New Cross-Chain Bridge Allows Ethereum-Based Assets To Exist On Internet Computer
According to developers behind the Internet Computer, a new cross-chain bridge connecting Ethereum with Internet Computer will allow ERC20 tokens to exist natively on the latter’s network.
Internet Computer is a blockchain built by the Dfinity Foundation to help facilitate a decentralized layer of web infrastructure. The blockchain is backed by prominent funds such as a16z, Polychain Capital and number of other large players.
The new bridge has been called Terabethia. It enables cross-chain contract communication, asset mirroring, and transfer across different chains. Terabethia is built on a forked version of Ethereum scaling solution StarkWare. The bridge will enable contracts on both chains to communicate and allow anyone to mirror and use any Ethereum asset on the Internet Computer and vice versa.
Bridges allow blockchains to exchange tokens, data, or smart contract instructions with each other. These operate independently of the rules or consensus mechanisms of whichever blockchains they connect.
As explained by Harrison Hines, founder of Web 3 development studio Psychedelic, “Similarly to how Ethereum extended the functionality, usefulness, and value of Bitcoin, we believe the Internet Computer has the potential to do the same for Ethereum assets and applications, and could even potentially become the best L2 for Ethereum long term.”
What the bridge does
The chain bridge comes ahead of Internet Computer’s native Ethereum integration. The integration will allow interoperability between the two chains. The integration will also enable Internet Computer smart contracts to hold Ethereum assets on Ethereum and make calls to them. However the bridge will not allow ERC20 assets to directly exist. A bridge helps solve this problem.
Moving assets between the Internet Computer and Ethereum can help create liquidity and complementary products for the user base of the two blockchains, such as non-fungible tokens (NFTs) or other decentralized finance (DeFi) products.
DeFi protocols rely on smart contracts as opposed to third parties to provide financial services, such as lending, borrowing and trading, to users.
DeFi (decentralised finance) is the opposite of centralised finance which is most commonly recognised by traditional systems such as banks. DeFi is a move away from these systems that aims to offer traders more creativity and flexibility in their holdings.
DeFi systems use a peer-to-peer trading model that eliminates the need for transactional intermediaries. The systems rose from a need for secure, open and transparent financial systems that eradicate the large superpowers that tend to dominate traditional finance.
Internet Computer launched in 2021 with a “reverse gas model”. The model sees developers supply the funds needed to run the applications/contracts that use their gas. Gas is a fee paid to use a blockchain, Internet Computer in this case.