High-profile hacks on crypto "bridges" - which let users swap digital tokens across blockchains - are creating opportunities for exchanges and other businesses to offer more secure alternatives.
Crypto exchanges FTX and Coinbase Global are deepening their capabilities to provide bridge-like services on various blockchains, so users invested in Bitcoin or Ethereum can easily participate in other networks' financial or gaming apps. FTX, for instance, launched a marketplace last year that allows customers to trade Solana-based non-fungible tokens, and to easily swap their Ethereum for the chain's main Sol coin to buy them. Users can also deposit an Ethereum-based NFT and withdraw it on Solana via FTX - instead of a bridge. And more app developers, like institutional lending marketplace Maple Finance, are moving onto new blockchains, making bridges unnecessary for certain transactions.
While some measures may have been in the works prior to the breaches, their urgency and attraction have increased after hackers siphoned more than US$1 billion out of crypto bridges like Wormhole and Ronin - most of it in February and March.
"It wouldn't shock me if more users wanted exchanges as bridges given their expertise and bankroll," Sam Bankman-Fried, chief executive officer of FTX, said in an email. "We're currently bridging some chains together and are thinking about potentially doing more."
With decentralised bridges, which are operated via software, it's often unclear who runs them, who can access their funds and how, and whether users will be reimbursed in case of a hack. On the other end of the spectrum, a more centralised alternative may be run by a company that is licensed and regulated, and can be held accountable for any problems.
On March 17, Coinbase Wallet introduced support for Solana, letting users send, receive and store Solana and SPL tokens, which are coins native to the Solana blockchain. For example, if investors had previously wanted to move a USDC coin - one of the top stablecoins - from Ethereum to Solana, they needed to deposit the USDC into Coinbase to buy Sol, then swap that token for USDC-SPL on market maker Raydium. Now, that can be done through Coinbase directly, according to Austin Federa, head of communications at Solana Labs
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Still, bridges won't be disappearing anytime soon. With more than 18,800 tokens, and thousands of blockchains, they are necessary for heavy users like Arca, a digital-asset management firm.
"People are becoming more conscious of the bridges they use," Bodhi Pinkner, a portfolio manager at Arca, said in an interview. "But the need to bridge is so large that avoiding them for someone like us is not an option." BLOOMBERG
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