Layer by Layer Issue 26: Solana, NEAR, and Polkadot

One of the main effects stemming from the broad growth of layer 1 (L1) blockchains over the past year has been the rapid emergence of protocols built to support the new activity between various chains. Cross-chain bridges now facilitate the transfer of several hundred million dollars in assets per day between major L1s, as well as L2s to a lesser extent. 

For instance, the Avalanche Bridge averaged a daily volume of about $160 million in the month of March, counting only transfers between Ethereum and Avalanche C-Chain. Most bridges use the lock-mint/burn-release mechanism for transfers, whereby native assets on a source chain are locked in a bridge smart contract and “wrapped” versions of these assets are subsequently minted on the destination chain. For transfers back to the source chain, off-chain relayers will trigger a burn transaction for the wrapped assets, followed by the release of locked assets from the bridge contract on the source chain. The prevalence of this type of bridge model allows us to estimate how much capital has been bridged between chains over time by taking a look at the total value locked (TVL) in bridge contracts.