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What is a cross-chain bridge? Vulnerabilities are hackers’ favourite target

By Daniela Ešnerová

11:44, 11 October 2022

Illustration of a hacker and a digital chain
Up to $2bn worth of crypto has been stolen in cross-chain bridges attacks so far this year according to Chainalysis – Photo: Shutterstock

Cross-chain bridges are in the spotlight once again after hackers attacked Binance (BNB) and its BNB Smart Chain (BSC), stealing some $110m worth of cryptocurrencies on 6 October.

Billions of dollars worth of cryptocurrencies have already been lost to cross-chain bridge exploits this year and counting.

Blockchain research firm Chainalysis has calculated that a whopping $2bn in cryptocurrency has been stolen via cross-bridge exploits so far as of August 2022. 

But what are cross-chain bridges and why exactly are they hackers’ darlings?

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Crossing bridges

Some of the most high-profile cross-chain bridge exploits have included the $320m Wormhole bridge hack in February, the $190m Nomad bridge attack in August and now, of course, $110m BNB Smart Chain attack.

A cross-chain bridge is a protocol used for transferring digital assets from one blockchain to another without the need to use a decentralised exchange. But why have they proven to be such a popular target for bad actors?

SOL/USD

180.04 Price
-2.000% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.2652

ETH/USD

3,457.26 Price
-1.420% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

XRP/USD

0.62 Price
+2.390% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

DOGE/USD

0.14 Price
-1.670% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

The answer lies in centralisation, according to Chainalysis. It said: “Bridges are an attractive target because they often feature a central storage point of funds that back the ‘bridged’ assets on the receiving blockchain.

“Regardless of how those funds are stored – locked up in a smart contract or with a centralised custodian – that storage point becomes a target.”

Moreover, in the quickly-evolving blockchain space, cross-chain bridges are still a work in progress.

“Effective bridge design is still an unresolved technical challenge, with many new models being developed and tested. These varying designs present novel attack vectors that may be exploited by bad actors as best practices are refined over time,” added Chainalysis.

The BSC attack was quickly managed, with the team behind the Binance’s BNB Chain and volunteers from the crypto community suppressing the ongoing attack in a matter of hours.

Hackers targetted some two million BNB – valued at the time by some as being worth around $570m – but thanks to the counteraction by Binance and the community, they managed to steal only some $110m by transferring $57m to Fantom (FTM), $53m to Ethereum (ETH) and $400,000 to Polygon (MATIC). 

Markets in this article

ETH/USD
Ethereum / USD
3457.26 USD
-49.7 -1.420%
FTM/USD
FTM/USD
0.51946 USD
-0.0222 -4.160%
MATIC/USD
MATIC/USD
0.55433 USD
-0.01239 -2.280%
BNB/USD
Binance Coin / USD
598.81 USD
-7.99 -1.330%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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