Understanding Crypto Bridges and $1 Billion in Thefts

There’s a reason bridges are more important than an average stretch of road -- and why holes in them are more dangerous. As the cryptocurrency world has grown more complex, more and more transactions have come to rely on so-called crypto bridges that enable transactions involving a wide range of tokens. In June, hackers looted about $100 million from crypto bridge Horizon. Even before that hack, money stolen from bridges had exceeded $1 billion, a stark reminder that just because something is useful, fast and cheap doesn’t mean it’s safe.

A platform that allows tokens designed for one blockchain -- the digital ledger that records and verifies transactions conducted using that token -- to be used on another. Bridges weren’t needed in crypto’s early days. Some 13 years ago, there was only the Bitcoin blockchain. Now, there are thousands of blockchains, each with its own advantages -- such as lower transaction fees -- and with its own army of applications, ranging from nonfungible token (NFT) marketplaces to decentralized crypto exchanges. The rising interest in DeFi, in which users often seek to lend or trade a variety of currencies, has increased the need for mechanisms to bridge the gulf between blockchains. More and more investors are seeking to jump from one chain to another to earn yields or to buy art. Someone who has Ether tokens may wish to go onto blockchains that have lower “gas,” or transaction fees than Ethereum, like Solana, to purchase NFTs, or to Polygon to play games, for example.