Crypto Bridge: Crypto bridge robberies wiping out $ 1 billion spur for alternatives

High-profile hacks on cryptographic “bridges”, which allow users to trade digital tokens through blockchain – are creating opportunities for trade and other activities to offer safer alternatives.

Cryptocurrency Exchanges FTX Other Global Coinbase Inc. are deepening their capabilities to provide bridge-like services across various blockchains, so users have invested Bitcoin or Ethereum can easily join financial or gaming apps from other networks. FTX, for example, last year launched a marketplace that allows customers to trade Solana-based non-fungible tokens and easily trade their Ethereum for the chain’s leading Sol coin to purchase them. Users can also deposit an Ethereum-based NFT and withdraw it to Solana via FTX, instead of a bridge. And more and more app developers, such as the Maple Finance institutional lending marketplace, are transitioning to new blockchains, making bridges unnecessary for certain transactions.

Although some measures were in place prior to the breaches, their urgency and attraction increased after hackers stole more than $ 1 billion from crypto bridges such as worm hole and Ronin – most in February and March. An April survey of 500 US adults by OnePulse showed that 80% of respondents don’t trust crypto networks to protect their funds. Although Ethereum-linked bridges still contain about $ 17.4 billion of locked-in value, it has dropped by about 17% over the past 30 days, according to tracker Dune Analytics.

“It wouldn’t shock me if more users wanted to trade as bridges, given their experience and bankroll,” said Sam Bankman-Fried, chief executive officer (CEO) of FTX in an email. “We are currently linking some chains and are planning to potentially do more.”

With decentralized, software-managed bridges, it’s often unclear who manages them, who can access their funds, and how and if users will be reimbursed in the event of a breach. On the other end of the spectrum, a more centralized alternative can be handled by a licensed and regulated company that can be held accountable for any problems.

March 17 Coinbase wallet introduced support for Solana, allowing users to send, receive and store Solana and SPL tokens, which are native coins of the Solana blockchain. For example, if investors had previously wanted to move a USDC coin – one of the best stablecoins – from Ethereum to Solana, they had to deposit USDC in Coinbase to buy Sol, then trade that token for USDC-SPL on market maker Raydio. Now, this can be done directly through Coinbase, according to Austin Federa, head of communications at Solana Labs.

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“The more exchanges they do, the easier it becomes to explore Solana’s offering without having to support a decentralized exchange or a bridge,” Federa said in an interview.

In its blog, Coinbase said it intends to further integrate into the Solana ecosystem, allowing users to connect to its decentralized applications or apps and manage their Solana NFTs directly within their Coinbase wallet.

Meanwhile, a number of non-trading apps like Maple are building versions for other blockchains, in part to help customers avoid bridges.

Maple, which started on the Ethereum blockchain, was launched on Solana in late April. Previously an investor with USDC-SPL stablecoins on Solana had to cross a bridge-like Wormhole to deposit funds in Maple. Now they can deposit directly.

“The corporate and institutional partners we dealt with really wanted this security,” said Sid Powell, managing director (CEO) of Maple Finance. As the security and performance of decentralized bridges improves, more people are likely to start using them, he said, noting that Maple is considering expanding to other networks, such as Avalanche.

Switching to different blockchains can require extensive code rewriting for an app, although it can offer many benefits. Crypto apps can potentially grow faster if using the underlying blockchain balloons.

“The main and most prevalent reason is to tap into diverse consumer bases,” said Bodhi Pinkner, a portfolio manager at Arca, a digital asset management company. “In theory, you can increase your user base. It would reduce the need for bridging if each application is assumed to be distributed in a cross-chain over each chain. ”

However, the bridges won’t disappear anytime soon. With over 18,800 tokens and thousands of blockchains, they are needed for heavy users like Arca.

“People are becoming more aware of the bridges they use,” Pinkner said in an interview. “But the need to build bridges is so great that avoiding them is not an option for someone like us.”