Bridges and their risks: moving crypto between chains

Why bridges exist

Ethereum, its layer 2s, BNB Smart Chain and Bitcoin all keep separate ledgers, and none of them can read the others. ETH on Arbitrum is not the same asset as ETH on Ethereum, and bitcoin cannot reach Ethereum at all without some intermediary. A bridge is that intermediary: a system that watches one chain and acts on another.

How they work

• Lock and mint. You deposit tokens into a contract on the source chain, and the bridge mints a matching wrapped token on the destination. Burning the wrapped token later releases the original. The wrapped token is worth something only while the locked funds are safe. Wrapped bitcoin on Ethereum works the same way, with a custodian holding the bitcoin.
• Burn and mint. An issuer that controls a token on several chains destroys it on one and creates it on the other. Circle’s Cross-Chain Transfer Protocol (CCTP) does this for USDC, so you receive native USDC rather than a wrapped copy.
• Liquidity networks. The service pays you from its own funds on the destination chain, often within a minute or two, and is repaid from your deposit once the source transaction is confirmed. You rely on its contracts and on the pools being funded.
• Canonical rollup bridges. Every rollup has an official bridge built into its design. Deposits from Ethereum arrive within minutes. Withdrawals back to Ethereum from optimistic rollups such as Arbitrum One, OP Mainnet and Base wait out a challenge period of about a week, during which anyone can prove a withdrawal fraudulent.

What can go wrong

A bridge concentrates large sums in one place and depends on something outside either chain to confirm that a deposit really happened. That makes bridges a prime target, and some of the largest thefts in crypto have been bridge hacks.

• Compromised signers. In March 2022 attackers who had taken control of five of the nine validator keys securing the Ronin bridge, built for the game Axie Infinity, withdrew more than $600 million. The FBI attributed the theft to North Korea’s Lazarus Group.
• Verification bugs. In February 2022 a flaw in how the Wormhole bridge checked signatures let an attacker mint about 120,000 wrapped ETH on Solana without depositing anything.
• Faulty upgrades. In August 2022 a routine upgrade left the Nomad bridge accepting messages it had never verified. Once the first attack became public, hundreds of copycat addresses joined in and about $190 million was taken.
• Fake bridge sites. Phishing copies of popular bridges are common. A fake bridge simply keeps what you send.

The pattern matters more than the names. When the thing that verifies transfers fails, the wrapped tokens on the other side can lose their backing, and the people holding them, who may never have used the bridge themselves, are left with a claim on funds that are gone.

Before you bridge

1. Ask whether you need to. Many exchanges let you withdraw directly to layer 2 networks. Withdrawing on the network you want avoids a bridge altogether.
2. Prefer the canonical route. For a rollup, use its official bridge, reached from the rollup’s own documentation. For USDC, use a route built on Circle’s transfer service, so that you receive native USDC.
3. Check what you will receive. Many chains carry both a native and a bridged version of the same token; bridged USDC is often labelled USDC.e. They are separate tokens with separate contracts and different risks. Confirm the destination contract address on the issuer’s site; our transaction lookup marks tokens from its curated list as verified.
4. Check who controls the bridge. Paste the bridge contract into the contract admin inspector. If a single key can upgrade it, that key can redirect everything the bridge holds. Contract admin keys explains what to look for.
5. Budget for gas on both sides. You pay gas on the source chain, and you need a little of the destination chain’s gas token to do anything once you arrive. The gas tracker shows what bridging costs on each supported chain.
6. Send a test. Bridge a small amount, confirm it arrives in your wallet, then send the rest.

While a transfer is in flight

A bridge transfer is two transactions on two chains, minutes or, for rollup withdrawals, days apart. Keep the hash of each. If funds have left the source chain but not arrived, look the source hash up in the transaction lookup to confirm your deposit reached the bridge contract, then check the bridge’s own status page for the second half. Canonical rollup withdrawals also need a final claim transaction on Ethereum once the challenge period ends, and nothing arrives until you send it.

Bridged tokens keep the risk

The risk does not end when your transfer arrives. A wrapped or bridged token is backed only as long as the bridge’s locked funds are safe, so a large, long-term balance in one carries the bridge’s risk for as long as you hold it. Where a native version of a token exists on the chain, prefer it for anything you plan to keep.