Moshe Hogeg is a tech entrepreneur and chairman of blockchain research at the University of Tel Aviv in Israel. Moshe Hogeg has donated millions for crypto mining research and founded the Alignment Blockchain Hub. Additionally, he led three coin offerings for his companies raising over $250 million. In the following article, Mr. Hogeg explains blockchain bridges, problems, and security risks as well as improvements for the digital currency to become a global standard.
A blockchain bridge is a digital asset that allows two different blockchain networks to interact with each other. By creating a bridge between two blockchain networks, users can transfer data and value between the two networks, which enables a wider range of possibilities and use cases that were previously not possible. That being said, Moshe Hogeg says that blockchain bridges currently account for the majority of digital asset thefts.
Although bridging blockchains has allowed for a greater deal of innovation, it has also created new security risks that didn’t exist in previously air-tight digital systems. Therefore, software designers are now developing better systems that can link individual blockchains without exposing assets or user data to potential hackers reports Moshe Hogeg.
The Problem of Interconnectivity Across Blockchains
Blockchains are designed to be isolated and independent from one another. This is done for security reasons, as it reduces the surface area for attack and makes it more difficult for hackers to target specific blockchains. However, Moshe Hogeg says that this isolation also creates a number of problems.
First, each
blockchain operates using a distinct set of rules and protocols, which make it difficult to transfer data or value from one system to another. Additionally, it makes it harder to develop applications that work across multiple blockchains.
Finally, the lack of interconnectivity has made it difficult to create a truly global and decentralized ecosystem. For example, if there’s no way to transfer value between the Bitcoin and Ethereum networks, then it’s difficult to create a decentralized application (DApp) that uses both networks.
The Solution: Blockchain Bridges
Moshe Hogeg explains that a blockchain bridge is a digital asset that links two different blockchain networks so they can interact with each other. By creating a bridge between two blockchain networks, users can transfer data across the two systems, allowing them to conduct transactions across assets. This is similar to how a bank may conduct transactions using both USD and Euros.
The most
common type of blockchain bridge is a two-way peg. A two-way peg enables the transfer of value from one blockchain to another. For example, the Bitcoin-Ethereum Bridge enables the transfer of value from the Bitcoin blockchain to the Ethereum blockchain.
However, blockchain bridges can also be used to transfer data between blockchains. For example, the Cosmos Hub is a blockchain that’s designed to interact with a number of different blockchains. The Cosmos Hub enables these different blockchains to share data with each other, which makes it possible to develop applications that use data from multiple blockchains.
Security Risks: Trust-Based and Trustless Bridges
When a blockchain opens itself to outside data, it also exposes itself to new security risks. To date, it’s estimated that bridges have been responsible for around $2 billion worth of lost assets, stolen by hackers who have exploited the gaps in the bridge. Therefore, it’s important to consider the security risks of any blockchain bridge before using it.
When it comes to security, there are two primary types of blockchain bridges—trust-based bridges and trustless bridges. A trust-based bridge is a bridge that’s based on a centralized third party. This third party is responsible for holding the private keys of the assets that are being transferred. This means that the third party must be trusted for the bridge to work correctly.
The most common type of trust-based bridge is a centralized exchange. Moshe Hogeg explains that when a user conducts a transaction through a centralized exchange, they’re trusting that the exchange will not lose or steal the assets because it’s been previously verified and secured by both sides of the bridge. For example, the Ethereum and Bitcoin Bridge.
A trustless bridge is a bridge that doesn’t require a third party to hold private keys. Since they don’t rely on centralized third-party, trustless bridges are more secure if properly designed but they are also prone to inherent weaknesses in their code if not made well.
The most common type of trustless bridge is a smart contract. A smart contract is a program that runs on a blockchain and automatically executes transactions when certain conditions are met. For example, the Ethereum-based decentralized exchange—Uniswap—uses smart contracts to enable the trustless exchange of digital assets.
Of course, Moshe Hogeg reports that both types of bridges are vulnerable to attack, which is why many software developers are now running stringent source code audits to verify that their bridges are safeguarded from potential hacks.
The Bottom Line
The blockchain bridge was originally designed as a solution to problems with cross-blockchain operability. In theory, they have helped to promote innovation, but they have also created new security risks, amounting to around $2 billion in stolen assets. Nevertheless, they are an integral part of modern blockchains and will continue to improve as digital payments become a global standard.
