How Cross-Chain Bridges Became a Billion-Dollar ATM for Hackers

A 100x memecoin emerges on Solana today, a "gold mine" DeFi protocol launches on Arbitrum tomorrow, and a brand-new L2 mainnet is waiting for the first wave of farmers to rush in the day after.

In the multi-chain era, staying on just one chain is not an option. To catch every hot trend, cross-chain operations are a daily routine. Cross-chain bridges handle hundreds of millions of dollars in asset transfers every day, making them the absolute lifeline of capital flow in the entire crypto world.

However, this lifeline is incredibly fragile. It's a channel for wealth, but it's also an "ATM" for hackers:

• From 2021 to 2024, there were about 50 cross-chain bridge attacks, with losses exceeding $4 billion.
• In 2022 alone, losses from bridge attacks amounted to $2 billion.
• A single bridge attack can result in losses of over $500 million.
• The amount of money stolen from cross-chain bridge attacks accounts for nearly 40% of the total theft in the industry.

Every massive theft is like an earthquake in the industry, wiping out the assets of countless users overnight.

This stark contrast between importance and vulnerability raises a critical question for every DeFi player: we rely on cross-chain bridges to seize opportunities, but how can we avoid becoming the next victim of a security incident?

To solve this problem, understanding how different bridges work, identifying their specific risks, and making the right choices is no longer advanced knowledge but an essential survival skill. In this article, we will break down the core mechanisms of cross-chain bridges and reveal their security weak points. 

Understanding Cross-Chain Bridges in One Sentence

First, let's go back to the basics: what is a blockchain? It's a distributed ledger where every transaction is recorded and cannot be tampered with. But each chain is an independent ledger, and the information on different ledgers is not interconnected. Each chain has different features, which create different needs and, in turn, the demand for cross-chain asset transfers. 

We need a mechanism to help our funds flow freely between these chains to meet our on-chain needs—this is the purpose of a cross-chain bridge.

How Assets Get to You

In reality, cross-chain bridges are similar to traditional finance; your money doesn't physically "cross the ocean" from one chain to another. This isn't practical in the real world, let alone in a completely digital on-chain world. Cross-chain transfers rely on "trusted information passing." Passing information online is simple, so the challenge of how to make it "trusted" has given rise to various cross-chain mechanisms. Before we discuss the "trust" issue, let's consider where the assets come from after a cross-chain transfer. There are a few basic models:

• Lock-and-Mint

A user locks a native asset in a smart contract on the source chain (e.g., Ethereum). Then, an external network of validators or an oracle confirms the lock event and mints a corresponding amount of wrapped tokens on the destination chain. When the user wants to transfer the assets back to the source chain, the process is reversed: the wrapped tokens on the destination chain are burned, which unlocks the native assets on the source chain.

• Lock-and-Unlock

A user locks their assets in a liquidity pool on the source chain, and the bridge protocol releases an equivalent amount of the same native asset from a liquidity pool on the destination chain to the user. This method avoids creating wrapped assets, and users always interact with native assets.

• Burn-and-Mint

In this model, the user's assets are not locked on the source chain but are permanently burned. The bridge operator (usually the issuer of the asset) then mints a new, equivalent amount of the native asset on the destination chain. The key to this model is that the bridge entity has the authority to mint native assets on the destination chain.

Whose Reputation Are You Relying On?

Although we understand how assets are transferred, the key to cross-chain operations isn't the transfer method but the method of trust. If asset transfer is the application, then the method of "being trusted" is the consensus mechanism.

External Validation: The validators are not the source chain, the destination chain, or the "bridge builders," but a group of trusted validators (Guardians) who monitor the source chain. When they observe a deposit event, they collectively sign a message to inform the destination chain of the user's cross-chain action. The contract on the destination chain trusts signatures from a certain threshold of these validators (e.g., 2/3) and allows the cross-chain transaction.

Optimistic Validation: This is a challenge-based mechanism. A user initiates a cross-chain request, which is broadcast to the network by a middleman. Within a certain period, anyone can submit proof to claim the transaction is fraudulent. If no one challenges it, the request is considered valid.

Issuer Validation: A centralized service from the asset issuer (like Circle for USDC) observes the burn event on the source chain. After observation, the service provider signs a proof. Because the signer is the authority for the USDC contract, the contract on the destination chain trusts this signature and calls the minting contract to create new assets.

Cross-Chain Bridges Are Also Hackers' ATMs

According to data from DefiLlama, 40% of the funds lost in crypto hacking incidents are from cross-chain bridges. Insecure private key management, unaudited contracts, and unreliable validator networks can all lead to huge losses.

For example, in July 2023, the cross-chain protocol Multichain experienced unusually large unauthorized withdrawals, along with the disappearance of its founder and uncertainty over the control of administrator private keys. This led to the theft of over a hundred million dollars, which remains one of the largest theft incidents in the crypto industry.

The popular cross-chain protocol Wormhole also has a "disgraceful" history. In 2022, a vulnerability in Wormhole's smart contract allowed a hacker to forge a minting message, creating 120,000 Ethereum tokens out of thin air. The loss was eventually covered by its "parent company," Jump Trading.

How to Improve Your Cross-Chain Experience

When we choose a cross-chain protocol in our daily use, we may not pay much attention to its security. When selecting mainstream cross-chain protocols, most choices are profit-driven; we are more likely to consider which bridge has lower fees or faster speeds. For instance, many users will choose a centralized exchange (CEX) as a means for cross-chain transfers. If you haven't been using CEXs effectively, you might have already lost a lot.

When you have to use a new bridge or a new chain's native bridge, give the info to an AI to quickly research the bridge's architecture. You might feel more at ease using it. Don't wait until your funds are stuck for over ten days to regret not choosing the right bridge.

End

With the maturation of interoperability protocols like LayerZero and Chainlink CCIP, the future cross-chain experience will no longer be simple "asset moving" but rather a more fundamental "information passing." At that time, users may no longer need to be aware of the "bridge's" existence to seamlessly call contracts and execute operations between different chains.

Although the term "bridge" may be somewhat outdated, and "interoperability" and "chain abstraction" are mentioned more often, you need to pay close attention to "what has changed and what is just a new name for the same thing." Don't let novel technology cheapen your cross-chain experience. 

Disclaimer: This content is for educational purposes only and does not constitute financial advice. DeFi protocols carry significant market and technical risks. Token prices and yields are highly volatile, and participating in DeFi may result in the loss of all invested capital. Always do your own research, understand the legal requirements in your jurisdiction, and evaluate risks carefully before getting involved.