The lack of interoperability between different blockchain networks poses a significant challenge. Currently, these networks operate as isolated islands, making it difficult to move assets like coins and NFTs across chains. This limitation restricts users from accessing and utilizing the diverse ecosystems and applications built on other blockchain networks.

Two key goals have emerged to address this interoperability problem: enabling the transfer of assets between chains and allowing decentralized applications (dapps) deployed on different networks to interact and integrate with each other seamlessly. This cross-chain communication and composability would unlock new possibilities and create a more interconnected blockchain ecosystem.

One proposed solution to facilitate asset transfer is the implementation of bridges, specifically federated bridges. These bridges rely on a group of staked validators who act as intermediaries. When a user wants to move an asset from one chain to another, they send it to the bridge’s address on the source chain. The validators then validate the transaction and instruct a smart contract on the target chain to mint a pegged or wrapped version of the asset, which the user can then utilize within that ecosystem. The process can be reversed to move the asset back to the original chain.

The use of validators is necessary due to the inherent difficulty of securely storing secrets, such as private keys, within the transparent and public nature of smart contracts. However, ongoing research explores the possibility of creating trustless bridges that could operate without validators, potentially leveraging advanced cryptographic techniques like zk-SNARKs.

Companies like Glassnode have metrics for tracking bridges deposits, which can be useful to monitor flow of assets between different blockchain networks, to determine the liquidity and activity of a bridge.