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Blockchain bridges: a major step towards a “multi-chain” future
Executive Education / 16 July 2020
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Michelle Neumann is Marketing & Sales Coordinator Professional & Executive Education at Frankfurt School.

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Blockchain technology has always been dogged by a lack of interoperability. Now developers hope to solve the problem once and for all – using “blockchain bridges”.

How blockchain bridges work

The term “blockchain bridge” is used to describe a connection between two different blockchain ecosystems. Blockchain bridges support exchanges of tokens or data in all possible directions. Exchanges are kept consistent with the help of “mint-and-burn” protocols. This means that when a token leaves its own blockchain, it is “burned” or locked, while a token of equal value is minted on the second blockchain. If the token then returns to its original network, the “twin” token on the second network is burned or locked instead.

Why blockchain bridges are useful

When a developer develops a decentralised application on a specific blockchain platform, it is usually bound to this platform. There is no way the developer can take advantage of the benefits of other blockchains or blockchain platforms.

Take Ethereum, for example. Developers who use the platform to create blockchain systems often run into scalability issues – one of the platform’s well-documented weaknesses. So far, the platform has failed to meet developers’ hopes for a swift solution to this problem, meaning that some of them have started to think about switching over to a faster platform such as EOS. The downside? They would lose the benefits of belonging to Ethereum, which include a lively community, a widely implemented token standard, and a reputation as the most popular platform for smart contracts.

Thanks to blockchain bridges, developers are now able to sidestep these issues. By sending tokens from one blockchain platform to another, developers can take full advantage of both platforms. The platforms also benefit – if Ethereum traffic is offloaded to and evenly distributed across other platforms, scaling issues will decline over the long term.

First real-world impressions

A number of bridges were implemented in early 2020 and are now in active use. Clearly they have only been operating in their current form for a few months, so they are still very much at the testing stage. This means that it is still too early to draw conclusions or even modify the models. However, blockchain bridges represent a very promising upgrade for stablecoins in particular. With the current focus on scalability and interoperability, blockchain bridges appear destined to play a key role in the future evolution of blockchain technology.

Would you like to find out more about blockchain and distributed-ledger technology? If you would like to become something more than just a passive observer of high-speed technological change, our Certified Blockchain Expert programme will give you the knowledge you need to play an active role in driving forward your company’s digitisation.

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