Bridge: Definition, Types, and Security Considerations in Cross-Chain DLT
Definition
A bridge in distributed ledger technology is a protocol or infrastructure component that enables the transfer of assets, data, or messages between two or more independent blockchain networks. Bridges solve the isolation problem inherent in DLT architecture: each blockchain is a self-contained system with its own state, consensus, and execution environment, and without a bridge, assets and information cannot move between them. By creating a secure channel for cross-chain communication, bridges enable the composability and liquidity aggregation that the DLT ecosystem requires to function as an integrated financial infrastructure.
How Bridges Work
The fundamental challenge of bridging is that assets on one blockchain cannot be physically moved to another — each blockchain maintains its own ledger, and a token on Chain A does not natively exist on Chain B. Bridges resolve this through representations: when an asset is “bridged” from one chain to another, the original asset is locked or burned on the source chain, and a corresponding representation (a wrapped or synthetic token) is minted on the destination chain. The bridge protocol ensures that the total supply across both chains remains constant and that the representation can be redeemed for the original asset.
Lock-and-mint bridges are the most common type. The user deposits their asset into a smart contract on the source chain, which locks the asset and emits an event. The bridge protocol detects this event and mints an equivalent representation of the asset on the destination chain. To return the asset to the source chain, the user burns the representation on the destination chain, and the bridge unlocks the original asset on the source chain.
Burn-and-mint bridges operate similarly but burn the asset on the source chain rather than locking it. This approach is used when the asset is natively supported on both chains — for example, a stablecoin issuer that maintains canonical token contracts on multiple chains may use burn-and-mint bridging to allow tokens to move between chains while maintaining a consistent total supply.
Atomic swap bridges use hash time-locked contracts (HTLCs) to enable trustless peer-to-peer exchanges between two chains without locking assets in a bridge contract. Each party locks their asset on their respective chain with a cryptographic hash lock; when one party reveals the secret to claim the asset on the destination chain, the secret is also revealed to the counterparty, who can then claim the asset on the source chain.
Liquidity network bridges use pools of liquidity on both chains to facilitate transfers. Instead of locking and minting, a user deposits assets into a pool on the source chain and withdraws equivalent assets from a pool on the destination chain. This approach avoids the latency of lock-and-mint mechanisms and does not require the creation of wrapped tokens, but depends on sufficient liquidity in the pools on both chains.
Trust Models
The security of a bridge depends on its trust model — the assumptions about who or what is trusted to ensure that cross-chain transfers are executed correctly.
Trusted (centralised) bridges rely on a single entity or a small, fixed committee to validate cross-chain events and authorise the minting of wrapped tokens. The security of the bridge depends entirely on the honesty and operational integrity of this trusted party. If the trusted party is compromised, it could mint unbacked tokens on the destination chain or steal locked assets on the source chain. Centralised bridges are operationally simpler but represent a significant trust concentration.
Externally verified bridges use a decentralised committee of validators who attest to events on the source chain. The validators stake tokens as collateral, which can be slashed if they provide false attestations. The security of the bridge depends on the economic security of the validator set — the cost an attacker would need to incur (through acquiring and risking a majority of the staked collateral) to provide false attestations. This model distributes trust across multiple parties but introduces economic security assumptions.
Natively verified bridges use the consensus mechanism of the source chain to verify events directly on the destination chain. This is achieved through light client implementations — smart contracts on the destination chain that independently verify block headers and state proofs from the source chain. Natively verified bridges provide the strongest security guarantees, as they inherit the full security of the source chain’s consensus, but are computationally expensive and may be limited by the verification capabilities of the destination chain.
Optimistically verified bridges assume that cross-chain messages are valid and provide a challenge period during which any participant can submit a fraud proof if they detect an invalid message. This approach mirrors the optimistic rollup model and provides strong security guarantees with reduced computational overhead, at the cost of withdrawal latency during the challenge period.
Security Risks
Bridges have been the site of some of the most significant security incidents in the DLT ecosystem. The concentration of locked assets in bridge smart contracts creates high-value targets, and the complexity of cross-chain verification logic introduces attack surfaces that do not exist in single-chain applications.
Common attack vectors include smart contract vulnerabilities in the bridge contracts, compromise of the validator committee in externally verified bridges, manipulation of the verification logic in natively verified bridges, and governance attacks that modify bridge parameters to enable theft.
The total value lost through bridge exploits across the DLT ecosystem runs into billions of dollars, underscoring the importance of rigorous security practices for bridge design, implementation, auditing, and monitoring.
For Swiss institutional users evaluating bridges for cross-chain asset transfers, the security model of the bridge is a primary consideration. FINMA’s expectations regarding the operational resilience and risk management of financial market infrastructure extend to cross-chain components, and a bridge failure that results in the loss of institutional assets would be subject to regulatory scrutiny.
Institutional Relevance
Bridges are relevant to Swiss institutional DLT applications in several contexts.
Cross-platform settlement — moving assets between SDX and public blockchain networks, or between different enterprise DLT platforms — requires bridge infrastructure that meets institutional security and compliance requirements.
Multi-chain asset management — maintaining positions on multiple blockchain networks — requires bridges that enable efficient cross-chain transfers without excessive latency, cost, or security risk.
Regulatory compliance — ensuring that cross-chain asset transfers comply with AML/KYC requirements, sanctions screening, and investor qualification checks — requires bridge designs that incorporate compliance mechanisms at the point of transfer.
The development of institutional-grade bridge infrastructure — combining the security of natively verified approaches with the compliance capabilities required by regulated entities — is an active area of innovation with direct relevance to the Swiss financial ecosystem.
For related analysis, see our coverage of interoperability protocols and DLT scalability solutions.
Donovan Vanderbilt is a contributing editor at ZUG DLT, covering distributed ledger technology law, regulation, and institutional adoption from Zurich. The Vanderbilt Portfolio AG provides research and analysis on Swiss digital asset infrastructure.