Ethereum has grown to become a powerful platform for the development of DeFi and Non-Fungible Token but that does not mean they only exist on Ethereum, on the contrary, DeFi & Non-Fungible Token have been spreading to other blockchains, creating creates many money-making opportunities for sharp investors who grasp this trend.
In this article, I will Chia some experiences, as well as a few notes in using Cross-chain Bridge to move Capital flows between different blockchains.
Definition of Cross-chain Bridge
Cross-chain bridge is a protocol that allows improved interoperability and communication between Blockchains. Two common applications of Cross-chain bridges are to support the transfer of Token and smart contract data from one chain to chain .
In this article, we will focus on experiences and tips for using cross-chain bridges to transfer Token between blockchains effectively.
Coin98 has a detailed article about the Cross-chain Bridge trend, how it works as well as investment opportunities with Cross-chain Bridge, you can refer to it below!
Correct understanding of transferring Token between blockchains
Basic principles & risks when using cross-chain bridges
Most current blockchains are not designed to operate Multi-Chain , so to be able to transfer Token from chain A to chain B, they will use a technology called Bridge. Currently, the most widely applied bridge design is the Lock - Mint - Burn method. Basically, it works like this:
Lock – Mint – Burn mechanism of action
(1) Users deposit Token in chain A into the Bridge.
(2) When receiving the asset, Bridge will Mint wrap the Token on chain B and send the Token to the user's corresponding wallet address.
(3) When needing to withdraw assets, users send the wrapped Token back to the Bridge.
(4) Those Token will be burned and Bridge will Token Lockup on chain A for users.
From here we can also see that a way to exploit this Bridge model is to unlock Token on Chain B without locking the corresponding Token on Chain A. This is also the error that causes Poly Network to be exploited and causes more damage. $600M.
Therefore, using bridges to transfer Token between blockchains still has certain risks that can cause you to lose money even though it is not your fault , especially in the context that bridge technology is not yet complete.
Token transfer costs when using cross-chain bridge
The next issue to pay attention to is the cost of transferring Token between blockchains. When you use a bridge to send Token from chain A to chain B, you may incur the following fees;
- Transaction fee is the transaction fee of blockchains. This fee is high or low depending on the blockchain you use.
- LP fee (%) : Some bridges use a user fee model because they need a Liquidity provider to provide Capital, serving to reduce the time waiting for confirmation from the destination blockchain. This fee will usually not be available on default Bridges provided by exchanges and projects.
Token deposit and withdrawal time when using cross-chain bridge
The time to deposit & withdraw Token between blockchains when using Bridge is not fixed, depending on many things.
- Token loading time can take from a few minutes to several tens of minutes .
- But the Token withdrawal time will be quite long, ranging from a few hours up to 2-3 weeks .
So please carefully check the deposit and withdrawal time of the Bridge you intend to use before using.
On the other hand, if you deposit & withdraw Token between blockchains using an exchange, the time period is usually quite short and there is not much difference between deposit and withdrawal.
The limitation of this method is that exchanges (CEX) only support the deposit and withdrawal of Token on a few prominent blockchains . For less prominent blockchains, you are forced to use the default bridges provided by the project, or Bridges provided by other third parties.
Above are 3 common issues that I think you need to grasp when using Bridge. In the rest of the article, I will show you some ways to transfer Token from Ethereum. to two popular blockchains: Polygon and BSC. BSC & Polygon are popular blockchains today and there is no shortage of dapps that support depositing and withdrawing Token from them.
In this article, I will introduce two popular methods: using Blockchain's own Binance and Birdge exchanges.
Instructions for transferring ERC20 Token from Ethereum to Binance Smart Chain
Use the Binance exchange
After logging in to Binance , you access the " Withdraw Crypto " interface here .
Then, select the type of Token you want to withdraw, under “ Network ”, select “ BSC ” and enter the withdrawal address.
Currently, Binance supports you to deposit and withdraw many types of Token via BSC such as BTC, ETH, BNB, BUSD, USDT, USDC,... If you plan to transfer Token to BSC, I think the simplest way is to use Binance.
Use Binance Bridge
First, you visit Binance Bridge: https://binance.org/en/bridge
Click “ Connect Wallet ”, switch to Ethereum in MetaMask wallet . If you have not added a BSC network in your MetaMask, you can click “ Add network ” and continue.
Then, you choose " Asset ", which means the type of asset you want to transfer from Ethereum to BSC.
Binance Bridge supports more than 60 popular cryptocurrencies. You can move your USDT, BUSD or ETH from Ethereum to BSCs quickly.
Next, enter the amount you want to transfer from ETH to BSC, select " confirm " and wait for the Token to arrive in your wallet.
Note: Waiting time can range from 5 - 15 minutes , depending on network operating conditions.
Instructions for transferring ERC20 Token from Ethereum to Polygon
Use Binance exchange (only supports Matic Token)
Binance supports you to withdraw Matic Token directly via Polygon. After logging in to Binance, you access the " Withdraw Crypto " interface here .
Then, select Matic , in “ Network ” select “ Polygon ”, enter the withdrawal address.
Use Polygon Bridge
You access the Polygon Bridge interface: https://wallet. Polygon.technology
Log in with Metamask and connect to your Ethereum wallet.
Then, select the Token you want to transfer from Ethereum to Polygon, click confirm twice as shown in the image and wait for the Token to arrive in your wallet.
Transaction fees will depend on network conditions.
For example, with ETH around $3,600 and gwei around 50, the transaction fee you have to pay for a Token transfer from Ethereum to Polygon is around $35 - $40.
Note: Waiting time can be from 7 - 15 minutes , depending on network operating conditions.
Tips for using cross-chain bridges effectively
What to do when you don't know which bridge supports transferring ERC20 Token from Ethereum to blockchain X?
Less developed blockchains will often build bridges from their blockchain to Ethereum so that Capital from Ethereum can easily flow through their ecosystem.
Therefore, when you want to transfer Token from Ethereum to a chain to "skin in the game" to earn profits, you can visit the project's Telegram or Discord to ask about the bridge the project provides, or the bridge supports the same thing.
What is the cheapest way to transfer Token ?
Bridge fees related to Ethereum will be high, this is inevitable.
In general, depositing and withdrawing Token between blockchains through centralized exchanges (CEX) is less costly when you use the default bridge.
Ways to minimize risks when using bridge?
You can minimize risks when using bridges by:
- Please learn carefully how to use the bride before using it , avoid losing money due to using it incorrectly (usually being wrong means losing money).
- Check the wallet address carefully when using a bridge (some bridges require a wallet address to transfer funds). If you neglect to make a mistake in your wallet address, the possibility of losing your money is quite high.
- Use bridges that have been authenticated by the blockchain Dev team (chat on tele or discord to ask).
Although Bridge plays an increasingly important Vai , more and more people use it, we also often make some mistakes when using it.
