Token bridges play a vital role in enabling the seamless transfer of assets from one blockchain to another. However, they often come with inherent risks, as they are typically owned and controlled by a single entity. Etho Protocol, has revolutionized this space by implementing a groundbreaking approach that utilizes multisig-controlled wallets. This article explores how Etho Protocol’s innovative use of multisig-technology mitigates the risks associated with token bridges and ensures decentralized decision-making.
The Importance of Token Bridges
In the rapidly evolving blockchain ecosystem, the interoperability between different blockchain networks is crucial. Token bridges serve as the connectors that facilitate the movement of assets between disparate chains. They enable users to take advantage of unique features, diverse ecosystems, and decentralized applications on multiple blockchains. However, traditional token bridges have been criticized for their centralized control, posing potential risks to the security and integrity of the assets being transferred.
The Risks of Centralized Decision Taking on Token Bridges
Centralized token bridges are susceptible to fraud, manipulation, and single points of failure. Since a single entity typically controls these bridges, it has the power to make critical decisions such as minting or burning assets. This level of authority can be exploited or abused, compromising the trust and decentralization principles that underpin blockchain technology. But not anymore.
Let us go under the hood
We will be looking at 2 typical use cases for the bridge:
- The transition of the wETHO token to ETHO
- The transition of ETHO to wETHO
Let us assume someone has 10k wETHO and wants to bring them over to mainnet ETHO to store a larger amount of data (ETHO’s primary use case).
In this case he would interact with the bridge application on https://bridge.ethoprotocol.com
The transition costs will be paid in ETHO and will be dependent on the ETH gas prices. So what is happening in the background then. Here a schematics of the bridge:
- A request to burn the token is detected by a transmitter entity of the bridge
- The request is received by the independent running instances of the council (each council member runs and owns VPS with independent references to the Ethereum and ETHO network. On the reception of the burn request, at least 4 instances need to come to a consensus decision that this is a valid request.
- On the consensus decision, ETHO will be dispersed from the ETHO wallet.
This ensures that if there is a network tempering funds cannot be released and require a consensus decision in order to do so.
Let us take the case ETHO to wETHO on the ETH chain:
In this case the transmitter entity would detect a TX with funds being moved into the bridge ETHO wallet. In this case again a consensus decision needs to be taken but this time to mint wETHO tokens on ETH. In that case a cryptographic proof is being generated to mint wETHO.
Etho Protocol’s innovative use of multisig controlled wallets sets a new standard for secure and decentralized token bridges. Etho Protocol mitigates the risks associated with centralized bridges by distributing decision-making authority and implementing a consensus-based approach. This approach not only enhances security but also fosters community engagement and trust in the token bridge ecosystem. As blockchain technology continues to advance, Etho Protocol’s commitment to decentralized solutions positions it as a pioneer in the realm of token bridges. This design is also scalable and can be extended to any ethereum or BSC based token.