What does cross chain crypto overseas Chinese mean? What are the types of crypto overseas Chinese?
What is cross chain crypto overseas Chinese? Cross chain bridge is a program that can send cryptocurrencies between at least two blockchains. The purpose of the token bridge is to enable people to transfer assets from one blockchain to another. The encryption bridge was originally designed to seamlessly and securely send tokens between blockchains. Although bridges are essential for cross chain communication, they have become an important issue in Web3. What are the types of cross chain overseas Chinese? The following content will answer for you.
1、 What is the cross chain encryption bridge?
Cross chain bridge is a program that can send cryptocurrencies between at least two blockchains. The purpose of the token bridge is to enable people to transfer assets from one blockchain to another, because different dApps (decentralized applications) may require users to interact with different blockchains.
Separated blockchains cannot communicate with each other. Although it is easy to remit money within the blockchain ecosystem, developers have been trying to find a safe way for different networks to interact with each other. Many people in the cryptocurrency industry refer to this problem as "interoperability problem"
For example, it is easy to use ETH payment transactions on Ethereum's dApps such as Uniswap and Aave. However, they still cannot use their Ethereum based assets on blockchains of competitors like Solana. This means that if you only have ETH in your encrypted wallet, you can't start using Solana dApp. Instead, you need to visit a centralized crypto exchange (CEX), buy Solana's SOL tokens, and send them to Solana's compatible wallet.
Ideally, bridges can eliminate all these additional steps. In the above example, a multi chain bridge, such as wormhole or Allbridge, can be used to link Ethereum to Solana and send Ethercoin to the Solana blockchain.
Most encryption bridges will lock your initial funds in the agreement and release new tokens on the target chain. However, the cryptocurrency received in the new blockchain will be the original "packaged" version. For example, when you send ETH to Solana on the bridge, you will receive token "packaged ETH"
The packaged tokens have the same market value as the underlying assets, but they are a composite version of the original tokens. The packaged tokens allow people to use cryptocurrencies in non local blockchains, thus increasing the liquidity of the entire Web3.
Supporters of cross chain bridges hope that this technology will improve the transfer of digital assets in DeFi (decentralized finance). Although this may not make cryptocurrency as liquid as fiat currency, it can enhance the digital capital flow between dApps and promote cooperation in the field of encryption.
2、 Type of encryption bridge
1. Trustworthy Bridge
The trusted bridge is sometimes called the "custody bridge" because the protocol leader directly keeps each user's cryptocurrency. When you lock the encryption to be moved on the trust token bridge, the company responsible for the bridge will be responsible for monitoring these digital assets. Moreover, the disadvantage of using trust based bridges is that users need to hand over their digital assets to a third party. In addition, because trusted bridges have clear central custodians, they are more likely to be targeted by hackers.
A major example of a trust based bridge is the Coin On Bridge. The security exchange completely controls its proprietary encryption bridge. Users can rest assured that Jin'an will not suddenly freeze their funds, go bankrupt, or be attacked by hackers.
Avalanche Bridge is another famous trust based bridge in DeFi. In this case, Ava Laboratories, headquartered in New York, monitors the encrypted bridge transmission.
2. No trust bridge required
On the trust free bridge, users do not have to worry about third-party risks from centralized organizations. Unlike manually monitoring encrypted transmission, the trustless bridge relies on autonomous smart contracts to complete transmission requests. The advantage of using smart contracts is that no trust bridge allows users to better control their cryptocurrency. Users do not have to worry about the central company's improper handling or taking away their funds.
However, trust free bridges are still highly experimental. Even diligent blockchain programmers can hardly write smart contract codes without mistakes. If a hacker uses an algorithm that does not require a trust bridge, users may lose all cryptocurrencies. In contrast, when using a trusted bridge, the custodian is likely to allocate insurance funds during cyber attacks.
Arbitrum, the second layer extension solution of Ethereum, has a local no trust bridge, and users can transfer digital assets between two chains. The competing smart contract blockchain Polkadot also has a "snow bridge" that does not need trust to help users transfer tokens between Polkadot and Ethereum.
The above content describes what cross chain encryption bridges are and the types of encryption overseas Chinese. Everyone can explore the Web3 ecosystem and the entire cryptocurrency market. However, although the bridge is an important tool in DeFi, users should be careful before delegating cryptocurrency to these protocols.