As blockchain ecosystems develop, one major theme that is gaining momentum is the interoperability between networks. Connecting networks is a source of tremendous value, enabling smoother asset transfers, increased capital efficiency, and cross-chain composability.
The BNB bridge was developed to address interoperability between the Binance Smart Chain (BSC) and Ethereum—the two largest smart contract networks by usage. Having established the ability to easily move assets and data between BSC and Ethereum is exciting, especially as the decentralized finance space continues to grow.
What is the BNB Bridge?
In the simplest terms, the BNB bridge allows for the seamless transfer of digital assets between Binance Smart Chain and Ethereum. Users can send tokens back and forth and can send stablecoins, utility assets like ETH and BNB, governance tokens, NFTs, etc.
Additionally, arbitrary data and computational logic can also be sent across chains, laying the groundwork for advanced cross-chain smart contract development.
A few examples of other things enabled by the bridge include:
- Zapping tokens into AMM pools on the other chain
- Chasing arbitrage opportunities between pegged assets
- Migrating NFTs to take advantage of faster/cheaper transactions
- Building dApps that leverage liquidity across chains
End users transfer assets across the BNB bridge through intuitive wallet interfaces in their browser. The entire process is supported by smart contracts and a system of decentralized relayer nodes running equally on BSC and Ethereum.
Why Connect These Blockchains?
There’s a huge potential value to be gained from bridging BSC and Ethereum. Both chains serve large and partially overlapping communities within DeFi. By connecting those chains, you allow value to move to whichever network features the best components for the given transaction.
Ethereum has the most incredible network effects and battle-tested security as a result of its first-mover advantage, which lends itself very well to storing high-value crypto assets. BSC, on the other hand, lends itself to much quicker speeds and very low fees, thanks to its consensus design model. This results in much more active trade and is even able to support microtransactions with low fees.
Bridging allows users to exploit the relative strengths of each chain so that apps can use the years of maturity of Ethereum while taking advantage of BSC’s speed and throughput capacity.
This relationship will work around some of Ethereum’s scalability problems while siphoning value through BSC from Ethereum’s high liquidity into BSC. This is a pure win-win for the communities of these two chains.
BNB Bridge: Significant Functions
Internally, the BNB bridge communicates between the two chains using four primary parts:
- Validators – Offer security assurances by deploying state proofs
- Relayers – Monitor chains and present state modifications
- Router Contracts – Contain transfer logic between pegs
- Pegged Tokens – Signify assets 1:1 on both chains
It facilitates a smooth and flawless experience for end users, transferring all the tokens on all blockchains.
A few of the functions are described below:
- Reliable custody through smart contracts
- Decentralized network of 2 40+ relayers
- Finality of transactions by utilizing the speed of BSC
- Low fees to make the transfer affordable to the users
- Support for arbitrary logic and data, enabling the latest composability
Numerous factors still support expansion:
- Integration with DeFi solutions is still happening simultaneously on both chains.
- Persist in marketing and educating about the advantages.
- Making more relayers and validators.
- Non-fungible tokens and arbitrary data transfers upgrades.
- More chains like Polygon are to be supported in the future.
Driving Growth and Adoption
With the rise of blockchains, the necessity of atomic cross-chain connections grows. The BNB bridge appears to be ideally located to be the main cross-chain compatibility link for BSC and Ethereum.
It now moves $8-15M daily transfer volume across a combination of stable coins, DeFi tokens, governance assets, NFT collections, and much more.
Total locked value in the bridge is $1.5B as of February 2023. The top bridged assets that contribute the most to total activity are BUSD, USDC, ETH, BNB, and pegged representations.
Several forces remain in favor of growth:
- Continued integration with DeFi protocols on both chains.
- Ongoing marketing and educational efforts around benefits.
- Onboarding more relayers and validators.
- Upgrades for non-fungible tokens and arbitrary data transfers.
- Future support for additional chains like Polygon.
As the number of blockchains increases, the value of atomic cross-chain connections increases. The BNB bridge seems to be well-positioned to serve as an important interoperability bridge between BSC and Ethereum.
Also Read: Blockchain Technology: A New Frontier in Forex Trading?
