Crypto Bridging: How They Work, Benefits, Risks, and What’s Next?

Posted On March 28, 2025

Crypto bridging lets you move assets between different blockchains without using a centralized exchange. It works by locking tokens on one chain and creating wrapped tokens on another, keeping their value the same.

Blockchains are like separate islands—they don’t naturally communicate. Crypto bridges solve this by allowing cross-chain transactions, making it easier to move assets between networks. This is a game-changer for DeFi, NFTs, and blockchain gaming. The demand is clear—by 2023, over $8 billion in assets were bridged each month across major blockchains like Ethereum, Polygon, BSC, and Avalanche.

But bridging isn’t perfect. Security risks and inefficiencies still exist. This guide breaks down how crypto bridges work, their benefits, risks, and the future of blockchain interoperability. Let’s get started.

What is Bridging in Crypto?

Crypto bridging allows users to transfer assets between different blockchains. Normally, you can’t send tokens from Ethereum to Solana directly because their networks don’t communicate.

However, a crypto bridge is like an international airport. Different blockchains are like countries with their own rules and currencies. Normally, you can’t use one country’s money in another without exchanging it. A blockchain bridge works like a currency exchange and customs checkpoint, letting tokens travel between blockchains while keeping their value intact.

There are two types of blockchain bridges:

• Trust-based (custodial) bridges rely on a central entity to oversee transfers. They are faster but require trust in a third party.
• Trustless (non-custodial) bridges use smart contracts to automate cross-chain transactions. They remove intermediaries, increasing security but also introducing technical risks.

Bridges work by using wrapped tokens (or “debt” tokens). The original asset is locked on the source chain while an equivalent token is minted on the destination chain. This ensures the asset’s value remains the same across networks. More on this in the next section.

This lets users move stablecoins or ETH from Ethereum to Polygon, BSC, or Solana for lower fees, yield farming, or cheaper DEX trades.

For instance, Axie Infinity’s Ronin Bridge helps players move ETH or USDC between Ethereum and Ronin. This lets them buy Axie NFTs and in-game items using Ethereum-based funds while enjoying lower fees on Ronin. Later, they can bridge assets back to Ethereum to sell NFTs on OpenSea or convert game rewards into mainstream tokens.

How Does Crypto Bridging Work?

A crypto bridge moves assets between blockchains by either locking and minting tokens or swapping through liquidity pools. Since blockchains don’t naturally communicate, these methods enable blockchain interoperability, allowing cross-chain transactions without centralized exchanges.

Lock-and-Mint: Most bridges use token wrapping to transfer assets. When you bridge a token, the bridge locks the original asset in a smart contract and mints an equivalent wrapped token on the destination chain.

For example, if you bridge ETH from Ethereum to Binance Smart Chain (BSC), the bridge locks your ETH on Ethereum and mints wETH (wrapped ETH) on BSC. The wrapped token keeps the same value and can be used in DeFi apps on BSC. When you bridge back, the wETH is burned, and your original ETH is unlocked.

Liquidity Bridges: Some bridges skip the wrapping process and use liquidity networks instead. They hold pools of assets on different blockchains and swap tokens instantly, similar to how liquidity pools work. 

For example, if you want to swap BUSD on BSC for USDT on Avalanche, bridges like Synapse or Hop use their liquidity pools to complete the swap in one step. This method avoids delays in minting wrapped tokens.

Bridges don’t just move tokens. They also enable cross-chain lending, where users can borrow on one blockchain while holding collateral on another. They support cross-chain governance, letting token holders vote on decisions even if their assets are on a different network. Some DAOs even use bridges to manage funds across multiple chains.

New technologies like atomic swaps and cross-chain messaging protocols aim to make crypto bridging even more secure and efficient in the future.

Benefits of Crypto Bridging

A crypto bridge helps users move assets between blockchains, making crypto more accessible and efficient. Without blockchain interoperability, tokens stay stuck on their original networks, limiting their use.

1. Move Assets Across Blockchains: Bridges let users transfer tokens between blockchains without selling or swapping on a centralized exchange. This saves trading fees and avoids tax-triggering conversions (or maybe not). For example, instead of selling ETH to buy BNB, you can bridge ETH directly from Ethereum to BNB Chain.

2. More Liquidity for DeFi: Decentralized finance (DeFi) platforms need liquidity to function. Without cross-chain bridges, assets are locked within their original networks. This limits the staking, lending, and yield farming ecosystem. Bridging allows users to access DeFi options on multiple chains.

3. Access More dApps and NFTs: Many dApps and NFT platforms run on specific blockchains. Bridges let users interact with these ecosystems without being stuck on one network. For example, bridging to Polygon lowers NFT transaction fees compared to Ethereum.

4. Reduce Reliance on Centralized Exchanges: Before cross-chain transactions, users had to rely on centralized exchanges to move assets between blockchains. Bridges offer a decentralized alternative. This reduces costs and custody risks.

5. Faster, Cheaper Transactions: Bridging to Layer 2 networks like Arbitrum or Optimism helps users avoid Ethereum’s high gas fees. Transactions become faster and cheaper while still benefiting from Ethereum’s security.

Risks of Crypto Bridging

Smart Contract Bugs

Most crypto bridges rely on smart contracts to automate cross-chain transactions. However, these contracts often have vulnerabilities that hackers exploit. 

Here are some common smart contract risks:

• Reentrancy Attacks – A hacker exploits a contract flaw to repeatedly withdraw funds before the system updates. Example: The Nomad Bridge attack (2022) allowed attackers to drain $190M due to a faulty update.
• Signature Verification Failures – If a bridge fails to verify signatures correctly, attackers can forge transactions. The Wormhole Bridge hack (2022) bypassed verification and minted 120,000 wETH ($326M loss).
• Incorrect State Validation – If a bridge doesn’t properly check deposits, hackers can trick it into minting tokens without locking real assets. The Qubit Finance exploit resulted in an $80M loss.

Security audits help, but they’re not foolproof. Plus, most projects conduct only one-time audits, missing post-launch vulnerabilities. On top of that, hackers also evolve their methods, finding new ways to break in. 

However, it’s not all dark and gloomy. 

Some projects, like Celer and LayerZero, have maintained a clean security track record. For instance, Celer’s cBridge had 15 independent audits by firms like CertiK and PeckShield before launch. 

This proves that a rigorous security-first approach works and bridges must prioritize ongoing testing, multiple audits, and advanced security protocols to prevent future exploits

Centralization Risks

Some cross-chain bridges use a custodial model, meaning a central entity controls users’ funds. This comes with two big risks:

• Custodian Hacks – If hackers breach the bridge operator, they can steal user funds. In 2022, the Ronin Bridge hack led to a $620M theft (one of the biggest crypto hacks ever) after attackers took control of private keys used for transaction validation. Check out the full story here. 
• Malicious Insiders – If bridge operators act dishonestly, they can steal funds. In 2021, AnubisDAO raised $60M for a bridge project but rug-pulled investors, vanishing with the money.

Centralized crypto bridges are still popular because they’re easy to use, but they create single points of failure. Decentralized bridges remove the need for trust in a third party, but come with their own risks.

Exploits and Hacks

By mid-2022, cross-chain bridges were the biggest target for crypto hacks, making up 69% of all stolen funds. In just eight months, hackers stole over $2 billion across 13 bridge exploits, according to Chainalysis.

Even with strong security and decentralization, crypto bridges will always be prime targets for hacks. 

Why?

The main reason is that bridges hold large pools of locked assets as collateral for bridged tokens—a massive honeypot for attackers. If hackers find a flaw, they can drain or counterfeit those assets in one attack.

Bridges are also hard to secure because they connect multiple blockchains, each with different consensus rules and security models. They must validate external proofs, manage custodians, validators, and oracles, and handle complex interactions, which is not easy to put simply. However, a standardized blockchain framework could simplify crypto bridging in the future (more on this later).

Best Practices for Using Crypto Bridges

No crypto bridge is 100% safe. Here’s how to protect your assets when making cross-chain transactions:

1. Use Audited Bridges: Only use blockchain bridges that have been audited by firms like CertiK, Quantstamp, or Trail of Bits. One audit isn’t enough—good bridges get frequent re-audits to stay ahead of new threats.

2. Choose Open-Source and Transparent Bridges: A trustless bridge should be open-source, meaning anyone can inspect its smart contracts for flaws. Transparent projects also publish security updates and reports. Some, like Wormhole, offer bug bounties (e.g., a $10M reward) to encourage ethical hackers to find vulnerabilities before bad actors do.

3. Avoid Centralized Validators: Some cross-chain bridges rely on a small group of validators to approve transactions. If just a few validators control everything, a single hack can be disastrous. That’s what happened with Ronin Bridge, where attackers took over a 5-of-9 multisig setup and stole $620M. Instead, use bridges with decentralized validation, like IBC-based bridges that rely on native blockchain security.

4. Look for Strong Cryptography: The most secure bridges use multi-party computation (MPC), threshold signatures, and zero-knowledge proofs to keep transactions safe. Avoid bridges that depend on closed-source security modules or a single oracle, as these create weak points for attackers.

5. Check Past Security Incidents: A bridge hack doesn’t always mean a project is bad—what matters is how the team responded. Did they fix the issue quickly, compensate users, and improve security? If a bridge has a track record of slow responses or negligence, it’s a red flag.

6. Look for Community and Ecosystem Support: Check if top DeFi platforms like MetaMask or PancakeSwap integrate the bridge. A strong developer and user community means more people are reviewing the system, making it harder for vulnerabilities to go unnoticed.

Check out our list of the best crypto bridges of 2025. We’ve done the research and picked the top options, so you don’t have to.

Is Bridging Crypto Taxable?

The tax treatment of crypto bridging depends on your location and how regulators interpret the transaction. 

When you use a blockchain bridge, your original tokens are locked, and wrapped tokens are minted on another chain. Some regulators see this as disposing of one asset and acquiring another, which could trigger capital gains or losses if the value changes.

For example, bridging ETH from Ethereum to BNB Chain might create wETH on BSC. If the IRS or other tax agencies classify this as an exchange, it could be taxable—similar to swapping ETH for wETH on a DeFi platform. 

However, if there’s no economic gain or ownership change, some jurisdictions might not consider it taxable.

How to prepare for crypto bridge taxes:

• Track all transactions – Keep records of dates, values, and fees for every cross-chain transaction.
• Use tax tools – Platforms like Bitcoin.Tax can help calculate gains and losses.
• Check local rules – Some regions allow gas fees to be deducted from taxable gains. Read our country-specific crypto tax guides.
• Consult a tax professional – When in doubt, consult an expert. Read our guide to choose the best crypto tax expert.

What’s Next for Crypto Bridges?

Crypto bridging is getting faster, safer, and more decentralized. Right now, security risks and inefficiencies make cross-chain transactions risky. But new technologies are stepping in to fix these problems and improve blockchain interoperability.

Stronger Security with Zero-Knowledge Proofs

To stop bridge hacks, developers are using zero-knowledge proofs (ZKPs) and multi-party computation (MPC) in blockchain bridges.

• ZKPs confirm transactions without exposing private data. This will reduce security risks. Projects like Succinct Labs and Polyhedra Network use zk-SNARKs to make bridging trustless—meaning no one has to “trust” a middleman for verification.
• MPC spreads control of cryptographic keys across multiple parties, like multi-signature wallets. This makes it harder for a single hacker to break in.

Bridges like Thorchain and tBTC already use threshold signatures, ensuring no one person controls the assets.

Standardized Cross-Chain Transactions 

Right now, every crypto bridge works differently, which causes problems. A universal standard could change that.

• Chainlink’s Cross-Chain Interoperability Protocol (CCIP) is working on a common framework for blockchain communication.
• IBC (Inter-Blockchain Communication) in Cosmos already allows permissionless transfers between blockchains. Developers are expanding this to Ethereum.
• Polkadot’s XCM helps parachains share data more efficiently.

In the future, major blockchains may adopt common standards. This will make crypto bridging smoother and more secure.

Bridging Will Go Beyond Just Tokens

The future of blockchain interoperability isn’t just about moving assets. 

• Cross-chain flash loans will allow users to borrow and repay funds across different blockchains in a single transaction.
• Multi-chain NFTs will exist across multiple blockchains at the same time.
• Composable dApps will spread different functions across chains. For example, an app might store data on Arweave, process transactions on Ethereum L2, and manage assets on Ethereum L1.

The future of crypto bridging is heading toward trustless, seamless, and highly secure solutions.