How can we make DeFi bridges more secure? Minimize Trust
How can we make DeFi bridges more secure? Minimize Trust
Bridges allow assets to be transferred between different blockchain networks, but they have come under numerous attacks over the years.
Cover/illustration via Cryptooshala
Blockchain bridges, also known as cross-chain bridges, are designed to connect different blockchain networks and enable the transfer of assets between them. However, developers must address several fundamental security issues in order to secure these bridges.
One of the main concerns is the possibility of hacking or theft of assets. As assets are transferred across different blockchain networks, they can become vulnerable to attacks from malicious actors. This can lead to the loss of assets and damage the reputation of the blockchain network. Therefore, it is important to implement strong security measures such as encryption and multi-signature transactions to mitigate this risk.
By the end of 2022, more than $2 billion had been lost in bridge breaches between circuits, a testament to the severity of bridge attacks in the industry. In August 2022, approximately $190 million was stolen from the Nomad Bridge before white hat hackers returned $9 million worth of funds to users.
Ronin’s Axie Infinity Bridge lost over $615 million when the protocol was hacked in March 2022. In addition, Binance recently helped recover $3 million from the hacked Harmony Bridge.
Another problem is the risk of errors in smart contracts. For example, blockchain bridges often rely on smart contracts to facilitate the transfer of assets between networks. However, an error in a smart contract can lead to unforeseen consequences, such as the loss of assets. To mitigate this risk, it is important to thoroughly test and validate smart contracts before deployment.
While blockchain bridges can greatly improve the interoperability of different blockchain networks, it is essential to know and address the fundamental security issues to ensure that these bridges operate safely and reliably.
There are two main types of cross bridges: trusted and untrusted bridges.
Trusted Bridges
Trusted bridges are internet protocols that store the user’s tokens during the bridging process. These protocols are also known as custodial bridges. When a user wants to move from one blockchain to another, the tokens are locked in the bridge and are the responsibility of the organization behind the bridge.
Since when using trusted bridges, users need to transfer the storage of cryptocurrency to a centralized entity, it can be easier for hackers to compromise the protocol. Again, this is because it is a central point of control that attackers can target. Avalanche Bridge on the Avalanche (AVAX) is a popular example of a trusted bridge. The Ava Labs organization controls the tokens locked in the protocol.
Unreliable bridges
Trustless bridges are decentralized bridge protocols that use smart contracts instead of centralized authority to manage locked tokens and perform cross-network transfers. As a result, trustless bridges give users more control over their tokens and do not have a central point of failure.
However, trustless bridges are not perfect, and if there are vulnerabilities in the smart contract code, the bridge can be compromised by an attacker.
Untrusted bridges are considered more secure than trusted bridges, despite the possibility of bugs in the code.
One example of a trustless bridge protocol is Pendulum, a decentralized smart contract network that connects fiat railways to a decentralized finance (DeFi) environment. The bridge increases fiat liquidity in the DeFi industry by linking interoperable currency-pegged tokens from major blockchain networks to various ecosystems within the decentralized finance space.
What blockchain platforms can do to prevent further exploits
Blockchain platforms can learn from bridge breaches by analyzing exploited vulnerabilities and implementing measures to prevent similar attacks in the future. One approach is to use trustless or minimally trusted operations when building the bridge architecture.
Trustless or minimally trusted transactions refer to schemes that do not rely on a centralized authority or intermediary to facilitate the transfer of assets between different chains. Instead, these projects use smart contracts and cryptographic techniques to ensure the security and integrity of transferred assets.
One example of an insecure chain-to-chain bridge is an atomic swap, which allows assets to be exchanged between different chains without the need for a centralized intermediary. The process works using a smart contract that holds the assets in escrow and transfers them to the right party after the exchange conditions are met.
Another example is the use of a side chain, a separate chain linked to the main chain. This process allows assets to be transferred to the sidechain, where they can be traded or processed with a different set of rules, and then safely and without trust moved back to the main chain.
By implementing trustless or minimally trusted operations, blockchain platforms can increase the security of their cross-chain bridges and make them less vulnerable to attacks.
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