Bitcoin and Ethereum were the first blockchains that broke through to the mainstream. Little did anyone know in 2009 speed, scalability, cross-chain transaction, and other factors would limit said blockchains from reaching their full potential.
Simply not designed for widespread adoption, many L1 and L2 companies mushroomed to address scalability and speed-related issues, which paved the way for newer problems. Soon enough, the blockchain community learned that there was no means for the blockchains to talk to each other, and assets within them were siloed. This is where cross-chain bridges come to the rescue.
What is a cross-chain bridge?
A cross-chain bridge is essentially a bridge between two different blockchains that enables the transaction of assets and information between the two. Cross-chain bridges are necessary as assets and data are siloed within the blockchain, unable to communicate with a different blockchain. To explain this simpler, imagine being stuck in a big metropolitan city like New York with no means to commute to any other city. This is precisely what’s happening with the Ethereum blockchain currently.
As of now, if you have funds on Ethereum (ETH) and want to migrate them to Polygon, the best bet way to do so is converting ETH to MATIC (Polygon’s cryptocurrency) with the help of CEX like Binance or Coinbase.
When a cross-chain bridge is built between two or more blockchains, as depicted in the image below, you may transfer funds and lend, swap, deposit, and stake assets seamlessly between any blockchain. This is known as blockchain interoperability.
Why do you need a cross-chain bridge?
There are three main reasons why cross-chain bridges are important. To enable a better user experience (UX), better asset productivity, and transacting liquidity for decentralized apps (dApps).
Without a doubt, Ethereum was, and for the most part, still is, the go-to platform for many developers and businesses to build dApps. Although Ethereum offers high-grade decentralization devoid of security issues and censorship, it comes with tradeoffs like slow transaction speeds, and high gas fees, which directly affect the dApp user experience.
To remedy this, newer blockchains like Polygon, Arbitrum, and others offer cheaper gas fees, higher network throughput, richer UX, and cross-chain bridges that can improve this process.