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How can we make DEFI bridges safer? Minimize the trust

How can we make DEFI bridges safer? Minimize the trust

Blockchain bridges, also known as “cross-chain bridges,” connect distinct blockchain networks and allow assets to be transferred between them. To ensure the safety and security of these bridges, developers must address numerous fundamental security problems. 

One major source of concern is the possibility of asset hacking or theft. As assets are exchanged between blockchain networks, they may become subject to malicious actors’ attacks. This might result in the loss of assets and harm the reputation of the blockchain network. To prevent this danger, it is critical to incorporate strong security mechanisms such as encryption and multi-signature transactions. 

Over $2 billion was lost in cross-chain bridge hacks by the end of 2022, demonstrating the severity of bridge assaults in the sector. In August 2022, over $190 million was taken from the Nomad Bridge before white-hat hackers refunded $9 million to consumers.

When the Ronin Bridge Protocol was hacked in March 2022, Axie Infinity lost around $615 million. Furthermore, Binance recently assisted in the recovery of $3 million from the compromised Harmony bridge. 

Another source of concern is the possibility of smart contract bugs. Blockchain bridges, for example, frequently rely on smart contracts to facilitate asset transfers between networks. However, a defect in the smart contract could have unforeseen implications, such as asset loss. To mitigate this risk, smart contracts must be rigorously tested and audited before deployment. 

While blockchain bridges have the potential to dramatically improve the interoperability of various blockchain networks, it is critical to be aware of and solve fundamental security concerns in order to maintain the safe and secure operation of these bridges.

Cross-chain bridges are classified into two types: trustworthy bridges and trustless bridges.

Trusted bridges

Cross-chain protocols that take possession of a user’s tokens during the bridging process are known as “trusted bridges.” Custodial bridges are another name for these protocols. When a user bridges from one blockchain to another, the tokens are locked within the bridge and are under the control of the organisation that built the bridge. 

Because users must give up cryptographic custody to a centralised body while using trustworthy bridges, hackers may find it easier to exploit the system. This is due to the fact that it is a major point of control that bad actors can target. A prominent example of a trustworthy bridge is the Avalanche Bridge on the Avalanche (AVAX). The tokens locked into the system are controlled by the Ava Labs company.

Trustless bridges

Trustless bridges are decentralised bridging protocols that maintain locked tokens and conduct cross-chain transactions using smart contracts rather than a single authority. As a result, trustless bridges give users more control over their tokens and eliminate the possibility of a single point of failure. 

However, trustless bridges are imperfect, and if there are flaws in the smart contract code, a bad actor can compromise the bridge. 

Despite the possibility of coding defects, untrusted bridges are regarded as safer than trusted ones. 

Pendulum, a decentralised network of smart contracts that connects fiat rails to the world of decentralised finance, is one example of a trustless bridging protocol (DeFi). By connecting compliant currency-pegged tokens from major blockchain networks into multiple ecosystems within the decentralised finance space, the bridge boosts fiat liquidity in the DeFi business.

What blockchain platforms can do to prevent further exploits

By examining the exploited vulnerabilities and applying measures to prevent similar attacks in the future, blockchain platforms can learn from cross-chain bridge hacks. One way is to use trustless or minimum trust operations in the bridge architecture’s creation. 

Trustless or low-trust operations are designs that do not rely on a centralised authority or middleman to facilitate asset transfers between chains. Instead, smart contracts and cryptographic techniques are used in these systems to assure the security and integrity of the transferred assets. 

The atomic swap, which facilitates the exchange of assets between various chains without the need for a central middleman, is one example of a trustless cross-chain bridge. A smart contract is used to store the assets in escrow and release them to the relevant party whenever the terms of the exchange are completed.

Another example is the use of a sidechain, which is a distinct chain that is linked to the main chain. This procedure allows assets to be transferred to the sidechain, where they can be exchanged or processed according to a new set of rules and then securely and trustless returned to the main chain. 

By providing trustless or minimal trust operations, blockchain platforms can improve the security of their cross-chain bridges and make them less vulnerable to attacks.

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