Bitcoin Bridges in Multi Chain Architecture

The dominant model relies on a few centralized entities holding billions in BTC. This creates a single point of failure and regulatory attack surface, undermining the core value proposition of Bitcoin.

• $1.5B+ TVL in bridges like WBTC is secured by off-chain legal promises.
• Counterparty risk is opaque and non-programmable.
• Every major bridge hack (e.g., Ronin, Wormhole) validates this flaw.

Projects like Babylon and Interlay are moving the security on-chain. They use Bitcoin's native scripting (like time-locks) and decentralized validator sets to create trust-minimized, programmable bridges.

• Security inherits from Bitcoin via staking/custody protocols.
• Enables native yield for BTC (e.g., staking, lending) without a custodian.
• Reduces systemic risk by eliminating centralized mint/burn control.

Bridges are evolving from simple asset ports to intent-based routing systems. Protocols like Chainflip and Squid abstract the bridge, allowing users to swap from native BTC to any token on any chain in one transaction.

• Solvers compete to provide the best route across bridges like THORChain, Stacks, and Liquid.
• User gets guaranteed output, not just a wrapped asset.
• This mirrors the UniswapX and CowSwap model applied to Bitcoin liquidity.

The dominant model relies on a federated multisig or a single custodian holding the wrapped BTC. This creates a central point of failure and a massive honeypot.\n- Attack Vector: Key compromise, regulatory seizure, or malicious insider.\n- Consequence: Irreversible loss of all bridged assets, as seen with $625M Ronin Bridge hack.

Bitcoin's slow finality and potential for deep reorgs create a fundamental mismatch with fast L1/L2 chains. A bridge that assumes a transaction is final can be exploited if the Bitcoin chain reorganizes.\n- Attack Vector: A malicious miner executes a 51% attack or a natural deep reorg invalidates a deposit.\n- Consequence: Double-spend of bridged assets, breaking the bridge's fundamental 1:1 peg.

Most non-custodial bridges (e.g., tBTC, Babylon) use an external oracle or validator set to attest to Bitcoin state. This shifts, but does not eliminate, the trust assumption.\n- Attack Vector: Oracle manipulation or validator set collusion to attest to fake deposits.\n- Solution Spectrum: Ranges from Starkware's L2 validity proofs to decentralized networks like Chainlink, each with its own security/trust trade-offs.

A bridge is only as strong as the liquidity of its wrapped asset (e.g., WBTC, tBTC). During market stress, these assets frequently trade below peg, creating arbitrage and systemic risk.\n- Attack Vector: Liquidity crunch on a destination DEX (e.g., Uniswap) triggers a bank run on the bridge's redemption mechanism.\n- Amplified by: Multi-hop bridges (e.g., via LayerZero, Axelar) that add nested trust layers.

Centralized bridges like Wrapped Bitcoin (WBTC) offer liquidity but introduce a single point of failure. Their ~$10B TVL is secured by legal promises, not cryptography. This model is a necessary evil for deep liquidity but antithetical to crypto's ethos.

• Key Benefit: Deep, immediate liquidity & composability in DeFi.
• Key Risk: Counterparty and regulatory seizure risk.

Federated models like Threshold Network (tBTC) and Liquid Network distribute custody across a permissioned set of nodes. Security scales with the honest majority assumption, not a single entity. This is the pragmatic middle ground, but inherits the attack surface of its signer set.

• Key Benefit: Trust minimized, non-custodial for the user.
• Key Risk: Security depends on signer collusion threshold.

Canonical bridges like Babylon and Interlay use Bitcoin's script to enforce cryptoeconomic security. They run light clients in Bitcoin transactions, slashing bonded assets for fraud. This is the holy grail—Bitcoin as a verifier—but is constrained by Bitcoin's ~4MB block space and slow finality.

• Key Benefit: Inherits Bitcoin's base-layer security.
• Key Risk: High latency (~1 hour+) and expensive verification.

Architectures like BitVM and Zero-Knowledge (ZK) proofs aim to make Bitcoin a verification hub. Instead of moving BTC, they prove state changes of an external chain (like a ZK Rollup). This avoids Bitcoin's throughput limits but requires complex, novel cryptography that is still in research.

• Key Benefit: Unlimited throughput, Bitcoin-finalized security.
• Key Risk: Nascent tech, complex fraud-proof/zk-proof challenges.