Crypto bridges: what they are, risks and when not to use one

A crypto bridge is a service that moves an asset from one blockchain to another: USDT from Ethereum to Arbitrum, ETH from mainnet to Base, "wrapped" bitcoin for use on another network. Blockchains do not talk to each other by default, and the bridge is what connects them. The problem is that it is also the most attacked point in the whole ecosystem: in 2022, more than two thirds of everything stolen in crypto left through bridges. This guide explains how they work, where the risk sits and when the right answer is not to use one.

How a bridge moves an asset

No token "travels" between networks. What exists are three mechanisms.

Lock and mint. You deposit the asset into a contract on the source network, which locks it; the bridge mints an equivalent version on the destination. To return, the equivalent is burned and the original released. It is the model of wrapped bitcoin (WBTC) and of many bridges between Ethereum and its layer 2s.

Burn and mint. The asset is destroyed at the source and created at the destination by the issuer itself, as Circle does with USDC between networks it supports. No locking here: the issuer backs both sides.

Liquidity pools. The bridge keeps reserves of the asset on each network. You hand it over at the source and receive from the reserve at the destination, paying a fee. It is the model of bridges like Stargate and of many that operate between layer 2s.

In every case, your asset comes to depend on something beyond the original blockchain: a contract, an issuer or a group of bridge validators. That is where the risk lives.

Why bridges are the favorite target

A bridge concentrates value locked in contracts and depends on a mechanism that attests "the deposit happened on network A, release on network B". Whoever fools that mechanism withdraws without depositing.

• Ronin, March 2022: about US$ 625 million, through compromised validator keys. Five of the nine keys that approved withdrawals were under the attacker's control.
• Wormhole, February 2022: about US$ 320 million, through a signature verification flaw that allowed minting wrapped ETH with no deposit.
• Nomad, August 2022: about US$ 190 million, through a routine upgrade that let any message pass as valid; hundreds of people copied the first attacker's transaction.

Chainalysis calculated in August 2022 that 13 bridge attacks totaled US$ 2 billion and represented 69% of everything stolen in crypto that year. The figures are from 2022 because it was the worst year, but the pattern holds: a bridge is only as safe as the code and the keys of whoever runs it, and none of those losses were reversed.

The risks for users, one by one

Contract risk. Money locked at the source can be stolen through a flaw in the bridge's contract, as with Wormhole and Nomad. You hold an equivalent token at the destination that no longer has backing.

Operator risk. Many bridges are controlled by a small group of validators or by a company. If the keys leak, as with Ronin, the vault opens.

Liquidity risk. Pool bridges can run out of reserves on the destination network under stress. The transaction hangs or the cost spikes.

Operational risk. Wrong network, wrong token, a contract address pasted into the destination field. This is the risk that depends only on you, and it is the most common. What to do when it happens is in sent crypto on the wrong network: can it be recovered?.

Wrapped token risk. A bitcoin wrapped on another network is not bitcoin; it is a receipt issued by whoever holds the original. If the custodian fails, the receipt is worth zero.

When not to use a bridge

For most investors, the safest answer is to avoid them. Three concrete situations:

1. Meaningful amounts of your wealth. The fee saving or yield on another network rarely justifies placing a large amount behind a third party's contract. Long-term reserves stay on the native network, in your own wallet, as crypto custody: self-custody vs third-party explains.
2. When the exchange solves it. If you need USDT on Arbitrum, withdrawing from the exchange directly over Arbitrum is usually cheaper and safer than withdrawing over Ethereum and bridging. The exchange issues on the network you choose.
3. Unknown bridges. A new bridge, with no public audit, no track record, promising yield to whoever "brings liquidity". That is the exact profile of the cases that end at zero.

When using one makes sense: small amounts, the official bridges of the networks themselves (a layer 2's native bridge is maintained by the network's team and, on optimistic rollups, has a withdrawal delay of about seven days that exists precisely for security), and always with a test transfer first. How those networks work is in layer 2: what it is and what changes for self-custody.

What is and is not recoverable

Worth being direct, because this is the kind of question that arrives in a hurry. Funds stolen from a bridge through a contract or key failure do not come back, except when the project itself reimburses, as Ronin did with investor backing. A confirmed transaction to a wrong contract address does not come back either. Vault Recovery, a service of Vault Ltda. within the Vault Capital group, recovers access to wallets (password, passphrase, incomplete seed, damaged device), and does not reverse transactions or recover funds from attacks; the service page says so in plain words. Where it helps: when the asset reached the right destination, in your wallet, and the problem became accessing it.

Crypto assets carry high risk, including significant volatility and the possibility of losing the invested capital. Vault Capital is a securities advisory firm authorized by Brazil's CVM under CVM Resolution 19/2021 and never holds custody of client assets.

Frequently asked questions

Is a bridge the same as swapping one crypto for another?

No. A swap changes the asset within the same network; a bridge takes the same asset, or a version of it, to another network. Some interfaces do both in one step, which increases the chance of error.

Is wrapped bitcoin (WBTC) bitcoin?

No. It is a token on another network that represents a bitcoin held by a custodian. It is worth something as long as the custodian honors redemption. To hold real bitcoin, use the Bitcoin network and your own wallet.

I was robbed through a bridge. Can it be recovered?

A confirmed blockchain transaction cannot be reversed. Some projects reimburse users from their own funds, case by case. Services promising to "trace and recover" sell tracing, not recovery, and many are the second scam.

What is the safest way to hold an asset on another network?

Withdraw from the exchange directly onto the destination network, with a test amount first. When that is not possible, use the network's official bridge, with a small amount.

Let's talk

If your asset reached the right wallet and the problem is accessing it (incomplete seed, passphrase, damaged device), Vault Recovery's assessment is free, does not ask for the seed at this stage and only charges a fee on what is recovered.