Bridges are the infrastructure that permit customers to alternate property between totally different blockchains, the digital database underpinning main cryptocurrencies. When a bridge service swaps one coin for one more, it “wraps” the foreign money so that it’s going to perform on the opposite blockchain.
A wrapped coin doesn’t turn into one other foreign money altogether — “it just looks like it,” Tom Robinson, chief scientist at blockchain evaluation agency Elliptic, informed CNN Business. Instead, a “token” is issued to characterize the brand new coin on the totally different blockchain. “I deposit my Bitcoin in the bridge. In return for doing that, I receive a Bitcoin token on the Ethereum blockchain, and then I can transfer that Bitcoin token, which is what is known as a wrapped asset, through the Ethereum blockchain,” explains Robinson.
To assist these wrapped cash, bridge companies maintain massive reserves of assorted cash. “You need to trust the bridge really has the assets that are backing those tokens,” mentioned Robinson. “They have huge amounts of assets that back those wrapped tokens.”
These coin reserves are attracting the eye of hackers and turning blockchain bridges into prime targets for heists, in keeping with Elliptic. “They’re just huge honeypots. They just hold huge amounts of crypto assets, and so they are very obvious targets,” mentioned Robinson.
In the newest instance, hackers reportedly stole cryptocurrency valued at $190 million from cryptocurrency bridge supplier Nomad, in keeping with blockchain safety and knowledge analytics firm Peckshield. (Nomad has not confirmed the whole quantity misplaced.)