A new cross-chain bridge connecting Ethereum with Internet Computer will allow ERC20 tokens to exist natively on the latter’s network, developers behind the bridge said this week.
Internet Computer is a blockchain built by the Dfinity Foundation to help facilitate a decentralized layer of web infrastructure. It is backed by prominent funds such as a16z, Polychain Capital and others.
Called Terabethia, the bridge enables cross-chain contract communication, asset mirroring, and transfer across different chains. It is built on a forked version of Ethereum scaling solution StarkWare, and 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 data, tokens, or smart contract instructions with each other. These operate independently of the rules or consensus mechanisms of whichever blockchains they connect.
“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,” explained Harrison Hines, founder of Psychedelic, the Web 3 development studio behind Terabethia.
What the bridge does
The bridge comes ahead of Internet Computer’s native Ethereum integration, which will allow interoperability between the two chains. The integration will allow Internet Computer smart contracts to hold Ethereum assets on Ethereum and make calls to them, but will not allow ERC20 assets to directly exist. A bridge helps solve this problem.
Porting 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 instead of third parties to provide financial services, such as lending, borrowing and trading, to users.
Internet Computer launched in 2021 with a “reverse gas model” to focus on scalability. The model sees developers supply the funds needed to run the applications/contracts that use their gas – a fee paid to use a blockchain, Internet Computer in this case.
But the response among investors has been less than tepid. Tokens of internet computer (ICP) fell 97% since their May 2021 issuance – from $700 to Friday morning’s $21 – amid reports of alleged insider trading and large token holders exiting their positions. The tokens have a market capitalization of $5 billion on Friday, down 72% from May 2021′s $18 billion figures.