Blockchains are an excellent medium to transfer assets between addresses inside their network. And that was enough for some time, when users interacting with a specific blockchain were interested in what was happening inside this siloed environment.
With the evolution of use cases and technologies, the number of blockchains offering specific solutions increased, and hence the need to move assets from one to another. Bridges came into the scene to provide this interaction and to enable the asset flow between separate blockchains.
In a non-technical explanation, in most cases, a bridge is a set of applications (smart contracts) that enables assets to be sent from one blockchain to another. In this excellent article from LiFi, there is a helpful classification for bridges based on how they move assets between chains that we will use here:
- Lock & Mint — These bridges lock assets on the source chain and mint assets on the destination chain. Examples: Polygon’s PoS bridge, Avalanche Bridge (AB), wrapped BTC, wMonero.
- Burn & Mint — These bridges burn assets on the source chain and mint assets on the destination chain. Examples: Hop, Across.
- Atomic Swaps — These bridges swap assets on the source chain for assets on the destination chain. Generally, they are more trustless because they rely on self-executing smart contracts for asset swaps and remove the requirement for a trusted third-party necessary in lock & mint or burn & mint mechanisms—examples: cBridge, Connext.
In this article we will focus on bridges’ TVL, breakdown by asset bridged, and chains served by it, where applicable. A set of constraints apply:
- A snapshot was taken on July 31st;
- List of bridges analyzed: Arbitrum Bridge, Avalanche Bridge, Fantom Anyswap, Gnosis Chain Bridge, Hop Protocol, Optimism Bridge, Polygon Bridges, Portal Token (Wormhole), Synapse, zkSync Bridge, HECO Bridge, ZkSpace Bridge, OMG Network, cBridge, PolyNetwork, Rainbow Bridge (Near)
- Assets quantity and value extracted from Etherscan;
- ETH represents WETH as well.
- The list of the bridges contracts can be found here;
- The interactive version of the charts can be accessed here;
- For the sake of clarity in the visualization, the minimum bridged value for an asset to be included in it was USD 100,000;
- For Rainbow Bridge (Near), the Aurora token balance on the SC was not considered
- Bridges to chains with specific purposes, like Ronin Bridge and Sorare Bridge (both for gaming platforms), weren’t considered;
Main objective and takeaways
Our main objective is to provide a set of visualization tools for an in-depth analysis of the asset distribution between several bridges. The common sense assumption would be that the asset distribution profile would be similar on the bridges featured, but that’s not always the case. Some bridges have asymmetries between the assets locked on them versus their share of the overall TVL. These insights help us make a focused analysis of what is different in each case. We will cover some outliers further in the document. In general, the 'official' bridges (between two specific chains) have a higher TVL than the multichain ones.
Bridges TVL Overview
The TVL on the bridges selected was USD 13 billion.
Polygon Bridges has the more significant value of tokens locked, USD 4.7 billion, followed by Arbitrum Bridge with USD 2.7 Billion. HECO, Avalanche, and Optimism bridges are in close contest for the third place. You can access this chart here and access the breakdown per asset on the various bridges, like for example the view on USDT below:
The chart above shows the USDT locked on each bridge by USD value. Taking the same chart for the USDC, we can easily verify that the latter is much more used as a bridged asset than USDT. (3.47 billion total x 1.46 billion total)
The following visualization is a breakdown of the TVL distribution between the Bridges analyzed, % -wise. The ETH Ecosystem (Layer 2 and sidechains) represents 63,77% of the total.
TVL Breakdown by Assets
We can see the TVL breakdown of assets in the visualization below:
In the chart above, it is possible to visualize that the most bridged assets by value are Stablecoins, ETH and WBTC, and MATIC and SNX, for different reasons that we will explore further.
When interacting with this visualization, by clicking over the asset, a panel will show up with more granular information (how much of that asset is locked in each bridge).
When the Bridge is a Multichain one, the asset breakdown also shows the chain where it is locked.
You also can verify how much in % each bridge holds for each asset in the chart below:
The information in the previous chart, combined with the % each bridge holds of the total TVL, can be used to search for eventual outliers (an asset whose concentration is higher on a specific bridge). This comparison is made in the table below:
Example of Bridged Token Analysis
Using the charts available, we can select an asset of interest for further analysis. In this example, we will choose LINK:
It has a higher concentration (Value Over Average) on Avalanche Bridge, Fantom Anyswap, and Portal (Wormhole) bridges.
Avalanche was the leading destination, with 40,3% of the bridged LINK on the sampled bridges. This represents a USD 25.47 million in value, as we can check on the chart below.
Going to DefiLlama to verify a possible reason for that, we find that Benqi has over USD 8 million of LINK tokens deposited on its lending platform.
Link token holders are known to not feel comfortable disposing their tokens into investments that may incur in losses (“Link Marines” mindset). This asymmetrical amount of LINK bridged to Avalanche was indicative that something different was available there.
When comparing Benqi’s pool with other opportunities for receiving a yield on the token without incurring Impermanent Loss (IL), we discover that this is one of the best yields available. This couldn’t be found directly on DefiLlama because they treat “LINK” and “Link.e” (Avalanche’s native token) as two different tokens, so Benqi yield numbers don’t show in the regular “LINK” search.
Bridges in details
In this section, we will explore a few bridges in more detail, with relevant information that can be extracted from the visualizations presented in the first section.
Info: Polygon bridges (PoS Bridge and Plasma Bridge)
Bridge mechanism: Lock & Mint
Main assets Bridged:
- USDC: $ 1,58B
- MATIC: $ 753M
- USDT: $ 653M
MATIC is the native token of the Polygon network, but it was deployed before it went live on the Ethereum blockchain. It was later bridged over to Polygon, and we can verify this with the chart below, which shows that the Polygon Bridges have locked 99,87% of MATIC of the bridges selected.
Looking at USDC concentration in bridges, we see that the Polygon Bridges are one where it has a “Value over Average”.
Polygon Bridges accounts for 45,72% of all USDC locked on the Bridges, while it represents 36.28% of the total TVL.
This deviation is a good insight on where to look for relevant investment opportunities at Polygon chain. For example, when going into DefiLlama, we see that an unusual DeFi protocol, MM Finance, has 26.15% of DeFi’s TVL on that chain.
Further exploring this protocol on the Yield section for the Polygon Chain and filtering it to find USDC investment opportunities, we see that MM Finance has some of the Top Pools by TVL and APY.
This new project on Polygon used USDC as its stablecoin of choice for its liquidity bootstrap strategy in early August.
Info: Arbitrum bridge
Bridge mechanism: Lock & Mint
Main assets Bridged:
- ETH: $ 1,16B
- USDC: $ 798M
- USDT: $ 231M
Despite having around half of Polygon Bridges’ TVL, Arbitrum Bridge has more than the double ETH locked in when comparing both. As a result, it also has a “Value Over Average” on the table below.
It has 39.83% of the ETH locked in all studied bridges while representing 20.59% of the total TVL.
Going to DefiLlama’s page for yield investment opportunities, we can see that ETH (WETH) is the base asset pair for all pools on the Arbitrum Chain (Polygon has a more diversified selection).
As the APY for these pools is high, especially for ETH-Stablecoins, this is an extra incentive to migrate ETH to this chain.
Info: Hop Protocol
Bridge mechanism: Lock & Mint - Layer1 to Layer2
Mint & Burn - Between Layer2
- ETH: $ 24M
- USDC: $17M
- DAI: $4M
Hop is a bridge specialized in fast transfers between ETH mainnet and L2 networks.
Hop protocol bridges five assets (ETH, USDC, USDT, DAI, and MATIC) between ETH mainnet and L2 solutions. Their concentration is bigger than Hop TVL's share at three of them. When comparing Hop Protocol rates with cBridge’s, as an example, we can confirm that the user would receive a larger amount at the destination chain, as the fees are lower.
Looking at cBridge's estimation, we can verify that Hop's rates are better.
Final thoughts and possible next steps
The Locked Asset Distribution and Concentration on a bridge can be an indicator that an investment opportunity presents itself on the destination chain (For the 'Official' Bridges) or that this Multichain Bridge has better conditions (fees, bridging time) than its competitors.
Anyone can use this data visualization to start their analysis and to obtain additional insights. Possible next steps for it can include:
- Add more bridges;
- Regular update of the database to analyze variations over time;
- Following significant incoming transactions and the fund's deployment at the destination chain;
- Automate part of the data acquisition process.
Everything we do at Liquality is entirely open-source, as we believe that our community can add value to what we build. With this in mind, all data to create this visualization is available (check the first section for the links).
Liquality is the one wallet to cover all chains. Hold and swap your assets across multiple chains in one easy-to-use wallet. Download the Liquality wallet and explore Bitcoin, Ethereum, and other chains like Polygon, Avalanche, BNB, Arbitrum, Solana, and Rootstock in a secure, one-stop wallet.