2.3 The Cross-Chain Bridge

The cross-chain bridge contains two layers of relationships, that is, the cross-chain is the purpose, and the medium is the bridge. To provide a rudimentary understanding of this concept, we will use the bridge in life to explain it. A bridge provides the necessary means for people to cross a river. In the blockchain, assets of the A chain are extradited to the B chain, and the mutual promotion of the ecology of each chain will be achieved across the consensus barrier. The reason for the prosperity of such products is that the assets on the chain of a single blockchain technology cannot be widely circulated. To exert their value more widely, they must be delivered through the help of cross-chain bridge products.

The initial cross-chain bridge in the market is a centralized exchange. For example, to realize the circulation of assets in the public chain, the exchange needs to act as a transfer station for encrypted assets, that is, a bridge. The bridge plays the role of keeping funds and releases this part of the funds in another service agreement. In conclusion, bridges are required whenever one wants to apply native blockchain technology assets like Bitcoin and Ethereum to any other system.

Due to the popularity of DeFi, the current popular cross-chain bridges for custodial services of cryptocurrencies, such as WBTC, RenBTC, sBTC, etc., such BTC anchor coins are issued on non-Bitcoin networks and as a special type of token, its price is anchored to the native Bitcoin. Users must rely on and trust a certain group of entities to mine and burn this type of BCT. Based on this type of token, it can better inject liquidity into DeFi and obtain high returns.