Bridge protocols

A space to discuss the ‘Bridges’ market sector available on Token Terminal.

What are bridges?

Bridges are smart contract-based exchanges that allow for the permissionless movement of assets across different L1/L2 blockchains.

What problems do bridges aim to solve?

It’s currently difficult to put valuable collateral assets, such as BTC & ETH, to work on multiple different chains without relying on centralized intermediaries.

How do bridges solve those problems?

Bridges bring down the cost of moving assets across chains to one function call. This means that it’s possible to unlock the economic bandwidth of high-value collateral, such as BTC & ETH, on multiple different chains.

Why is now the right time to build and invest in bridges?

The bridge market was initially dominated by custodial bridges, like centralized exchanges and custodians (Binance, Coinbase, BitGo, etc.). It’s obvious why a multichain crypto industry cannot rely on only centralized bridges at scale, which is why we’re seen many decentralized and non-custodial bridges being built right now.

What is the business model of bridges?

The primary business model for bridges is to generate revenue by taking a cut of the trading fees paid by traders. That is, the bridge takes a portion of the liquidity providers’ revenue.

Where can I view the current and historical (financial) performance of bridges?

Bridges dashboard: Bridges | Markets | Token Terminal

Methodology for bridge-specific metrics

Total value locked: liquidity deposited into the bridge’s trading pools.
Transfer volume: trading volume of the assets listed on the bridge.
Fees: total trading fees paid by traders.
Supply-side fees: share of trading fees that goes to the liquidity providers.
Revenue: share of trading fees that goes to the protocol (and its tokenholders).
Token incentives: value of governance tokens distributed to liquidity providers and/or traders on the bridge.
Daily active users: daily distinct addresses transferring assets through the bridge.

Example project documentation

Relevant links