties with malicious intentions will attempt to exploit it.
Unfortunately, there hasn’t been a perfect solution to the conundrum the industry faces. Both trusted and trustless platforms have implicit flaws in their design and compromise the security of the blockchain bridge in their respective ways.
In addition, as the value and users of the cryptocurrency industry keep increasing, hackers are getting more sophisticated. Traditional cyberattacks like social engineering and phishing attacks have also adapted to the Web3 narrative to target both centralized and decentralized protocols.
Although not foolproof, a valuable first step towards addressing the security issues on blockchain bridges can be an extremely rigorous source code audit before deploying the bridge on the blockchain. This must be a ground-up check to minimize any flaws whatsoever, because all it takes is one slip up with a bad line of code and hackers have a way in.
Due to that, it is vital for users to do their due diligence before interacting with any bridging ecosystem, which includes checking the documentation, the code and the maturity of the system. This is a means of protecting their crypto while the developers find a solution to overcome the limitations of current blockchain bridging protocols.
This article was originally published on
Aug 16, 2022 at 7:26 p.m. UTC
Sign up for Shows, show newsletter promo.
Please note that our
do not sell my personal information
has been updated.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a
strict set of editorial policies. CoinDesk is an independent operating subsidiary of
Digital Currency Group, which invests in
startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of
stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.