The initial days of development of any new technology bring the assurance of simple ways to use the technology. For example, crypto users had no problems without the knowledge of using more than one specific ‘home’ chain. On the contrary, cross-chain or multi-chain has become a prominent paradigm.
The web3 landscape includes hundreds of unique blockchain networks with unique features, goals, and aims. However, interactions among different chains create cross-chain bridge security concerns. At this point of time, you must consider the growing complications in the world of web3 with the addition of multiple layers. How could standalone blockchains solve the problem of cross-chain interoperability? The answer would lead you to cross-chain bridges.
Cross-chain bridges are unique smart contracts tailored to enable the transfer of assets between different chains. However, cross bridges vulnerabilities can create concerns regarding the adoption of cross-chain bridges. It is important to remember that the technical aspects of each bridge could differ from the other. On top of it, cross-chain bridges should also have a high amount of total value locked in the bridges to ensure liquidity in all conditions.
The concentration of value in the bridges makes them a quick and high-risk target for exploitation or theft. At the same time, Ethereum head Vitalik Buterin, has stated that cross-chain technology has formidable limitations in security. Let us learn more about the security of cross-chain bridges and the best practices to protect assets in cross-chain bridge interactions.
What are Cross-Chain Bridges and How Do They Work?
Cross-chain bridges crypto bridges or blockchain bridges are an application that enables cryptocurrency transfer across different blockchain networks. The bridges ensure that different blockchain networks can interact with each other and exchange data alongside fulfilling other instructions. With the help of cross-chain bridges, developers from different crypto ecosystems could collaborate with each other and create new interoperable applications.
You can determine the answers to “Is cross-chain bridge safe?” by diving deeper into the details of their working mechanism. Cross-chain bridges work like dApps for moving assets between different blockchain networks. The bridges lock or burn tokens by using a vault smart contract on the source chain and unlock or issue the tokens on the destination chain by using a peg smart contract.
The working mechanism of cross-chain bridges also involves a set of ‘guardians’ for monitoring the process of asset transfer. As a result, it can ensure that only the specified amount of tokens are released on the destination blockchain. Most of the cross-chain bridge hacks revolve around discovering loopholes in the vault smart contract and peg smart contract. Upon identification of such bugs in cross-chain bridges, hackers could withdraw funds from any side of the bridge without investing any assets in the source chain.
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Why Should You Worry About Cross-Chain Bridge Security?
The next important question about cross-chain bridges points to the necessity of learning about security for crypto bridges. What are the prominent factors that call for learning about cross-chain bridge security? As of now, the blockchain landscape has more than 1000 different blockchain networks, with some of them being Ethereum forks.
On the other hand, you can find many standalone blockchain platforms with their unique version of the consensus model and other features. However, users seek seamless and intuitive user experiences in the crypto landscape. Any crypto owner would search for the flexibility to swap their tokens into other tokens. The transfer of valuable assets between two blockchain networks must be seamless and easy, like converting USD to any other fiat currency.
Crypto bridges can provide friction-free customer journeys by facilitating interoperability between different networks. On the other hand, it is impossible to ignore a cross-chain bridge attack or other criticisms of cross-chain bridges. For example, Vitalik Buterin has expressed concerns regarding security of multi-chain transactions. In addition, some of the largest hacks in the world of cryptocurrencies have happened through cross-chain bridges.
Furthermore, users would have to pay higher transaction fees with cross-chain bridges. On top of it, cross-chain bridges lead to conflicts between developer tools on different platforms. Therefore, it is reasonable to believe that cross-chain bridges can present a massive point of vulnerability for the blockchain ecosystem.
Apart from the threats of cross-chain bridge security risks, it is also important to focus on the functionality of cross-chain bridges. Cross-chain bridges can help different blockchain networks in sharing data, transferring assets, and accessing contracts from other blockchain networks.
As a matter of fact, cross-chain functionalities could help in encouraging large-scale crypto adoption. On the contrary, some people also point out that cross-chain bridges reduce the barriers to accessibility. It is important to note that the security issues in cross-chain bridges could offer lessons for improving blockchain technology.
Are Cross-Chain Bridges Really the Future?
Ethereum founder Vitalik Buterin has criticized cross-chain bridges for different reasons. First of all, Buterin believes that asset transfers on a different chain could not offer the same security as native chain transfers. On top of it, he also stated that the risks of cross-chain bridge hacks can increase exponentially when the interdependencies exceed two bridged chains. On the other hand, Vitalik Buterin has also pointed out that different blockchain communities have distinct values. Therefore, it is important to develop a future with multi-chain solutions that could allow the co-existence of different types of communities.
As of now, layer zero protocols or independent blockchains could provide interoperability with each other. Layer 0 blockchains serve as a security layer for all connected networks, alongside enabling interactions between chains. All blockchains could transfer assets through their layer 0 ecosystem and leverage the security benefits of the main chain.
Some of the leading layer 0 networks include Cosmos, Polkadot, and Kusama, which also serve as the main blockchains in their distinct ecosystems. Why do you need a cross-chain bridge security strategy when you have layer 0 networks? Layer 0 chains could have hidden vulnerabilities that could make them more vulnerable to security attacks. In addition, cross-chain bridges offer user-friendly interfaces, which are not available with layer 0 blockchains.
With layer 0 blockchains, you would have to reconfigure different wallet connections. On top of it, you would have to work with new gas tokens that could create friction for new users. Therefore, the demand for cross-chain protocols has consistently dominated the market. You can find proof of the same in the continuously increasing amount of the TVL of Ether being transferred to cross-chain bridges.
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Threat of Cross-Chain Bridge Hacks
The importance of cross-chain bridges for encouraging the adoption of blockchain and web3 could not overshadow their security risks. Anyone searching for answers to questions like “Is cross-chain bridge safe?” should note that bridge hacks are responsible for over 50% of losses in DeFi. Hackers have successfully stolen $2.53 billion from dApps, which support cross-chain transactions.
It is important to note that different blockchain networks use different technologies, albeit with similarities in smart contract vulnerabilities and private key theft. Now, imagine how the threats would multiply when you connect multiple blockchain networks with a bridge. For example, assume that a cross-chain bridge connects 50 different blockchain networks. If one of the blockchains is affected by a 51% attack, then the bridge would put the security of other 49 blockchain platforms at risk.
Why would you come across cross bridges vulnerabilities when you try to achieve interoperability between blockchain networks? In simple words, you can compare different crypto tokens with different units of money. Every crypto token is scripted using a unique coding language, and they operate in unique virtual environments. Cross-chain bridges are special smart contracts, and developing the logic for such applications is considerably challenging. The smart contracts have to support the conversion between different crypto tokens.
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What Types of Attacks are Common for Cross-Chain Bridges?
The best thing about cross-chain bridge attacks is the opportunity to learn about new ways to improve web3 security. More hacks would emerge and pave the path for introducing viable improvements to the web3 landscape. However, every new cross-chain bridge attack example reflects the severity of the impact of security vulnerabilities of cross-chain bridges. As a matter of fact, cross-chain bridges were responsible for almost 69% of all the crypto funds stolen in 2022. Here are some of the notable types of vulnerabilities in crypto bridge security.
One of the most notable examples of a cross-chain bridge vulnerability points to fake deposits. The most recent example of such attacks is the Wormhole protocol attack in February 2022, which led to theft of $325 million. A cross-chain bridge security strategy helps you understand such threats and how the deposit validation process could present prominent vulnerabilities. Cybercriminals could capitalize on vulnerabilities in the code and make fake deposits, which would be perceived as real ones by the bridges.
Another common type of attack on cross-chain bridges refers to validator takeover. In such types of attacks, the bridges rely on validators for voting on approval of transfers. Hackers could gain control over the majority of network nodes and approve malicious transfers, thereby leading to losses.
One of the best examples of such cross-chain bridge hacks is the Ronin network hack in March 2022. The hack led to a loss of almost $600 million. On top of it, the Ronin network hack also points out the problems with failure of incident response strategies.
Apparently, the team at Ronin Bridge did not know about the exploit in their validation mechanism for almost six days after the attack. Therefore, cross-chain bridges alongside web3 apps that rely on smart contracts would need continuous real-time monitoring tools. The monitoring tools help in real-time identification of malicious data and security breaches.
False deposit events are the same type of attacks as fake deposits in cross-chain bridges. You can find a critical response to “Is cross-chain bridge safe?” by exploring the meaning behind false deposit events. The most recent example of false deposit events is the Qubit hack in January 2022, which led to theft of $80 million.
Such types of hacks are evident in scenarios where bridges allow transfer of assets to another blockchain after verifying deposit events on the source blockchain. Hackers can use such vulnerabilities to create deposit events without any real deposits. In addition, hackers could also make deposits with valueless tokens.
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Safeguards against Cross-Chain Bridge Attacks
A closer reflection on the different cross bridges vulnerabilities shows that you can avoid them by following certain precautions. You can avoid security issues on cross-chain bridges by adopting the following best practices.
- Ensure decentralization of validators to avoid single points of failure.
- Time delay on withdrawals from cross-chain bridges could help in preventing theft.
- Real-time monitoring of transfers could help in identifying abnormal transactions quickly.
- An insurance fund could serve as a valuable contingency plan for reducing the impact of damages due to crypto bridge exploits.
- External audits by third-party security firms can help in easier identification of vulnerabilities.
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The losses due to crypto bridge attacks have created a formidable challenge for the best interoperability solutions in blockchain and web3. As the domain of blockchain and web3 expands continuously, it is important to focus on cross-chain bridge security and examples of hacks. You must also note that crypto bridges are vulnerable to inherent flaws, such as errors in code.
Therefore, it is important to pay attention to resolution of problems in design of cross-chain bridges for adapting to emerging security requirements. At the same time, you should know that security breaches have never halted the engine of innovation in any field. On the contrary, security breaches on cross-chain bridges could open more avenues for their continuous improvement. Learn more about cross-chain bridges and their importance in the web3 landscape right now.
*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!