Top 3 Blockchain Bridges
A bridge receives one type of crypto, locks it as a deposit, and then "mints" an equal amount of another crypto.The top 3 bridges by TVL are Wrapped Bitcoin (WBTC), Multichain, and Just Cryptos (JST).
Let's say you live in India and are traveling to Singapore. In India, people use Indian Rupees (INR) while in Singapore they use Singapore Dollars (SGD).
So you could convert some money from INR to SGD using a bank. Or you could use an international card that enables you to pay in SGD when you are in Singapore.
This is simple in the world of banks. But a lot more difficult in the world of Blockchains.
Let’s take an example.
Ethereum Mainnet and Terra are two independent Blockchains. They have different rules and consensus mechanisms. The native token of Ethereum Mainnet is ETH while that of Terra is LUNA.
Now suppose that you have a bunch of LUNA on Terra, but want to use it on the Ethereum Mainnet. How do you do that?
That's where a Blockchain Bridge comes into the picture. You could use the Terra Bridge to buy Wrapped Luna (WLUNA), which is an ERC-20 token native to the Ethereum Mainnet.
In simple terms, here's how a typical bridge works:
It receives one type of crypto e.g. LUNA.
It locks this LUNA as a deposit.
It "mints" an equal amount of another crypto e.g. Wrapped LUNA and releases it on another blockchain e.g. Ethereum Mainnet.
The top 3 bridges by TVL are:
Wrapped Bitcoin (WBTC)
Multichain (MULTI)
Just Cryptos (JST)
1. Wrapped Bitcoin (WBTC)
Wrapped Bitcoin is a tokenized version of Bitcoin (BTC) that runs as an ERC-20 token on the Ethereum blockchain. WBTC is backed by Bitcoin in a 1:1 ratio. DeFi projects around Bitcoin are easier to build because of WBTC.
Here is how it works:
The user requests WBTC from a merchant.
The merchant performs the KYC & AML (Know Your Customer & Anti-Money Laundering) processes and verifies the user’s identity.
The user and the merchant then execute the swap. Bitcoin from the user is transferred to the merchant, and WBTC from the merchant is transferred to the user.
Minting is the process of creating new WBTC tokens. Minting is initiated by a merchant and performed by a custodian.
Burning is the process of redeeming Bitcoin for WBTC tokens. This can only be done by merchant addresses. The amount to be ‘burnt’ is deducted from the merchant’s WBTC on-chain balance and the supply of WBTC is then reduced.
Website: https://wbtc.network
DeFiLlama: https://defillama.com/protocol/wbtc
CoinMarketCap: https://coinmarketcap.com/currencies/wrapped-bitcoin
2. Multichain
Multichain (originally Anyswap) enables 25+ blockchains to inter-operate.
The Multichain network is comprised of SMPC nodes that exist separately from all blockchains and collectively sign transactions.
SMPC nodes are run by different entities. A group of these nodes comes together to sign transactions. Only these nodes know part of the key for the signing.
Multichain offers 4 types of services:
Bridge
Router
Crosschain Contract Calls
Crosschain NFT Bridges & Router
In the Bridge, an asset is locked up in an MPC smart contract on the source blockchain and a corresponding wrapped asset is minted on the target blockchain.
In the reverse process (redeeming), the wrapped asset is burned and then the asset in the smart contract is released back to the source blockchain.
Multichain custodial bridges are useful for simple ERC20-like tokens since they do not require liquidity on each blockchain.
The Multichain router enables asset transfers between two or more blockchains. It uses liquidity pools to work with pre-existing blockchain assets.
Crosschain Contract Calls enable projects to make cross-chain contract calls with the security of Multichain's MPC network.
Crosschain NFT Bridges and Router are for ERC721 and ERC1155 NFTs.
Website: https://multichain.org
DeFiLlama: https://defillama.com/protocol/multichain
CoinMarketCap: https://coinmarketcap.com/currencies/multichain
3. Just Cryptos (JST)
The JUST ecosystem comprises the USDJ Stablecoin, the JustLend DAO lending platform, and Just Cryptos (JST).
Just Cryptos is a bridge that connects cryptos like Bitcoin, Ether, Litecoin, and Dogecoin to the TRON network. All cryptos are stored and can be swapped on the Poloniex exchange.
JST is the exclusive token for dApp governance and protocols in the JUST ecosystem. JST can be earned through mining, trading, and participating in various campaigns.
JST holders can jointly govern JUST through decentralized voting. JST can be mined by depositing, lending, providing liquidity, etc.
Website: https://just.network
DeFiLlama: https://defillama.com/protocol/justcryptos
CoinMarketCap: https://coinmarketcap.com/currencies/just