Cross-Chain Bridge Hacks Emerge as Top Security Risk

In the scientific literature, scalability and complexity are the open challenges around the presented results of our second research question. None of the primary papers imply their further implications to security and privacy issues. One could say that increasing complexity to a system might lead to security risks. Humans tends to make mistakes, especially doing complicated https://www.xcritical.com/ tasks such as implementing complex systems. This might lead to mistakes in code which in turn could make the system vulnerable to attacks.

How Does a Blockchain Bridge Work?

Bridges, therefore, must stand as fortresses, meticulously fortifying their defenses against the relentless onslaught of cyber threats. Selecting and integrating a blockchain bridge requires careful consideration of various factors, including security, compatibility, and the specific needs of the blockchain application. This simple security measure is a powerful last line of defense for a cross-chain bridge. Even in the event of a successful hack or what does bridge mean in crypto exploit that evades every other security measure, rate limits put a limit on how much value can actually be extracted from the cross-chain bridge.

What Is the Future of Blockchain Bridges?

Cross-chain bridges enable many innovative processes, but security concerns surround them, as these apps have been targeted by hackers. Due to the technical aspects of cross-chain bridges, it’s best to use them only if you understand how they work and what you’re doing so that you don’t encounter unexpected crypto losses. The concentration of value in the bridges makes them a quick and high-risk target for exploitation or theft. At the same time, Ethereum head Vitalik Buterin, has stated that cross-chain technology has formidable limitations in security. Let us learn more about the security of cross-chain bridges and the best practices to protect assets in cross-chain bridge interactions.

Why Should You Worry About Cross-Chain Bridge Security?

In addition, as the value and users of the cryptocurrency industry keep increasing, hackers are getting more sophisticated. Traditional cyberattacks like social engineering and phishing attacks have also adapted to the Web3 narrative to target both centralized and decentralized protocols. Unfortunately, there hasn’t been a perfect solution to the conundrum the industry faces. Both trusted and trustless platforms have implicit flaws in their design and compromise the security of the blockchain bridge in their respective ways. Users, institutions, and dApp developers should be wary of unproven validator sets that lack the requisite experience and knowledge to securely and reliably operate a cross-chain bridge. Some cross-chain bridges rely on a single network of validators for all bridging operations.

How Secure Are Blockchain Bridges? Why Are You Attacked So Often?

In the example above, you could leverage a multi-chain bridge like Wormhole or Allbridge that links Ethereum to Solana and send the ETH to the Solana blockchain. Assuming they’re not, there are two other ways to create this inter-chain layer. Either use a built-in peer-to-peer (P2P) validator network or a third-party decentralized oracle. So even if we can design around those risks, we might not discover them until millions of tokens are again stolen.

• In the context of bridges, this can lead to funds being illicitly withdrawn multiple times, causing substantial losses.
• Not only does this improve user experience, but it also makes it easier for you to execute blockchain transactions.
• Assuming they’re not, there are two other ways to create this inter-chain layer.
• Cross-chain bridges aren’t as battle-tested as blockchains like Bitcoin (BTC).
• If you consider using CCIP in production, we first recommend that you wait until the protocol has stabilized and undergone enough security analysis and review by security experts.

Most Popular Blockchain Bridges

By the time it arrives, you would have to probably pay more fees than you had originally intended. The funds were then sent from Tornado Cash to several additional Ethereum addresses. Crypto exchange services that identify inbound transfers from these Ethereum addresses can use Elliptic’s software to identify that the ultimate source of funds was in fact the Harmony Horizon hack – despite the use of a mixer. Another key method cross-chain bridge hackers have used to launder funds is to clean them using mixing services.

Security and Privacy Challenges in Blockchain Interoperability – A Multivocal Literature Review

One of the most common use cases for the blockchain bridges or crypto bridges is to own native crypto assets. Using a blockchain bridge, users can transfer assets from one blockchain to another, allowing them to access different networks and use different services. For example, users may transfer their Ethereum-based assets to a different network, such as the Binance Smart Chain, to take advantage of lower transaction fees or access a specific decentralized application (dApp). These tokens are then enveloped or “wrapped” and dispatched to the recipient’s wallet.

They break down the dividing wall among different blockchain networks so they can interact efficiently. A bridge can take an asset on blockchain A and give the equivalent of the same asset on blockchain B. As the digital landscape continues to evolve, blockchain bridges stand out as vital components that amplify the potential and versatility of decentralized ecosystems. They provide a medium for disparate blockchains to interconnect, share data, and value, thus embodying the very essence of collaboration in a decentralized setting. Both trusted and trustless bridges have a number of structural and technological flaws and are still unable to offer effective solutions.

Bridges are either custodial or non-custodial, depending on who controls the tokens used to construct the bridging assets. You have the Indian currency – the rupee, but you need pounds in England for daily transactions. Be the first to receive our latest company updates, Web3 security insights, and exclusive content curated for the blockchain enthusiasts.

The most effective approach to prevent verification bypass is to thoroughly test the bridge against all possible attack vectors and ensure the verification logic is sound. A note is that the solution with anonymous multi-hop locks by Malavolta et al.[33] tested the transaction speed and found it performing well in comparison to the original HTCL based system. Using the aforementioned search strings, we found 489 scientific literature and 333 grey literature for further analysis. After filtering, we identified 16 primary scientific papers and and 30 grey literature.

I am passionate about exploring new possibilities and challenges in this rapidly evolving field of Web3. As more bridges are built and refined, a shift towards an interconnected, multi-chain metaverse happens. If you consider using CCIP in production, we first recommend that you wait until the protocol has stabilized and undergone enough security analysis and review by security experts.

Bridges unlock the potential for these diverse ecosystems to interact and collaborate, expanding the possibilities for both users and developers. Implementing mechanisms like bug bounties to reward the discovery and responsible disclosure of vulnerabilities fosters a collaborative security culture. Furthermore, utilizing advanced monitoring tools and real-time analytics allows for timely detection and mitigation of potential threats. In this environment of heightened risk, unwavering vigilance and uncompromising security measures become non-negotiable imperatives. The potential consequences of a breach transcend mere financial losses; reputational ruin and a shattered sense of trust within the broader ecosystem loom large.

Taking a step further than just bridging assets across, Axelar General Message Passing (GMP) makes interoperability easier and more accessible across chains. GMP enables developers to build on any Axelar-supported chain and call a function on any other connected chain to utilize the best features of multiple chains, thereby opening up endless possibilities. For an extra added implementation, there is often an extra added complexity to the blockchain system that could generate issues for implementation, updates, and further expanding the blockchain. In the mitigations for improving the security of private keys by implementing elliptic curve diffie-hellman presented by [26] and [33] generate a complexity to the system.

The smart contracts have to support the conversion between different crypto tokens. Apart from the threats of cross-chain bridge security risks, it is also important to focus on the functionality of cross-chain bridges. Cross-chain bridges can help different blockchain networks in sharing data, transferring assets, and accessing contracts from other blockchain networks. Cross-chain bridges work like dApps for moving assets between different blockchain networks. The bridges lock or burn tokens by using a vault smart contract on the source chain and unlock or issue the tokens on the destination chain by using a peg smart contract.

Blockchain bridges can be categorized into “trusted” and “trustless” bridges based on their level of security. A blockchain bridge, also referred to as a cross-chain bridge, was developed to address the problems with blockchain collaboration. Due to the fact that blockchain operates in a silo and is unable to communicate with other networks, it has eventually grown to be a necessary component of the world of blockchain. Bridges also bring a solution to blockchain scalability, which has been a problem for a while.

If both deem the other valid, the cross-chain transaction is executed, resulting in peer-to-peer cross-chain transactions. Cross-chain swaps using local verification are often referred to as atomic swaps. Continuous improvement of security protocols and practises is critical given the dynamic nature of cyber threats.

That hack resulted in the theft of cryptoassets worth more than $540 million, some of which North Korea has attempted to launder using methods described above, such as DEXs and the Tornado Cash mixer. Elliptic Navigator – our industry-leading transactions screening solution – enables compliance teams to identify transactions involving mixers. Using Elliptic’s configurable risk scoring engine, compliance teams can set monitoring parameters aligned to their risk appetite – ensuring they can reliably identify transactions with mixers that they consider high risk. Despite guidance from the Financial Action Task Force (FATF) indicating that countries should apply AML regulation to DeFi services, most DEXs still do not engage in AML monitoring. DEXs also offer ample liquidity in a wide range of tokens, enabling rapid execution. Any service that enables criminals to make reliable and rapid token swaps without having to provide KYC information is extremely useful in the money laundering process.

This figure accounts for approximately 69% of all stolen crypto funds in the year. In March 2022, over $625 million worth of cryptocurrencies were stolen from the Ronin Bridge protocol as a result of a malicious attack from hackers, marking the event as one of the biggest cryptocurrency heists ever. In August, another $200 million was lost from the Nomad Bridge as a consequence of an exploit of a vulnerability in its underlying technology — smart contracts. Cross-chain bridges have appeal because they provide customers with much-needed liquidity.