How do you move funds from one blockchain to another? Is there a simple way? Or perhaps you have heard of how Decentralized Finance (DeFi) is disrupting the world of traditional finance and you are a participant of DeFi? If so, you must have encountered the frustrations of moving funds across blockchains and perhaps even tried converting ETH to BNB and are surprised by the gas fee?
Although blockchain and DeFi are fast rising technologies, there is no denial that there are still gaps that hinder the free flow of crypto assets. Cross-chain bridges are the solution to some of these gaps.
With the boom of DeFi, interoperability becomes a key component. Tokens, assets, smart contracts instructions and data must be able to be transferred between blockchains seamlessly. And for this reason, the rise of cross-chain bridges technology is booming just as fast.
If you are an avid participant in DeFi, understanding cross-chain bridges and which one best suits you is important. Let’s find out why.
What is a cross-chain bridge?
Also known as a blockchain bridge, cross-chain bridges connect data between one blockchain to another, in a nutshell. Essentially, each cross-chain bridge is a set of computer code, including smart contracts, that enable users to transfer tokens, crypto assets and data between two different blockchains despite the difference in protocols, governance models and rules.
In summary, cross-chain bridges allow users to:
Allows users to access a wide variety of Decentralized Finance Applications (dApps).
Oversee fast, low-cost transactions of tokens hosted on otherwise less scalable chains.
Once the assets are transferred, users can use them to earn yields, stake, and perform other DeFi activities.
Centralized vs Decentralized
The design of cross-chain bridges are broadly classified into two groups: decentralized versus centralized.
When you want to transfer, for example USDT on a centralized exchange platform, it’s not very complicated, you just have to make a withdrawal on an exchange and ensure that you are sending the same crypto type to the destination address without mistake.
With DeFi protocols, things are not so simple. For one, not all of them use the same blockchain. Next, given that the DeFi protocols are decentralized, it means that no platform keeps your fund on their hot wallet; in the case of Binance Smart Chain for example. Hence, this is why you need a DeFi wallet.
On the cross-chains in DeFi, there are many, with the most popular ones being built to interopole with Ethereum.
What is Ethereum Virtual Machine?
The Ethereum blockchain is one of the most used for DeFi protocols, although Binance Smart Chain (BSC) has largely caught up. One of the main components of the Ethereum blockchain is the EVM for “Ethereum Virtual Machine”, a sub-layer of the Ethereum blockchain.
It allows, among other things, to deploy Smart-contracts and to guarantee their immutability on the ETH blockchain as well as their cost in gas. It’s perfectly transparent and we don’t need more if we run our smart contracts on ETH.
EVM-enabled blockchain is one that has the ability to access the status, transaction information and smart contract specifications of the ETH network at any time (i.e. in real time). As a result, the platform is able to leverage the power of the ecosystem while adding additional functionality and functional aspects.
How to move from one blockchain to another?
This is possibly the most important point although it is a bit more complicated than transferring funds on a centralized exchange but not impossible to master.
There are many blockchains available for DeFi and even if ETH remains one of the most used, it is necessary to be able to change blockchain. This is where the Cross-chain-bridges come in, whose usefulness is precisely to allow a change of blockchain.
For example, if you wish to move funds from Ethereum chain to Binance Smart Chain and Solana, you will consider using the Binance Bridge and Sollet Wallet. Currently, the Binance Bridge supports a wide variety of chains – Bitcoin, Ethereum, BSC, Tron, Eon and more.
On the other hand, the Sollet Wallet only supports Ethereum and Solana assets.
To move your funds using Binance Bridge:
First, click to open the bridge and connect your Metmask or BSC wallet.
Then select the coin or token you wish to transfer and choose the chain you want to move it to.
Enter the amount of the coin you wish to move or simply click the Max button to move everything.
Finally, provide the destination or receiving wallet address and click next to proceed and finish the conversion.
How to choose the right one?
There is a wide variety of bridges available and it can be quite easy to get lost. To make the right choice, we advise you to use bridges allowing you to swap between several blockchains.
The BSC Bridge for example, allows you to swap between the BSC, ETH, SOL, TRX, and OMNI blockchains. It is one of the easiest to use too.
Other bridges also allow you to swap on several blockchains, such as: Evo DeFi and Anyswap Bridge.
To use a cross-chain bridge or not? After all, there is a lot to learn and digest before getting started.
This question is best answered with: what is your end goal? If trading and investing via centralized platforms are what you are most comfortable with, do not mind having your fund being managed by a centralized entity, then perhaps yes, you will have no need to venture into cross-chain bridges.
However, if having complete ownership over your own assets and funds is your priority, along with security and privacy, cross-chain bridges are not an option. It is a must!
Our take on the above question? With blockchain technology changing and improving at lightning speed, it is better to learn and try something new with baby steps along the way than risk losing control over your funds and assets down the road.