Web3 cryptos are decentralized, open-source cryptocurrencies that use smart contracts to give people control over their data and make transactions without relying on third parties. Web3 is a platform that aims to allow people in the world to interact through tokens and smart contracts. It is not owned by large corporations or governments but instead is built and operated by the users themselves.
Blockchains that allow people to move digital assets from one blockchain to another are called bridges. Bridges are applications that allow people to move digital assets from one blockchain to another.
An attack on the cryptocurrency network Ronin in March 2022 led to the theft of 540 million dollars in Ethereum and USD coins, making it one of the biggest hacks of all time. As a result of the incident, hackers exploited a vulnerability in a service called the Ronin Bridge. Several successful attacks have highlighted the inherent security shortcomings of “blockchain bridges” in recent years.
In addition to allowing crypto holders to move their assets between blockchains, blockchain bridges are also called network bridges. Due to cryptocurrencies’ silos and lack of interoperability, they play an important role, allowing you to send Bitcoin to an Ethereum wallet address, for example. Within the crypto economy, bridges have emerged as a vital mechanism because of this siloed nature.
Digital assets aren’t actually transferred between chains when using bridge services. As a result, cryptocurrency tokens are “wrapped” to create a new asset on the other chain. When a user bridges Bitcoin to Solana, the bridge essentially freezes the original Bitcoin by locking it in a wallet address, before spitting out wrapped Bitcoin (WBTC) that can be used on the second chain. Essentially, it is a gift card with the same monetary value, but which is only usable in that particular store.
Because of the way bridges work, they hold significant amounts of cryptocurrency tokens hidden in smart contracts, and those reserves make them particularly attractive to hackers.
Every value held on-chain is subject to attack at any time of the day, as crypto stalwarts know well. Due to the fact that the internet never goes down, any bridge can always access the tokens it holds.
The Ronin Hack Demonstrates Centralization’s Dangers
Ronin Network was the target of a massive DeFi heist with a dollar value of over $100 million. RONIN is an Ethereum sidechain that enables cheaper and faster transactions than the main Ethereum network. Millions of dollars in cryptocurrency and stablecoins were constantly processed through it for the popular “play-to-earn” cryptocurrency game Axie Infinity.
A sidechain is a blockchain scaling solution that requires a bridge to connect to other chains. ETH can be locked up on Ronin and mint wrapped for use on alternative networks. A Proof of Authority consensus algorithm is used to process and approve transactions. As a result of this model, 5 of 9 validators must agree on a transaction in order for consensus to be reached. Sky Mavis, the company that developed Ronin, operated four of Ronin’s validators.
As a result of Axie Dao’s decision in November 2021 to install a gas-free RPC node to alleviate network congestion, it was a heavily centralized setup. Transactions may be signed by the Sky Mavis keys listed by the DAO. However, the allow list was never revoked despite being intended as a temporary arrangement.
Using social engineering techniques, the attackers compromised Sky Mavis’s four keys using the North Korean-sponsored Lazarus Group. Using a vulnerability in the RPC’s code, the hackers gained control of a fifth validator and made illicit withdrawals.
Lack of decentralization compromised Ronin’s multi-signature system for signing off on transactions. Having a single entity control the majority of governance illustrates the vulnerability of security mechanisms.
Vulnerabilities persist in smart contracts
As a result of the Ronin hack, millions of dollars worth of value have been lost in a string of high-profile attacks on blockchain bridges. A month earlier, an attack on the Qubit Bridge resulted in the theft of around $80 million worth of Ethereum.
Qubit Finance operates a service that allows users to lend and borrow digital assets between Ethereum and Binance Smart Chain networks. In exchange for an ERC-20 token, users can receive a BEP-20 coin, which can then be used on the Binance chain.
A logical error was found within the smart contract code of Qubit Bridge, which was the cause of the hack. A hacker could exploit the vulnerability by manipulating the bridge with malicious data, so they could withdraw BSC tokens without making a deposit on Ethereum. According to the autopsy report, the QBridge smart contract failed to verify that the required amount of ETH was locked. A fake proof of a nonexistent deposit was instead presented by the hacker.
DeFi’s blockchain bridges remain vulnerable to smart contract vulnerabilities, particularly when dealing with smart contracts. Almost all bridge attacks target smart contracts, which are automated contracts that self-execute when certain conditions are met.
The key to expanding crypto’s reach is building bridges
Since crypto platforms became popular, they have been subjected to an endless stream of attacks. According to its adherents, DeFi can provide a more accessible and equitable alternative to traditional financial services, but as the space has evolved, DeFi has faced what can be called a trial by fire.
The heists of cryptocurrency exchanges and the DeFi protocol have become as common as attacks on bridges. As high-stakes platforms with enormous value, bridges, like exchanges and protocols, are vulnerable to bugs in their underlying code, due to the fact that they hold enormous amounts of information.
Without a proper solution to the risk of attacks, crypto and DeFi won’t achieve widespread adoption. Institutional investors, such as investment banks and hedge funds, hold the majority of the world’s value. It is imperative that these organizations prioritize compliance and the safety of their funds over any potential profits. Therefore, until its security issues are resolved, DeFi and crypto are unlikely to become much more than niche investment industries.
The security of bridges is of utmost importance. A decentralized application’s potential reach is severely limited by the siloed nature of blockchains. Ethereum-based dApps cannot communicate with those built on other blockchains. The DeFi ecosystem cannot transact with Bitcoin, the world’s most valuable and widely used cryptocurrency. It is imperative that users have a safe way to communicate with different chains if crypto is ever going to become ubiquitous.
Building Better Bridges
Fortunately, there are those in the industry who understand the importance of a secure blockchain connection. AllianceBlock’s AllianceBridge, which has a unique infrastructure that’s more decentralized and delivers faster and safer performance than other blockchains, is one promising prospect. It supports Ethereum, Binance Smart Chain, Avalanche, Polygon, Arbirtrum, Optimism, and Energy Web.
Decentralized bridges, in contrast to centralized bridges, rely on a few or one entity to verify the legitimacy of transactions. The validity of transactions is established by multiple operators using well-structured consensus mechanisms. In order to ensure consensus, AllianceBridge has developed a decentralized bridge with a unique method.
A smart contract is used by AllianceBridge to lock the tokens it receives and then issue wrapped tokens on the target blockchain. Users will be able to redeem their wrapped tokens on the original network until they decide to redeem them on the second chain. When the wrapped tokens are burned, their existence ceases, while the original tokens on the native chain become accessible.
AllianceBridge differs from other bridge operators by using an EVM-compatible network. Moreover, it uses the robust, third-party Hedera Hashgraph Consensus Service, which uses an innovative “gossip-about-gossip” consensus algorithm.
HCS allows blockchain applications and networks to submit messages to the Hedera public ledger, where they are timestamped and ordered transparently. By doing so, AllianceBridge is able to reach a consensus without synchronizing its bridge operators. A high degree of decentralization and faster performance result from HCS, while an extra layer of trust makes the bridge more secure.
Even more, reassurance comes from AllianceBridge’s smart contracts, which lock the original assets and mint and burn wrapped tokens. Omniscia has fully audited the entire smart contract codebase to ensure that it adheres to the EIP-2535 standard. As a result of the audit, Omniscia pointed out a number of potential problems that AllianceBlock promptly addressed before the code was released.
AllianceBridge’s security and reliability have contributed greatly to AllianceBlock’s suite of DeFi offerings, such as DeFi Terminal, which makes it easy for projects to launch liquidity mining and staking campaigns across multiple supported networks and DApps with ease. Using AllianceBlock’s secure blockchain interoperability protocol, a rich, interconnected Web3 ecosystem can grow and evolve on a robust foundation.
Via this site
