The crypto-world has a lot of potential for cross-chain bridges. This technology is not without its problems, as well as the tokens used to wrap them. Portal wants to end the use of wrapped assets, third-party custody and other restrictions on user assets.
Cross-Chain Bridges are a security risk
These were the words of Vitalik Buterin who founded Ethereum last month. Buterin is using harsh language because cross-chain bridges, which are vulnerable to 51% attack, has a reason. Hackers and other criminals can control the system and defraud victims when such attacks occur. Although a 51% attack is not a permanent problem, attackers’ possibility to steal funds needs to be nipped in the bud.
This bridge wraps and locks funds onto other chains, facilitating transfers in their current forms. Although it is elegant, this solution introduces security risks. More specifically, the wrapping and locking aspect isn’t decentralized or trustless. This approach could also lead to security issues, like the one that affected MultiChain and THORChain.
Staghead Crypto Head Neil Player adds:
“Cross chain bridges present a unique set of security risks and these types of exploits are not a surprise. This is an example of how cutting-edge many applications running on blockchains are. Exploits such as what occurred on Wormhole are expected to cause growing pains as the technology and techniques associated with bridging assets matures.”
Poly Network’s hack made news because it was the biggest in decentralized finance to date. Roughly $600 million in assets were stolen – and later returned, thankfully – confirming the vulnerability of these cross-chain bridges. Sadly, Wormhole lost 120,000 Ether – or over $320 million – due to insufficient validation protocols for “guardian” accounts. These bridges are prone to security breaches that make it difficult for many people to believe in their safety.
Portal Is A Good Solution
It is crucial to address the main risks associated with cross-chain bridges. Too many attacks can be made on assets in a larger network. Furthermore, many bridges use central federations as well as external validators in order to process transfer transactions, which can reduce the trustlessness of decentralization.
Portal is a cross-chain DEX that uses Bitcoin to make the world a better place. Portal does not employ wrapped tokens nor third-party custodial options. Trade execution is free from replication and re-bonding, so funds of participants are not able to be accessed. Peer-to-peer transactions are made via atomic swaps. Users can trade Layer-1 assets with no delays or exploits.
Portal executive chairman Chandra Duggirala explains:
Bridges can be difficult to secure and reason about. The guarantees that an IOU provides for assets wrapped on chains are basically the same as an IOU. It becomes difficult to protect user funds when hundreds of millions and even billions of dollars are secured by untested custodians who have poor security protocols and poorly designed systems. Especially given the balance of incentives, with hackers and attackers basically having to get out of jail free cards due to the “code is law” nature of public blockchains, security is especially important. Bitcoin is simple and we trust the proven and lasting transaction types that Bitcoin offers over all other experimental methods to use real money.”
Transactions can be completed in their entirety or partially without the requirement of locked funds and wrapped assets. If neither party receives the correct exchanged assets, the Portal transaction will be rerun automatically. This is an important step towards eliminating exploits in any stage of a transaction. DeFi is more attractive than cross-chain bridges that are ineffective and hack-prone because all transfers are anonymous.
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