Lock-and-Unlock Bridge

The fundamental process involves a custodial or trust-minimized model:

• Locking: User deposits native assets (e.g., ETH) into a secure smart contract or custodian on the source chain.
• Minting: An equivalent amount of wrapped or synthetic tokens (e.g., wETH on another chain) is minted on the destination chain.
• Unlocking/Burning: To redeem the original asset, the wrapped tokens are burned on the destination chain, triggering the release of the locked collateral on the source chain.

These are the official, native bridges for major Layer 2 (L2) networks and appchains, typically using a lock-and-mint model.

• Examples: Arbitrum's L1→L2 bridge, Optimism Gateway, Polygon PoS Bridge.
• Function: They lock ETH or ERC-20 tokens on Ethereum and mint a canonical, natively usable version (e.g., Arbitrum ETH) on the L2. This minted asset is the standard for that ecosystem.

These bridges facilitate asset movement between non-native chains by creating wrapped representations.

• Process: Lock BTC on Bitcoin, mint wBTC on Ethereum. Lock AVAX on Avalanche, mint avaxWETH on Ethereum.
• Custody Models: Can be custodial (like wBTC, managed by a consortium) or trust-minimized using decentralized validator networks.

Security depends on the custodian or verifier of the lock contract.

• Custodial: Relies on a single entity or federation (e.g., Multichain prior to 2023). Presents counterparty risk.
• Federated/Multi-sig: Uses a committee of known entities to control locks. Faster but introduces trust assumptions.
• Light Client/Relay: Uses cryptographic proofs (like Merkle proofs) to verify source chain state. More decentralized but complex.

Lock-and-unlock bridges concentrate several critical risks:

• Custodial Risk: The entity holding locked funds could be hacked or become malicious.
• Smart Contract Risk: Bugs in the lock/mint contracts on either chain can lead to fund loss.
• Wrapped Asset Depeg: The minted token can lose its 1:1 peg if confidence in the bridge fails.
• Censorship Risk: The bridge operators could refuse to process unlock transactions.

Unlike liquidity-based bridges (e.g., Chainscore), lock-and-unlock bridges do not rely on pooled liquidity on both sides.

• Key Difference: A liquidity bridge uses liquidity pools on both chains and atomic swaps. A lock-and-unlock bridge uses minted representations backed by locked collateral.
• Implication: Lock-and-unlock bridges can support any asset with a custodian, but introduce different trust vectors. Liquidity bridges are more capital-intensive but can be more permissionless.

The security of the wrapped assets on the destination chain depends entirely on the bridge's minting logic. A compromised bridge contract can:

• Mint unlimited wrapped tokens, leading to hyperinflation and collapse of the peg.
• Permanently blacklist user addresses, freezing funds.
• Pause functions indefinitely, halting all withdrawals. This risk is mitigated in decentralized models using optimistic or fraud-proof systems to challenge invalid state transitions.

The bridge must maintain a 1:1 reserve of locked assets to minted tokens. Risks include:

• Asymmetric withdrawals: A bank run scenario where many users withdraw simultaneously can test solvency.
• Cross-chain reorgs: A blockchain reorganization on the source chain could reverse a lock transaction after minting has occurred on the destination chain, breaking the peg.
• Oracle failure: Bridges relying on oracles for state verification are vulnerable to oracle manipulation or downtime.

Many bridge contracts have upgradeable proxies controlled by admin keys. This introduces governance risk:

• A malicious or coerced upgrade could introduce backdoors.
• Time-lock mechanisms and decentralized governance (e.g., DAO votes) are critical safeguards.
• The transparency and timeliness of upgrade announcements are essential for user safety.

Decentralized bridges use a validator or relayer set to attest to cross-chain events. Security depends on:

• The cryptoeconomic security (staking) of the validator set.
• The fault tolerance (e.g., 2/3 majority) required to approve transactions.
• Sybil attacks where an attacker controls a majority of low-stake validators. A robust, decentralized, and economically incentivized validator set is the primary defense.

A contrasting cross-chain mechanism where assets are minted as wrapped tokens on the destination chain and the original assets are burned on the source chain. This is the dominant model for bridging to non-native smart contract chains (e.g., bridging BTC to Ethereum as WBTC).

• Key Difference: Does not require a custodian to lock the original asset; relies on a burn proof.
• Example: Wrapped Bitcoin (WBTC) on Ethereum, where BTC is burned on the Bitcoin sidechain and an equivalent amount of ERC-20 WBTC is minted.

A bridge model that uses atomic swaps and liquidity pools on both chains instead of locking assets in a central vault. Users swap assets with a pool on the source chain and a corresponding pool on the destination chain releases the target asset.

• Key Feature: Non-custodial; no central entity controls the locked value.
• Examples: Connext and Hop Protocol use this model for fast transfers between EVM chains.

A bridge secured by a decentralized set of validators or oracles that collectively attest to and relay state proofs between chains. This is a common security model for many lock-and-unlock bridges.

• Security Model: Relies on the cryptoeconomic security of the validator set (e.g., staking with slashing).
• Examples: Polygon PoS Bridge (Heimdall validators), Axelar (delegated Proof-of-Stake network).

The official, chain-native bridge deployed and often endorsed by the core development team of a blockchain. For Layer 2s and appchains, this is typically a lock-and-unlock bridge that mints canonical wrapped assets on the new chain.

• Purpose: Provides the standard and most secure route for moving assets to/from the chain's base layer.
• Examples: Arbitrum Bridge (Ethereum ↔ Arbitrum), Optimism Gateway.

A token on a destination chain that represents a locked native asset from a source chain. It is the key output of a lock-and-unlock bridge, enabling the original asset to be used in the destination chain's DeFi ecosystem.

• Mechanism: 1:1 backed by the locked collateral.
• Standard: Often follows the destination chain's token standard (e.g., ERC-20, SPL).
• Risk: Value depends entirely on the solvency and trustworthiness of the bridge custodian or protocol.

The critical risk dimension for lock-and-unlock bridges, centering on who controls the locked assets in the vault or smart contract.

• Custodial: A single entity (company, foundation) holds the keys. Highest centralization risk.
• Multisig: A multisignature wallet controlled by a federation requires M-of-N signatures.
• Decentralized: Controlled by a smart contract secured by validators or the underlying chain's consensus.
• Primary Risk: The vault is a high-value target for exploits and hacking.