Bridges and wrapped token risks

Blockchains cannot read each other's ledgers, so moving a token from one to another needs a go-between. In the common design the original token is locked in a contract on the first chain, and a matching token is minted on the second. That minted copy is a wrapped token. It is a receipt for the locked original rather than the original itself, and its worth rests on the lock holding firm. If someone drains the locked funds, the receipts remain in circulation but lose their backing. Holders may then find the wrapped token trading well below the asset it was meant to mirror, and no automatic process restores the link between the two.

Failures cluster in a few places. A bug in the bridge's smart contract can let an attacker mint tokens without locking anything or withdraw funds that were not theirs. Bridges that rely on a small group of validators or a single operator can be undone if enough signing keys are stolen or the group colludes. Message delays and chain reorganizations can also confuse a bridge about what really happened on the source chain. Bridges hold large pooled balances in one place, which makes them an attractive target. Describing a bridge as trusted or trustless says who must be believed: an operator in the first case and the code itself in the second.