THIS WEEK, THE cryptocurrency network Ronin disclosed a breach in which attackers made off with $540 million worth of Ethereum and USDC stablecoin. The incident, which is one of the biggest heists in the history of cryptocurrency, specifically siphoned funds from a service known as the Ronin Bridge. Successful attacks on “blockchain bridges” have become increasingly common over the past couple of years, and the situation with Ronin is a prominent reminder of the urgency of the problem.
Blockchain bridges, also known as network bridges, are applications that allow people to move digital assets from one blockchain to another. Cryptocurrencies are typically siloed and can’t interoperate—you can’t do a transaction on the Bitcoin blockchain using Dogecoins—so “bridges” have become a crucial mechanism, almost a missing link, in the cryptocurrency economy.
Bridge services “wrap” cryptocurrency to convert one type of coin into another. So if you go to a bridge to use another currency, like Bitcoin (BTC), the bridge will spit out wrapped bitcoins (WBTC). It’s like a gift card or a check that represents stored value in a flexible alternative format. Bridges need a reserve of cryptocurrency coins to underwrite all those wrapped coins, and that trove is a major target for hackers.