Background

Past tutorials only cover topics that are solely based on DeFiChain and its blockchain. In this tutorial, we'll go over bridging, which permits creating DeFiChain-based ecosystems on other networks, which has huge implications for DeFiChain. For example, bridges create a fast, easy, and decentralized way to purchase native DFI with tokens from other networks, like ETH or wBTC, removing exchange barriers for investors. Also, it enables DFI to be traded on DEXes in other networks including Uniswap or KyberSwap, opening opportunities for new investors to begin investing or advanced users to take advantage of new LPs or arbitrage. With new innovations can also come unforeseen problems or learning barriers, and this article will help resolve those.

Structure and Function

There are six categories of bridges, sorted by three parameters.

1. Trust

   1. Trusted

   2. Trustless

2. Direction

   1. Uni-directional

   2. Bi-directional

3. Funds

   1. Mint/Burn

   2. Pooled

Bridges have three categories, one from each parameter. For example, the Quantum bridge, which connects DeFiChain to Ethereum, is trusted, bi-directional, and pooled

Trusted

Trusted bridges are managed by a central party. Another example of this would be the Binance bridge. Users must trust the operator that they hold the appropriate funds when a user wants the party to return the funds, as the operator holds all funds.

Trustless

Trustless bridges do not rely on any third-party to carry out transfers. In general, they use smart contracts to manage and oversee funds. One downside to trustless bridges is that smart contracts are prone to errors, which can cause them to be hacked and their funds stolen. Over time, developers are improving the security of these bridges and the ultimate goal would be to have all trustless bridges between blockchains.

Uni-directional

Uni-directional bridges only allow a user to bridge funds in one direction. If the Quantum bridge was uni-directional, it would only permit the transfer of, for example, native DFI to ERC-20 DFI or ERC-20 DFI back to native DFI, not both. If a user bridges their funds, they cannot reverse the process, so they must make sure that they have a way to bridge back or that they are confident in their decision.

Bi-directional

In contrast, bi-directional bridges permit bridging back and forth between chains. Most bridges are bi-directional, because funds do not flow in one direction only.

Mint/Burn

Some bridges mint and burn assets when they are bridged. For example, the bridge from native Bitcoin to wrapped Bitcoin on Ethereum uses this method. Certain addresses can send BTC to the custodian address (which holds native BTC to back wBTC), minting wBTC. In reverse, these addresses can request the BTC back by sending the wBTC back and burning it.

Pooled

Bridges with pooled assets facilitate transfers like an exchange. If the BTC↔wBTC bridge operated this way, there would be a pool of BTC and wBTC on the bridge, and when users deposit one asset they can specify the address on the other chain to which they want to receive the other asset. In general, pools will take a very small percentage as fees for providing the liquidity. On the other hand, users who want to earn some rewards on their assets can take advantage of this and deposit assets to the bridge's pools.

Regardless of how a bridge functions, the work for the user to use the bridge is still quite similar.

1. The user chooses the token or coin that they have and want to send, as well as the network it is on.

2. The user double-checks they chose the correct token/coin and network.

3. The user chooses the network they would like to receive the new tokens/coins.

4. The user checks their transaction information again (networks, tokens/coins, amount)

Here is a tutorial to bridge funds on Quantum Bridge.

1. Check the amount of liquidity for the bridge. There must be enough liquidity for the destination network and token to complete a transfer. The amount of liquidity can be viewed on this site: https://quantumbridge.app/liquidity.

2. Return to the bridge page and select the initial network, destination network, token/coin, and amount.

3. Connect the MetaMask wallet to the bridge.

As of April 2022, the Quantum bridge only supports the DeFiChain and Ethereum networks and the MetaMask wallet, which is represented by this tutorial. 

4. Click "Review transaction" and follow the instructions.

The bridge will ask for the deposit, users are allowed 24 hours to send the funds to the address that is seen in step 2 on the website. When the user has sent the funds, they can proceed to step 3. Quantum Bridge will check if it has received funds, and then in step 4 those funds can be released.

On our next tutorial, check out DeFiChain's Governance!