Patrick McCorry, In-house Professor @ Infura, has clarified the misconceptions on the security models for locking funds in one blockchain and representing funds in another blockchain.

He has put together a small note to distinguish the bridges, side chains, and layer-2 protocols – worth noting.

For clarity, a bridge does the job of holding assets on the layer-1 blockchain.  The same assets are released on another (an external) service. The bridge defines the details of the custody of the funds. The bridge also clarifies the conditions that should be satisfied if the assets should be unlocked.

When a layer-1 blockchain like Ethereum connects to any other system, an Ethereum bridge is used in the process.

The role of the bridge: A user can deposit funds into the bridge.  And the representation of the assets will be issued on another system. The new account balances are updated on the bridge. And, this can be used to help with the withdrawal process.

The user will be able to withdraw their assets from the bridge equivalent to the value of the token stored in another blockchain.  The token on the other bridge is burnt after the value is withdrawn.  The single organization bridge is the most commonly used bridge.

Other types of bridges like multi-organization bridge and crypto-economic bridge are also in use. In a Multi-organization bridge, a fixed set of independent parties have custody of the locked funds. In a crypto-economic bridge, a dynamic set of parties depending upon their weightage in assets tend to have custody of funds.

It is only the custodian who will be able to verify if the fund balances in other blockchains are correct when they are burned or if the liabilities are more than the assets in the bridge.  Thus, the layer-1 blockchains in all 3 bridge types cannot verify account balances.  Whether the funds can be released or not is something that the custodians decide after verifying the balances and liabilities.

A bridge is a general consideration when it comes to onboarding custodial services. Also, a bridge is used to connect one blockchain to another. So, when it is used to connect two blockchains, it is known as a side chain. Side Chain integrity should be verified to ensure the contingency of funds when the custodians go offline.

In a layer-2 bridge, it is possible to move funds from the Layer-1 blockchain to another off-chain system. In this process, a bridge is used to hold funds issued on the other system. The layer-2 protocol protects the funds with the same security as layer-1, because it cannot depend on custodians or any other off-chain systems to protect the integrity of funds.  The new type of bridge is the layer-2 bridge.

Concluding, the layer-1 blockchain has custody of the funds, and the bridge must be convinced the layer-2 protocol is not compromised. In the worst case, the bridge will self-enforce the layer-2 protocol’s liveness until all funds can be withdrawn. The layer-2 bridge is the most powerful of all bridges.