blockchains out there!</p>\n<p>Imagine that you have a line of 10 very different cars. Some of them are station wagons, some are pickup trucks - some are brand new and modern, while others barely even start. Now, while all of these objects are cars, and are able to take you from point A to point B, their characteristics are very different from one another, nonetheless.</p>\n<p>The exact same logic can be applied to blockchains, too! There&rsquo;s a huge variety of blockchains within the industry today, and all of them appear to offer their own, unique approach to solving some sort of a problem. <strong>Which blockchain projects can be trusted, though, and which of them are better to be avoided?</strong></p>\n<p>In this section, we&rsquo;re going to take a look at some of the most important points to note, when analyzing different types of blockchains and blockchain-powered projects. We&rsquo;ll talk about the most important features that all reliable blockchains should possess, and how you can spot potential scams, too!</p>\n<p><em>Without further ado, let&rsquo;s get to it!</em></p>\n<h2>Public VS Private Blockchains</h2>\n<p>The very first thing that you should know about blockchains, when you want to analyze them, is that <strong>there are two main types of blockchains out there</strong> - <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-public-blockchain/">public, and <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-private-blockchain/">private ones.</p>\n<p>Think about it like this - imagine that you love gaming, specifically, online games that you can play with your friends. Games such as RuneScape, or World of Warcraft.</p>\n<p>Both of these games can be played on their main, public servers - these servers are accessible to everyone, and have some established rules and guidelines about how you interact with the digital world around you.</p>\n<p>However, it&rsquo;s no secret that both games have private servers, as well. These servers are owned by some sort of a private individual, and are usually altered, quite a bit - better monster loot drop rates, more damage, rare items are made less rare, and so on. You get the idea.</p>\n<p>While the example isn&rsquo;t exactly spot-on (since both versions of the games are owned by private individuals or companies), it should still give you a pretty good idea of how private and public blockchains differ!</p>\n<p><strong>Public blockchains are the norm</strong> - generally speaking, they are transparent, completely decentralized, run by public <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-node/">nodes, and do not belong to any single authority (company, individual, organization, etc.). As opposed to that, private blockchains DO belong to a single governing entity, are governed by private nodes, and are <strong>usually very use case-specific</strong> - meaning, they are used for a very specific purpose, and thus, aren&rsquo;t always available to the public.</p>\n<p>All of that is to say that, in this section, we&rsquo;re going to be focusing on the most common and popular type of blockchains - public ones. The absolute majority of all of the main cryptocurrency projects are built on these blockchains, and you&rsquo;ll encounter them far more often than private ones.</p>\n<h2>Security - The Name of the Game</h2>\n<p>Now that we&rsquo;ve established that much, we can move on to the points that you need to look at when analyzing types of blockchain projects. And, as far as these criteria go, you&rsquo;ll find security to be at the very top of the list.</p>\n<p>Now, if you know anything about crypto, this shouldn&rsquo;t come as a surprise to you, whatsoever! After all, as I always say - <strong>if the project lacks security features, it&rsquo;s not even worth looking into, in the first place!</strong></p>\n<p><strong><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Types of blockchains: An example with a car.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/best_types_of_blockchains_01.o.jpg/" alt=\"Types of blockchains: An example with a car.\" width=\"1000\" height=\"364\" /></strong></p>\n<p>Let&rsquo;s take a look at another example with cars. Imagine that you&rsquo;re looking to buy a new, modern and beautiful car - one that has a huge array of fancy features, top-tier handling on the road, and is very comfortable to drive, in general. The car is actually very affordable, as well! There&rsquo;s just one issue - there is no way to lock it, at all.</p>\n<p>So, while you CAN buy this car, and enjoy all of the perks that it has to offer, every single day, you&rsquo;ll risk it being stolen, since all that the thieves would need to do is open the door - that&rsquo;s it! This factor alone would probably make you think twice about buying a car like this!</p>\n<p>Blockchains are the exact same. <strong>You should always make sure that the technology behind the blockchain is modern, secure, and bulletproof, at least theoretically. </strong>Read up about the project on the forums, check what the core developers have to say, talk to your peers, and take a look at all of the projects that are built on this blockchain - all of this should give you a pretty good idea, as far as security is concerned!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Types of blockchains: The ways you can check if the technology behind the blockchain is modern and secure.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/best_types_of_blockchains_02.o.jpg/" alt=\"Types of blockchains: The ways you can check if the technology behind the blockchain is modern and secure.\" width=\"1000\" height=\"515\" /></p>\n<h2>Flesh Out Your Goals</h2>\n<p>The second big thing that you really need to figure out when trying to find the best blockchains is <strong>what exactly it is that you&rsquo;re interested in</strong>, in the first place.</p>\n<p><em>Sound weird? Well, allow me to explain!</em></p>\n<p>Certain blockchains are very user- and newbie-friendly. Meaning, they are very simple to navigate through, use, and invest in. Take <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin, as an example - the blockchain doesn&rsquo;t have any innate functionality, and is mainly used for investment purposes.</p>\n<p>On the other hand, you have blockchains such as <strong>Polkadot</strong> - it&rsquo;s a super-complex network that&rsquo;s oriented at supporting other blockchain projects, and allowing different blockchain networks to &ldquo;communicate&rdquo; with one another. Now, that&rsquo;s some high-end, developer-related subject matter!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Types of blockchains: Polkadot.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/best_types_of_blockchains_03.o.jpg/" alt=\"Types of blockchains: Polkadot.\" width=\"1000\" height=\"437\" /></p>\n<p>If the latter sounds more like your cup of tea, then I highly recommend reading a <a href=https://www.bitdegree.org/"/crypto/learn/what-is-polkadot-in-crypto/">dedicated section about Polkadot</strong></a>, to get a better understanding of what this network is all about. That being said, my point still stands - once you understand WHY it is that you&rsquo;re researching different blockchain platforms, you&rsquo;ll be able to narrow your search, significantly.</p>\n<p>Speaking of which, this ties in perfectly with another element of your research, too.</p>\n<h2>DYOR on The Use Cases of the Blockchain</h2>\n<p>Once you have all of your goals set and clear, the third step is to <strong>find a blockchain that would allow you to manifest those goals into reality! </strong>Allow me to illustrate what I mean with an example.</p>\n<p>So, imagine that your significant other sent you to a grocery store to do some shopping. Now, if your goal was to buy some milk and bread, but you, for some reason, decide to go shopping in a clothing store, instead of a grocery shop, chances are that you won&rsquo;t find any milk or bread there!</p>\n<p>The same is true with different types of blockchains, as well. So, for example, <strong>Ethereum is the main blockchain that different <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-are-decentralized-applications-dapps/">dApps are built on</strong>, while, as we&rsquo;ve talked about earlier, <strong>Bitcoin is a &ldquo;dumb&rdquo; blockchain</strong> - it has <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-defi/">no DeFi functionality</strong></a>, and people buy Bitcoin simply because they see it as digital gold, and believe that it will rise in price, over time.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Types of blockchains: Ethereum VS Bitcoin.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/best_types_of_blockchains_04.o.jpg/" alt=\"Types of blockchains: Ethereum VS Bitcoin.\" width=\"1000\" height=\"285\" /></p>\n<p>If you&rsquo;re unfamiliar with <a href=https://www.bitdegree.org/"/crypto/learn/what-are-dapps-in-crypto/">dApps and <a href=https://www.bitdegree.org/"/crypto/learn/what-is-defi/">DeFi, in general, check out the sections dedicated to these topics in the BitDegree Crypto 101 Handbook! That said, though, the point here remains the same - since different blockchain networks will have different use cases, you really need to do your own research on what your blockchain of choice is best for, and then see if it fits the goals that you&rsquo;ve fleshed out, earlier.</p>\n<h2>Does the Blockchain Have a Strong Community Behind it?</h2>\n<p>The fourth aspect that you need to consider when researching the best blockchain networks is <strong>whether or not the network has an avid and passionate community</strong>, and just how easy it is to navigate it.</p>\n<p>My favorite way to look at it is this: imagine that you&rsquo;re an entry-level investor, and are not interested in any high-tier projects, or advanced blockchain functionality. Instead, you&rsquo;re simply looking to invest in a network that has some great perspectives, and is attracting users with some unique features.</p>\n<p>Imagine that, in a situation like this, you encounter two blockchains - one that&rsquo;s super-popular and well-established, and another that no one has even yet heard about, and that has very limited functionality.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Types of blockchains: Does the Blockchain Have a Strong Community Behind It?\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/best_types_of_blockchains_05.o.jpg/" alt=\"Types of blockchains: Does the Blockchain Have a Strong Community Behind It?\" width=\"1000\" height=\"556\" /></p>\n<p><strong>With the well-established blockchain</strong>, you are able to access multiple different projects, figure out what are the different types of tokens, and then trade them in a simple manner, since they are supported on multiple <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-exchange/">exchanges. Besides, you can get all of your questions answered since the community forums are alive and well.</p>\n<p><strong>With the less-known blockchain</strong>, the situation is different. Everything&rsquo;s sort of &ldquo;up in the air&rdquo;, there aren&rsquo;t really any big-name projects being developed on it, and if you want to trade tokens, you&rsquo;d need to use some sort of a complex, advanced swapping tool that&rsquo;s only available within their ecosystem.</p>\n<p>In a situation like this, it&rsquo;s quite obvious that the well-known blockchain is the safer and easier pick! That being said, this does transition perfectly into my next point.</p>\n<h2>Avoiding Scams</h2>\n<p>So, up to this point, we&rsquo;ve talked about the different aspects that you should look into when analyzing different types of blockchain protocols and networks. For step No. 5, you should also be able to look into and understand <strong>what a potentially-shady blockchain looks like</strong>, and learn to avoid it!</p>\n<p>Evidently, oftentimes, this isn&rsquo;t a simple thing to do<em>. </em>But, there are some tell-tale signs to look out for. Many of these signs are actually the same as when analyzing cryptocurrency-powered projects, too!</p>\n<p><strong>For starters, you need to look into who created the blockchain network.</strong> Are the founders anonymous? If not, are they well-known and respected within the industry? Answers to these questions can really help you discard a big chunk of shady blockchain networks from your list!</p>\n<p><strong>Then, the fundamentals. </strong>Is the blockchain secure? Do the developers behind it apply all of the best-practices? What is the purpose behind the project - is there one, in general?</p>\n<p>After you figure all of that out, you&rsquo;ll be able to move to some of the <strong>more-specific questions</strong> - project funding, roadmap, whitepaper, and so on. At the end of the day, follow your gut feeling - if something <em>*feels*</em> off, then it&rsquo;s often better to stay safe and avoid the project.</p>\n<h2>Wrapping Up</h2>\n<p>In this section, we&rsquo;ve covered some of the most important points that you need to look at when searching for and analyzing the best blockchain networks. You should now also be able to differentiate between great blockchains, as well as those that should be avoided, if you want to keep your funds safe!</p>","meta_title":"Different Types of Blockchains: Which One is the Best?","meta_description":"If you're having trouble deciding which blockchain, out of dozens available, you should pick, discover all the answers you need here!","meta_keywords":"types of blockchains, types of blockchain, different types of blockchain, blockchain types, types of blockchain platforms, types of blockchain protocols, types of node in blockchain, what are the different types of tokens in blockchain, different types of blockchain technology","order":6,"language":"en","created_at":"2022-07-07T05:38:40.000000Z","updated_at":"2023-05-04T10:25:24.000000Z","modified_content":"<p>In this section, I&rsquo;m going to tell you about the different types of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-blockchain/">blockchains out there!</p>\n<p>Imagine that you have a line of 10 very different cars. Some of them are station wagons, some are pickup trucks - some are brand new and modern, while others barely even start. Now, while all of these objects are cars, and are able to take you from point A to point B, their characteristics are very different from one another, nonetheless.</p>\n<p>The exact same logic can be applied to blockchains, too! There&rsquo;s a huge variety of blockchains within the industry today, and all of them appear to offer their own, unique approach to solving some sort of a problem. <strong>Which blockchain projects can be trusted, though, and which of them are better to be avoided?</strong></p>\n<p>In this section, we&rsquo;re going to take a look at some of the most important points to note, when analyzing different types of blockchains and blockchain-powered projects. We&rsquo;ll talk about the most important features that all reliable blockchains should possess, and how you can spot potential scams, too!</p>\n<p><em>Without further ado, let&rsquo;s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"Best Types of Blockchains Revealed (5 Animated Rules)\"\n title=\"Best Types of Blockchains Revealed (5 Animated Rules)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: Different Types of Blockchains: What to Look Out For?</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"Different Types of Blockchains: What to Look Out For?\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"sCp9U3vr9RI\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">Best Types of Blockchains Revealed (5 Animated Rules)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/sCp9U3vr9RI/hq720.jpg/"/n alt=\"Best Types of Blockchains Revealed (5 Animated Rules)\"\n title=\"Best Types of Blockchains Revealed (5 Animated Rules)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"Best Types of Blockchains Revealed (5 Animated Rules)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"sCp9U3vr9RI\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>Public VS Private Blockchains</h2>\n<p>The very first thing that you should know about blockchains, when you want to analyze them, is that <strong>there are two main types of blockchains out there</strong> - <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-public-blockchain/">public, and <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-private-blockchain/">private ones.</p>\n<p>Think about it like this - imagine that you love gaming, specifically, online games that you can play with your friends. Games such as RuneScape, or World of Warcraft.</p>\n<p>Both of these games can be played on their main, public servers - these servers are accessible to everyone, and have some established rules and guidelines about how you interact with the digital world around you.</p>\n<p>However, it&rsquo;s no secret that both games have private servers, as well. These servers are owned by some sort of a private individual, and are usually altered, quite a bit - better monster loot drop rates, more damage, rare items are made less rare, and so on. You get the idea.</p>\n<p>While the example isn&rsquo;t exactly spot-on (since both versions of the games are owned by private individuals or companies), it should still give you a pretty good idea of how private and public blockchains differ!</p>\n<p><strong>Public blockchains are the norm</strong> - generally speaking, they are transparent, completely decentralized, run by public <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-node/">nodes, and do not belong to any single authority (company, individual, organization, etc.). As opposed to that, private blockchains DO belong to a single governing entity, are governed by private nodes, and are <strong>usually very use case-specific</strong> - meaning, they are used for a very specific purpose, and thus, aren&rsquo;t always available to the public.</p>\n<p>All of that is to say that, in this section, we&rsquo;re going to be focusing on the most common and popular type of blockchains - public ones. The absolute majority of all of the main cryptocurrency projects are built on these blockchains, and you&rsquo;ll encounter them far more often than private ones.</p>\n<h2>Security - The Name of the Game</h2>\n<p>Now that we&rsquo;ve established that much, we can move on to the points that you need to look at when analyzing types of blockchain projects. And, as far as these criteria go, you&rsquo;ll find security to be at the very top of the list.</p>\n<p>Now, if you know anything about crypto, this shouldn&rsquo;t come as a surprise to you, whatsoever! After all, as I always say - <strong>if the project lacks security features, it&rsquo;s not even worth looking into, in the first place!</strong></p>\n<p><strong><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Types of blockchains: An example with a car.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/best_types_of_blockchains_01.o.jpg/" alt=\"Types of blockchains: An example with a car.\" width=\"1000\" height=\"364\" /></strong></p>\n<p>Let&rsquo;s take a look at another example with cars. Imagine that you&rsquo;re looking to buy a new, modern and beautiful car - one that has a huge array of fancy features, top-tier handling on the road, and is very comfortable to drive, in general. The car is actually very affordable, as well! There&rsquo;s just one issue - there is no way to lock it, at all.</p>\n<p>So, while you CAN buy this car, and enjoy all of the perks that it has to offer, every single day, you&rsquo;ll risk it being stolen, since all that the thieves would need to do is open the door - that&rsquo;s it! This factor alone would probably make you think twice about buying a car like this!</p>\n<p>Blockchains are the exact same. <strong>You should always make sure that the technology behind the blockchain is modern, secure, and bulletproof, at least theoretically. </strong>Read up about the project on the forums, check what the core developers have to say, talk to your peers, and take a look at all of the projects that are built on this blockchain - all of this should give you a pretty good idea, as far as security is concerned!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Types of blockchains: The ways you can check if the technology behind the blockchain is modern and secure.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/best_types_of_blockchains_02.o.jpg/" alt=\"Types of blockchains: The ways you can check if the technology behind the blockchain is modern and secure.\" width=\"1000\" height=\"515\" /></p>\n<h2>Flesh Out Your Goals</h2>\n<p>The second big thing that you really need to figure out when trying to find the best blockchains is <strong>what exactly it is that you&rsquo;re interested in</strong>, in the first place.</p>\n<p><em>Sound weird? Well, allow me to explain!</em></p>\n<p>Certain blockchains are very user- and newbie-friendly. Meaning, they are very simple to navigate through, use, and invest in. Take <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin, as an example - the blockchain doesn&rsquo;t have any innate functionality, and is mainly used for investment purposes.</p>\n<p>On the other hand, you have blockchains such as <strong>Polkadot</strong> - it&rsquo;s a super-complex network that&rsquo;s oriented at supporting other blockchain projects, and allowing different blockchain networks to &ldquo;communicate&rdquo; with one another. Now, that&rsquo;s some high-end, developer-related subject matter!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Types of blockchains: Polkadot.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/best_types_of_blockchains_03.o.jpg/" alt=\"Types of blockchains: Polkadot.\" width=\"1000\" height=\"437\" /></p>\n<p>If the latter sounds more like your cup of tea, then I highly recommend reading a <a href=https://www.bitdegree.org/"/crypto/learn/what-is-polkadot-in-crypto/">dedicated section about Polkadot</strong></a>, to get a better understanding of what this network is all about. That being said, my point still stands - once you understand WHY it is that you&rsquo;re researching different blockchain platforms, you&rsquo;ll be able to narrow your search, significantly.</p>\n<p>Speaking of which, this ties in perfectly with another element of your research, too.</p>\n<h2>DYOR on The Use Cases of the Blockchain</h2>\n<p>Once you have all of your goals set and clear, the third step is to <strong>find a blockchain that would allow you to manifest those goals into reality! </strong>Allow me to illustrate what I mean with an example.</p>\n<p>So, imagine that your significant other sent you to a grocery store to do some shopping. Now, if your goal was to buy some milk and bread, but you, for some reason, decide to go shopping in a clothing store, instead of a grocery shop, chances are that you won&rsquo;t find any milk or bread there!</p>\n<p>The same is true with different types of blockchains, as well. So, for example, <strong>Ethereum is the main blockchain that different <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-are-decentralized-applications-dapps/">dApps are built on</strong>, while, as we&rsquo;ve talked about earlier, <strong>Bitcoin is a &ldquo;dumb&rdquo; blockchain</strong> - it has <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-defi/">no DeFi functionality</strong></a>, and people buy Bitcoin simply because they see it as digital gold, and believe that it will rise in price, over time.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Types of blockchains: Ethereum VS Bitcoin.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/best_types_of_blockchains_04.o.jpg/" alt=\"Types of blockchains: Ethereum VS Bitcoin.\" width=\"1000\" height=\"285\" /></p>\n<p>If you&rsquo;re unfamiliar with <a href=https://www.bitdegree.org/"/crypto/learn/what-are-dapps-in-crypto/">dApps and <a href=https://www.bitdegree.org/"/crypto/learn/what-is-defi/">DeFi, in general, check out the sections dedicated to these topics in the BitDegree Crypto 101 Handbook! That said, though, the point here remains the same - since different blockchain networks will have different use cases, you really need to do your own research on what your blockchain of choice is best for, and then see if it fits the goals that you&rsquo;ve fleshed out, earlier.</p>\n<h2>Does the Blockchain Have a Strong Community Behind it?</h2>\n<p>The fourth aspect that you need to consider when researching the best blockchain networks is <strong>whether or not the network has an avid and passionate community</strong>, and just how easy it is to navigate it.</p>\n<p>My favorite way to look at it is this: imagine that you&rsquo;re an entry-level investor, and are not interested in any high-tier projects, or advanced blockchain functionality. Instead, you&rsquo;re simply looking to invest in a network that has some great perspectives, and is attracting users with some unique features.</p>\n<p>Imagine that, in a situation like this, you encounter two blockchains - one that&rsquo;s super-popular and well-established, and another that no one has even yet heard about, and that has very limited functionality.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Types of blockchains: Does the Blockchain Have a Strong Community Behind It?\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/best_types_of_blockchains_05.o.jpg/" alt=\"Types of blockchains: Does the Blockchain Have a Strong Community Behind It?\" width=\"1000\" height=\"556\" /></p>\n<p><strong>With the well-established blockchain</strong>, you are able to access multiple different projects, figure out what are the different types of tokens, and then trade them in a simple manner, since they are supported on multiple <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-exchange/">exchanges. Besides, you can get all of your questions answered since the community forums are alive and well.</p>\n<p><strong>With the less-known blockchain</strong>, the situation is different. Everything&rsquo;s sort of &ldquo;up in the air&rdquo;, there aren&rsquo;t really any big-name projects being developed on it, and if you want to trade tokens, you&rsquo;d need to use some sort of a complex, advanced swapping tool that&rsquo;s only available within their ecosystem.</p>\n<p>In a situation like this, it&rsquo;s quite obvious that the well-known blockchain is the safer and easier pick! That being said, this does transition perfectly into my next point.</p>\n<h2>Avoiding Scams</h2>\n<p>So, up to this point, we&rsquo;ve talked about the different aspects that you should look into when analyzing different types of blockchain protocols and networks. For step No. 5, you should also be able to look into and understand <strong>what a potentially-shady blockchain looks like</strong>, and learn to avoid it!</p>\n<p>Evidently, oftentimes, this isn&rsquo;t a simple thing to do<em>. </em>But, there are some tell-tale signs to look out for. Many of these signs are actually the same as when analyzing cryptocurrency-powered projects, too!</p>\n<p><strong>For starters, you need to look into who created the blockchain network.</strong> Are the founders anonymous? If not, are they well-known and respected within the industry? Answers to these questions can really help you discard a big chunk of shady blockchain networks from your list!</p>\n<p><strong>Then, the fundamentals. </strong>Is the blockchain secure? Do the developers behind it apply all of the best-practices? What is the purpose behind the project - is there one, in general?</p>\n<p>After you figure all of that out, you&rsquo;ll be able to move to some of the <strong>more-specific questions</strong> - project funding, roadmap, whitepaper, and so on. At the end of the day, follow your gut feeling - if something <em>*feels*</em> off, then it&rsquo;s often better to stay safe and avoid the project.</p>\n<h2>Wrapping Up</h2>\n<p>In this section, we&rsquo;ve covered some of the most important points that you need to look at when searching for and analyzing the best blockchain networks. You should now also be able to differentiate between great blockchains, as well as those that should be avoided, if you want to keep your funds safe!</p>","preview_url":"https://www.bitdegree.org/crypto/learn/types-of-blockchains","youtube_video":{"id":77,"channel_id":1,"sort":33,"video_title":"Best Types of Blockchains Revealed (5 Animated Rules)","description":"Best Types of Blockchains Revealed (5 Animated Rules)\n\nPicking and choosing from different types of blockchains can prove to be a rather difficult task, especially if you’re new to the industry. There’s a huge number of different blockchain types out there, all serving some specific purpose or use case.\n\nIn this video, I’ll tell you all about the most important aspects to look into, when researching different types of blockchains. You will also learn how to avoid potential scams, and what are some of the most common red flags to watch out for. \n\nDo you know an awesome & unique blockchain network? Do share your findings, in the comment section below!\n\nVideo Time Table:\n\n0:00 Introduction to Best Types of Blockchains\n1:06 Public Vs Private Networks\n2:40 How to Find the Best Types of Blockchains: Security\n3:50 How to Find the Best Types of Blockchains: Set Your Goals \n4:48 How to Find the Best Types of Blockchains: Do Your Own Research\n5:46 How to Find the Best Types of Blockchains: Community Behind it\n7:03 How to Find the Best Types of Blockchains: Avoid Scams\n7:57 Wrap-up: Best Types of Blockchains Revealed\n\nMore Related Videos:\n? What is Blockchain? https://www.youtube.com/watch?v=O2-XxMo5PFs\n? What is a Smart Contract? https://www.youtube.com/watch?v=0VCMtKx9AxU\n? What is a Rug Pull in Crypto? https://www.youtube.com/watch?v=pgTVuCsUcKw\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#TypesofBlockchains #TypesofBlockchain #BlockchainTypes","video_id":"sCp9U3vr9RI","duration":504,"view_count":354,"thumbnail_url":"https://i.ytimg.com/vi/sCp9U3vr9RI/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-07-05 14:57:56","created_at":"2022-07-05T23:00:02.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}}},"prevSection":{"id":30,"featured_image_id":7442,"original_id":null,"youtube_video_id":93,"author_id":42,"translator_id":null,"chapter_id":1,"title":"The Different Types of Crypto Fees Explained","slug":"crypto-fees","definition":"Did you know that there is a gas fee associated with every operation performed on Ethereum, including transmitting tokens or engaging with smart contracts?","status":"published","content":"<p>Hey, in this section, we&rsquo;re going to talk about <strong>crypto fees</strong>, and everything associated with this topic!</p>\n<p>Nowadays, fees are something that everyone is very used to - whether it be shopping online or interacting with different businesses, in any way, in many cases, you will need to pay some sort of a service or product fee. Cryptocurrency trading isn&rsquo;t an exception, either!</p>\n<p>Crypto gas (or, network) fees can be confusing, and that&rsquo;s not to mention things like trading fees, or even withdrawal &amp; deposit fees, too. At the same time, all of this information is very important, when you&rsquo;re getting into crypto - it can really be the difference between you making a potential profit with your trades, or losing a lot of money on fees!</p>\n<p>In this section, we&rsquo;re talking about crypto fees. To be a bit more specific, we&rsquo;ll talk about the different types of fees that you might come across, cover what are gas fees in crypto, and also look for cryptos with no transaction fee. Is that possible? Find the answer below!</p>\n<p><em>Now, let&rsquo;s get to it!</em></p>\n<h2>The Different Types of Crypto Fees</h2>\n<p>Now, then - to start things off, and before we can get into the specifics of crypto fees, we should first establish what sorts of fees you might come across, when you&rsquo;re buying, selling, or trading crypto.</p>\n<p>Starting out from the top, you&rsquo;ll find that the most interesting type of fees are the <strong>crypto gas fees, also known as blockchain fees. </strong>&ldquo;Gas&rdquo; is a strange term, I admit, but essentially, it refers to the fee that you need to pay to the network, in order for your transaction to be submitted and, eventually, approved. It&rsquo;s something that I&rsquo;ll elaborate on further.</p>\n<p>You could look at it as actual gas that you put into your car, as well! Say, you want to travel to your friend&rsquo;s house, but he lives a couple of hours away. In order for you to be able to drive to your friend, your car will need gas (or petrol, or diesel, or these days, electricity) - without it, the car won&rsquo;t start, and you won&rsquo;t be able to make the journey!</p>\n<p>The principle is exactly the same with cryptocurrency transactions, too. If you want your transaction to be approved, you&rsquo;ll need <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-miner/">network miners</strong></a> or <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-validator/">node validators</strong></a> to do so. They won&rsquo;t do it for free, though, and will charge you a fee. Admittedly, the just-mentioned concepts are rather complex - if you&rsquo;re not familiar with them, check out other sections on the Crypto 101 Handbook to find information about these and similar topics!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Crypto fees: Crypto gas fees VS transaction fees.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto_fees_01.o.jpg/" alt=\"Crypto fees: Crypto gas fees VS transaction fees.\" width=\"1000\" height=\"736\" /></p>\n<p>The next popular type of crypto fees is called <strong>&ldquo;transaction fees&rdquo;, or &ldquo;trading fees&rdquo;. </strong>This is the fee that you will pay to, say, a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-exchange/">cryptocurrency exchange</strong></a>, in order for it to execute your trade, or to perform a cryptocurrency purchase with USD, EUR, or any other <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-fiat/">fiat currency</strong></a>.</p>\n<p>Notably,<strong> transaction or trading fees are only paid when you actually make a cryptocurrency purchase or trade</strong>, on a specific exchange platform that specializes in this field. So, for example, if you only want to send some cryptocurrency to your friend, from your wallet to theirs, in most cases, the only fees that you&rsquo;ll need to pay are the earlier-discussed gas, or blockchain, fees.</p>\n<p>While you will find very different numbers being thrown around, depending on where you look, <strong>the general industry-average trading fee is considered to be 0,25% for both crypto buyers and sellers</strong> (or, rather - market makers and takers). Although, keep in mind that market takers (the ones who interact with an order created by the market makers) usually have to deal with higher fees!</p>\n<p>Now, we got really technical there for a second<em>. </em>This is some advanced-level economics, mixed with cryptocurrency terminology - it&rsquo;s not that simple to wrap your head around, I admit! Again, though - if certain concepts that we&rsquo;ve discussed up to this point sound foreign to you, make sure to check out other sections in this Crypto 101 Handbook!</p>\n<p>Another form of fees that you also need to know about are <strong>loan fees.</strong> Here, the concept is pretty simple - if you&rsquo;re a lender, you will likely charge the borrower a fee, for them borrowing your cryptocurrency assets. Unlike with trading, however, <strong>loan fees don&rsquo;t really have an intricate system that would determine the fee that you&rsquo;d pay</strong>, before you even borrow the assets.</p>\n<p>In fact, loan fees can vary, quite a bit. And that makes sense, too! If you were to lend your friend your car for the weekend, you might ask them to fill up the tank, once they&rsquo;re done - however, if you would be asked to lend that same car, to a stranger, and for, say, an entire month, a filled tank probably wouldn&rsquo;t suffice - you&rsquo;d likely ask for some form of compensation, too!</p>\n<p>In any case, lending (or, rather - borrowing) fees are unavoidable, if you plan to borrow crypto, for some reason. Make sure to look into the numbers on different lending platforms, however, and try to find the best deals!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Crypto fees: Loan fees VS deposit/withdrawal fees.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto_fees_02.o.jpg/" alt=\"Crypto fees: Loan fees VS deposit/withdrawal fees.\" width=\"1000\" height=\"745\" /></p>\n<p>The last form of fees that we need to talk about is the <strong>deposit and withdrawal fees.</strong> As the terms might suggest, these fees are paid when you deposit or withdraw cryptocurrencies to and from an exchange. That&rsquo;s a notable point to keep in mind, too - <strong>deposit and withdrawal fees only exist with cryptocurrency exchanges!</strong> <em>Well, in most cases, at least.</em></p>\n<p>Once again, you can view this from the perspective of the example I gave earlier. Let&rsquo;s say that you&rsquo;ve filled up your car&rsquo;s gas tank, and are ready to travel to your friend&rsquo;s house. As you go there, you need to drive through a few different roads - while most of them are free to travel through, a few have tools that need to be paid, in order for you to be able to drive on them, and not get a ticket.</p>\n<p>This example illustrates the point I&rsquo;ve made earlier - <strong>while some services will allow you to withdraw and deposit cryptocurrencies free of charge, others will have fees that you need to pay.</strong></p>\n<h2>Solving the Mystery of Gas Fees</h2>\n<p>Now that you know about the main types of fees that you&rsquo;ll encounter while dealing with cryptocurrencies, I&rsquo;d like to go back to the concept that usually causes beginners the most amount of confusion - crypto gas fees.</p>\n<p>Specifically, how do you know what the gas - or network - fees are going to be when you decide to send cryptocurrency to someone else? Is there a specific number, or does it depend on some factors?</p>\n<p>Well, let me tell you - it&rsquo;s all much simpler than it looks, when you hear about it for the first time!</p>\n<p>For starters, no - <strong>there is no single number that would be associated with gas fees</strong>. Each network has its own fee model, and on top of that, there&rsquo;s a myriad of variables that can impact those crypto gas fees, even more.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Crypto fees: Ethereum.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto_fees_03.o.jpg/" alt=\"Crypto fees: Ethereum.\" width=\"1000\" height=\"465\" /></p>\n<p>The simplest example can be found by taking a look at <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum. It&rsquo;s the second-most-popular cryptocurrency in the world, so, as you can expect, there are a lot of transactions happening on the network, every single second. If you&rsquo;ve ever bought ETH, or have sent it to your friend, you&rsquo;ve participated in a transaction like that, too!</p>\n<p>Sometimes, there are so many transactions happening on the Ethereum network, that a queue starts to form. <strong>One way to make sure that your transaction isn&rsquo;t stuck in that queue for too long is to pay a higher gas fee </strong>- then, transaction validators will have a bigger incentive to confirm your transaction first, since they will receive a bigger reward for doing so!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Crypto fees: Paying a higher gas fee.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto_fees_04.o.jpg/" alt=\"Crypto fees: Paying a higher gas fee.\" width=\"1000\" height=\"486\" /></p>\n<p>Cryptocurrency miners, transaction validators, and nodes are all a different topic that has to do with some advanced and technical transaction confirmation details - in other words, it requires a much deeper explanation in a separate section. Going back to crypto gas fees, the point I&rsquo;m trying to make is simple - <strong>gas fees are not stable, and will depend on various factors.</strong></p>\n<h2>Crypto Without Transaction Fees</h2>\n<p>Moving on, the final question that I&rsquo;d like to address has to do with <strong>cryptos with no transaction fees.</strong> Specifically, do such cryptocurrencies even exist, in the first place?</p>\n<p><em>Well&hellip; Kind of.</em></p>\n<p><em><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Crypto fees: Crypto without transaction fees.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto_fees_05.o.jpg/" alt=\"Crypto fees: Crypto without transaction fees.\" width=\"1000\" height=\"453\" /></em></p>\n<p>As far as I could find, cryptocurrencies with ZERO transaction fees don&rsquo;t really exist, with some exceptions (such as <strong>the NANO coin</strong>). However, there are many cryptos that offer the lowest transaction fees - so, you could say that there are PRACTICALLY no fees.</p>\n<p>A great example would be <strong>IOTA.</strong> This cryptocurrency has very low transaction fees - you could go as far as to say that they&rsquo;re negligible. Another very popular coin is <strong>Cardano</strong> - while the fees on this network are bigger, by comparison, they are still nearly non-existent.</p>\n<p>If you yourself are looking to trade crypto without fees, it&rsquo;s definitely a topic that requires a lot of research and know-how, as far as the market is concerned. There are new cryptocurrency projects popping up every single day - some of them do, for a fact, emphasize their <em>&ldquo;small transaction fee&rdquo;</em> benefits!</p>\n<p>Also, if you&rsquo;re looking for which crypto has the lowest transaction fees in order to save money on the fees that you&rsquo;d pay while trading or sending it, remember that there are other factors involved in the process, too! For example, you would then also need to look for a cryptocurrency exchange platform that has small trading fees, as well as try to time your trades when the network isn&rsquo;t majorly congested!</p>\n<h2>Wrapping Up</h2>\n<p>So, then - by now, you should have developed a pretty good understanding of cryptocurrency fees! This is true both when it comes to the types of fees that you may encounter, as well as what you can do to minimize and lower the amount of fees that you pay, for your transactions.</p>\n<p>Remember - if you want to pay as small of a transaction fee as possible, you need to find <strong>cryptocurrencies with nearly-zero fees, and trade (or buy, sell, transfer) crypto when there aren&rsquo;t a lot of people doing the same thing, </strong>at the same time.</p>","meta_title":"Types of Crypto Fees and How Do They Differ?","meta_description":"Feeling overwhelmed due to a huge variety of crypto fees? Can't seem to figure out the difference between them? Find all answers right here!","meta_keywords":"crypto fees, crypto gas fees, gas fees crypto, what are gas fees crypto, trade crypto without fees, crypto, transaction fees, block chain fees, lowest crypto transaction fees, which crypto has lowest transaction fees, crypto with no transaction fee","order":4,"language":"en","created_at":"2022-07-19T10:07:57.000000Z","updated_at":"2023-05-04T10:25:24.000000Z","modified_content":"<p>Hey, in this section, we&rsquo;re going to talk about <strong>crypto fees</strong>, and everything associated with this topic!</p>\n<p>Nowadays, fees are something that everyone is very used to - whether it be shopping online or interacting with different businesses, in any way, in many cases, you will need to pay some sort of a service or product fee. Cryptocurrency trading isn&rsquo;t an exception, either!</p>\n<p>Crypto gas (or, network) fees can be confusing, and that&rsquo;s not to mention things like trading fees, or even withdrawal &amp; deposit fees, too. At the same time, all of this information is very important, when you&rsquo;re getting into crypto - it can really be the difference between you making a potential profit with your trades, or losing a lot of money on fees!</p>\n<p>In this section, we&rsquo;re talking about crypto fees. To be a bit more specific, we&rsquo;ll talk about the different types of fees that you might come across, cover what are gas fees in crypto, and also look for cryptos with no transaction fee. Is that possible? Find the answer below!</p>\n<p><em>Now, let&rsquo;s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"Crypto Fees Explained: How Not to Overpay? (Animated)\"\n title=\"Crypto Fees Explained: How Not to Overpay? (Animated)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: The Different Types of Crypto Fees Explained</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"The Different Types of Crypto Fees Explained\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"c1NItwMjjAs\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">Crypto Fees Explained: How Not to Overpay? (Animated)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/c1NItwMjjAs/hq720.jpg/"/n alt=\"Crypto Fees Explained: How Not to Overpay? (Animated)\"\n title=\"Crypto Fees Explained: How Not to Overpay? (Animated)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"Crypto Fees Explained: How Not to Overpay? (Animated)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"c1NItwMjjAs\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>The Different Types of Crypto Fees</h2>\n<p>Now, then - to start things off, and before we can get into the specifics of crypto fees, we should first establish what sorts of fees you might come across, when you&rsquo;re buying, selling, or trading crypto.</p>\n<p>Starting out from the top, you&rsquo;ll find that the most interesting type of fees are the <strong>crypto gas fees, also known as blockchain fees. </strong>&ldquo;Gas&rdquo; is a strange term, I admit, but essentially, it refers to the fee that you need to pay to the network, in order for your transaction to be submitted and, eventually, approved. It&rsquo;s something that I&rsquo;ll elaborate on further.</p>\n<p>You could look at it as actual gas that you put into your car, as well! Say, you want to travel to your friend&rsquo;s house, but he lives a couple of hours away. In order for you to be able to drive to your friend, your car will need gas (or petrol, or diesel, or these days, electricity) - without it, the car won&rsquo;t start, and you won&rsquo;t be able to make the journey!</p>\n<p>The principle is exactly the same with cryptocurrency transactions, too. If you want your transaction to be approved, you&rsquo;ll need <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-miner/">network miners</strong></a> or <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-validator/">node validators</strong></a> to do so. They won&rsquo;t do it for free, though, and will charge you a fee. Admittedly, the just-mentioned concepts are rather complex - if you&rsquo;re not familiar with them, check out other sections on the Crypto 101 Handbook to find information about these and similar topics!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Crypto fees: Crypto gas fees VS transaction fees.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto_fees_01.o.jpg/" alt=\"Crypto fees: Crypto gas fees VS transaction fees.\" width=\"1000\" height=\"736\" /></p>\n<p>The next popular type of crypto fees is called <strong>&ldquo;transaction fees&rdquo;, or &ldquo;trading fees&rdquo;. </strong>This is the fee that you will pay to, say, a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-exchange/">cryptocurrency exchange</strong></a>, in order for it to execute your trade, or to perform a cryptocurrency purchase with USD, EUR, or any other <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-fiat/">fiat currency</strong></a>.</p>\n<p>Notably,<strong> transaction or trading fees are only paid when you actually make a cryptocurrency purchase or trade</strong>, on a specific exchange platform that specializes in this field. So, for example, if you only want to send some cryptocurrency to your friend, from your wallet to theirs, in most cases, the only fees that you&rsquo;ll need to pay are the earlier-discussed gas, or blockchain, fees.</p>\n<p>While you will find very different numbers being thrown around, depending on where you look, <strong>the general industry-average trading fee is considered to be 0,25% for both crypto buyers and sellers</strong> (or, rather - market makers and takers). Although, keep in mind that market takers (the ones who interact with an order created by the market makers) usually have to deal with higher fees!</p>\n<p>Now, we got really technical there for a second<em>. </em>This is some advanced-level economics, mixed with cryptocurrency terminology - it&rsquo;s not that simple to wrap your head around, I admit! Again, though - if certain concepts that we&rsquo;ve discussed up to this point sound foreign to you, make sure to check out other sections in this Crypto 101 Handbook!</p>\n<p>Another form of fees that you also need to know about are <strong>loan fees.</strong> Here, the concept is pretty simple - if you&rsquo;re a lender, you will likely charge the borrower a fee, for them borrowing your cryptocurrency assets. Unlike with trading, however, <strong>loan fees don&rsquo;t really have an intricate system that would determine the fee that you&rsquo;d pay</strong>, before you even borrow the assets.</p>\n<p>In fact, loan fees can vary, quite a bit. And that makes sense, too! If you were to lend your friend your car for the weekend, you might ask them to fill up the tank, once they&rsquo;re done - however, if you would be asked to lend that same car, to a stranger, and for, say, an entire month, a filled tank probably wouldn&rsquo;t suffice - you&rsquo;d likely ask for some form of compensation, too!</p>\n<p>In any case, lending (or, rather - borrowing) fees are unavoidable, if you plan to borrow crypto, for some reason. Make sure to look into the numbers on different lending platforms, however, and try to find the best deals!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Crypto fees: Loan fees VS deposit/withdrawal fees.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto_fees_02.o.jpg/" alt=\"Crypto fees: Loan fees VS deposit/withdrawal fees.\" width=\"1000\" height=\"745\" /></p>\n<p>The last form of fees that we need to talk about is the <strong>deposit and withdrawal fees.</strong> As the terms might suggest, these fees are paid when you deposit or withdraw cryptocurrencies to and from an exchange. That&rsquo;s a notable point to keep in mind, too - <strong>deposit and withdrawal fees only exist with cryptocurrency exchanges!</strong> <em>Well, in most cases, at least.</em></p>\n<p>Once again, you can view this from the perspective of the example I gave earlier. Let&rsquo;s say that you&rsquo;ve filled up your car&rsquo;s gas tank, and are ready to travel to your friend&rsquo;s house. As you go there, you need to drive through a few different roads - while most of them are free to travel through, a few have tools that need to be paid, in order for you to be able to drive on them, and not get a ticket.</p>\n<p>This example illustrates the point I&rsquo;ve made earlier - <strong>while some services will allow you to withdraw and deposit cryptocurrencies free of charge, others will have fees that you need to pay.</strong></p>\n<h2>Solving the Mystery of Gas Fees</h2>\n<p>Now that you know about the main types of fees that you&rsquo;ll encounter while dealing with cryptocurrencies, I&rsquo;d like to go back to the concept that usually causes beginners the most amount of confusion - crypto gas fees.</p>\n<p>Specifically, how do you know what the gas - or network - fees are going to be when you decide to send cryptocurrency to someone else? Is there a specific number, or does it depend on some factors?</p>\n<p>Well, let me tell you - it&rsquo;s all much simpler than it looks, when you hear about it for the first time!</p>\n<p>For starters, no - <strong>there is no single number that would be associated with gas fees</strong>. Each network has its own fee model, and on top of that, there&rsquo;s a myriad of variables that can impact those crypto gas fees, even more.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Crypto fees: Ethereum.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto_fees_03.o.jpg/" alt=\"Crypto fees: Ethereum.\" width=\"1000\" height=\"465\" /></p>\n<p>The simplest example can be found by taking a look at <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum. It&rsquo;s the second-most-popular cryptocurrency in the world, so, as you can expect, there are a lot of transactions happening on the network, every single second. If you&rsquo;ve ever bought ETH, or have sent it to your friend, you&rsquo;ve participated in a transaction like that, too!</p>\n<p>Sometimes, there are so many transactions happening on the Ethereum network, that a queue starts to form. <strong>One way to make sure that your transaction isn&rsquo;t stuck in that queue for too long is to pay a higher gas fee </strong>- then, transaction validators will have a bigger incentive to confirm your transaction first, since they will receive a bigger reward for doing so!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Crypto fees: Paying a higher gas fee.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto_fees_04.o.jpg/" alt=\"Crypto fees: Paying a higher gas fee.\" width=\"1000\" height=\"486\" /></p>\n<p>Cryptocurrency miners, transaction validators, and nodes are all a different topic that has to do with some advanced and technical transaction confirmation details - in other words, it requires a much deeper explanation in a separate section. Going back to crypto gas fees, the point I&rsquo;m trying to make is simple - <strong>gas fees are not stable, and will depend on various factors.</strong></p>\n<h2>Crypto Without Transaction Fees</h2>\n<p>Moving on, the final question that I&rsquo;d like to address has to do with <strong>cryptos with no transaction fees.</strong> Specifically, do such cryptocurrencies even exist, in the first place?</p>\n<p><em>Well&hellip; Kind of.</em></p>\n<p><em><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"Crypto fees: Crypto without transaction fees.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/crypto_fees_05.o.jpg/" alt=\"Crypto fees: Crypto without transaction fees.\" width=\"1000\" height=\"453\" /></em></p>\n<p>As far as I could find, cryptocurrencies with ZERO transaction fees don&rsquo;t really exist, with some exceptions (such as <strong>the NANO coin</strong>). However, there are many cryptos that offer the lowest transaction fees - so, you could say that there are PRACTICALLY no fees.</p>\n<p>A great example would be <strong>IOTA.</strong> This cryptocurrency has very low transaction fees - you could go as far as to say that they&rsquo;re negligible. Another very popular coin is <strong>Cardano</strong> - while the fees on this network are bigger, by comparison, they are still nearly non-existent.</p>\n<p>If you yourself are looking to trade crypto without fees, it&rsquo;s definitely a topic that requires a lot of research and know-how, as far as the market is concerned. There are new cryptocurrency projects popping up every single day - some of them do, for a fact, emphasize their <em>&ldquo;small transaction fee&rdquo;</em> benefits!</p>\n<p>Also, if you&rsquo;re looking for which crypto has the lowest transaction fees in order to save money on the fees that you&rsquo;d pay while trading or sending it, remember that there are other factors involved in the process, too! For example, you would then also need to look for a cryptocurrency exchange platform that has small trading fees, as well as try to time your trades when the network isn&rsquo;t majorly congested!</p>\n<h2>Wrapping Up</h2>\n<p>So, then - by now, you should have developed a pretty good understanding of cryptocurrency fees! This is true both when it comes to the types of fees that you may encounter, as well as what you can do to minimize and lower the amount of fees that you pay, for your transactions.</p>\n<p>Remember - if you want to pay as small of a transaction fee as possible, you need to find <strong>cryptocurrencies with nearly-zero fees, and trade (or buy, sell, transfer) crypto when there aren&rsquo;t a lot of people doing the same thing, </strong>at the same time.</p>","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-fees","youtube_video":{"id":93,"channel_id":1,"sort":31,"video_title":"Crypto Fees Explained: How Not to Overpay? (Animated)","description":"What are Gas fees and any other crypto fees? Here is my explainer with all crypto fees clearly explained with animation!\n\nCrypto fees are going to be a relevant topic, no matter what you do in the space. Every single time you trade crypto, send some coins or tokens to your friends, or purchase an NFT, you pay a few different fees. Tracking all of them can get quite confusing, fast! \n\nIn this video, I’ll tell you all about the different types of crypto fees that you might come across, when interacting with cryptocurrencies. I will also introduce and explain what are crypto gas fees, as well as give you some tips on how you can find cryptos with the lowest transaction fees, too!\n\nDo you have any tips on how to minimize crypto trading fees? If so, do share them in the comment section below the video!\n\nVideo Time Table:\n\n0:00 Introduction to What Are Crypto Fees\n1:03 The Different Types of Crypto Fees\n4:59 Gas Fees Explained\n6:27 Crypto Without Transaction Fees\n7:42 Wrap-up: What Are Crypto Fees\n\nMore Related Videos:\n? Blockchain Transaction Explained https://www.youtube.com/watch?v=h1zkHIBFiS4\n? Best Types of Blockchain https://www.youtube.com/watch?v=h1zkHIBFiS4\n? How to Get Free Crypto? https://www.youtube.com/watch?v=aNjehGx3WqM\n? How to Avoid Crypto Taxes? https://www.youtube.com/watch?v=ERzU_Xz_P-o\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#CryptoFees #CryptoGasFees #GasFeesCrypto","video_id":"c1NItwMjjAs","duration":505,"view_count":331,"thumbnail_url":"https://i.ytimg.com/vi/c1NItwMjjAs/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-07-20 19:20:21","created_at":"2022-07-20T23:00:02.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}}},"chapterTitle":"Blockchain","cryptoBookSection":{"id":32,"featured_image_id":7662,"original_id":null,"youtube_video_id":105,"author_id":42,"translator_id":null,"chapter_id":1,"title":"The Key Notion Behind the Concept of Bridging in Crypto","slug":"what-is-bridging-in-crypto","definition":"Did you know that a blockchain bridge can be perceived by its literal meaning since it links two different blockchains?","status":"published","content":"<p>In this section, I&rsquo;m going to tell you what is bridging in crypto!</p>\n<p>Imagine that you&rsquo;ve decided to visit a friend, who lives in a different city. It&rsquo;s a pretty long drive, so you pack up your things, and hit the road. Approaching the city where your friend&rsquo;s house is located, you notice that there&rsquo;s a river that needs to be crossed.</p>\n<p>Since you&rsquo;re driving a simple car, and not a futuristic car-boat, you can&rsquo;t just swim over the river! However, luckily, you notice that there&rsquo;s a bridge - you can use it to cross over, and meet your friend on the other side. <strong>From a somewhat philosophical point of view, this is how blockchain bridges work, too!</strong></p>\n<p>In this section, we&rsquo;re going to answer the question - what is bridging in crypto? Specifically, I&rsquo;m going to tell you about the problem that many blockchains face, what is crypto bridging &amp; how it can help eliminate that problem, and we&rsquo;ll also talk about the best blockchain bridges and how to spot them, too!</p>\n<p><em>Now, let&rsquo;s get to it!</em></p>\n<h2>The Communication Problem of Blockchains</h2>\n<p>So, for starters, allow me to elaborate on the example I gave in the introduction, as we move on to discuss what are blockchain bridges, and how do they work.</p>\n<p>In the example, both you and your friend represent two different blockchain networks. For the sake of this example, let&rsquo;s say, <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin and <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum. As you might be aware, both of these blockchains are very different from one another!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is bridging in crypto: The communication problem of blockchains.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_crypto_bridging_01-62ea3457bd369.o.png/" alt=\"What is bridging in crypto: The communication problem of blockchains.\" width=\"1000\" height=\"543\" /></p>\n<p><strong>Ethereum</strong> is this super-smart global computer that allows its users to create and participate in <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-smart-contract/">smart contracts</strong></a>, <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-defi/">decentralized finance (or, DeFi)</strong></a>, and a variety of other revolutionary activities. On the flip side, <strong>Bitcoin</strong> is usually seen as the &ldquo;dumb&rdquo; blockchain - essentially, it has no &ldquo;smart&rdquo; functionality, and is mostly only used as a store of value.</p>\n<p>Note that, if some of the terms I&rsquo;ve mentioned earlier aren&rsquo;t familiar to you, do make sure to check out other sections in the Crypto 101 Handbook - you'll find dedicated sections on all of those topics! Moving on, though, you might ask - <em>so, where&rsquo;s the problem?</em></p>\n<p>Well, what if you want to, say, participate in some sort of a cool, new <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-are-decentralized-applications-dapps/">dApp on Ethereum, but you&rsquo;re only holding Bitcoin? <strong>This is where blockchain bridges come in to save the day!</strong></p>\n<p>You see, this is kind of the biggest problem that all blockchain networks face, in general - they have a pretty difficult time communicating with one another! Since many of these protocols are built using very different technology, they aren&rsquo;t able to connect with each other - it&rsquo;s like trying to install an Xbox game on your personal computer!</p>\n<h2>What is a Blockchain Bridge, and Where is it Used?</h2>\n<p>Moving on, in order to help different blockchain networks connect and &ldquo;communicate&rdquo; with one another, you need bridges. To answer the question of what is bridging in crypto simply, you can think of these bridges as<strong> special connections that allow two completely different blockchains to share data, coins &amp; tokens, and various other information.</strong></p>\n<p><strong><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is bridging in crypto: Coin VS Token.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_crypto_bridging_02-62ea345b00706.o.png/" alt=\"What is bridging in crypto: A blockchain bridge.\" width=\"1000\" height=\"726\" /></strong></p>\n<p>Notice how I mention &ldquo;coins &amp; tokens&rdquo; - this part is very important! If you&rsquo;d like an in-depth explanation of what are the differences between crypto coins and tokens, <a href=https://www.bitdegree.org/"/crypto/learn/coin-vs-token/">check out this section</strong></a> - for now, though, just know that <strong>crypto coins have their own blockchains, while cryptocurrency tokens are built on the blockchains of other coins.</strong></p>\n<p><em>Feeling confused? </em>Well, look - let&rsquo;s illustrate that with an example.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is bridging in crypto: Ethereum VS BNB.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_crypto_bridging_03-62eb65a09adde.o.png/" alt=\"What is bridging in crypto: Ethereum VS BNB.\" width=\"1000\" height=\"363\" /></p>\n<p>Once again, let&rsquo;s look at Ethereum - this is a blockchain that has a native coin of its own, by the same name. However, Ethereum is also home to a huge variety of different tokens, too - the Shiba Inu token, Bancor, the Basic Attention Token, and so on.</p>\n<p>Then, you have another network, such as the <strong>Binance Smart Chain.</strong> The native coin of this blockchain is BNB. Binance Smart Chain also has a variety of tokens built on it, too.</p>\n<p>Where do blockchain bridges come in? Well, think about it this way - what would happen if you wanted to use your Ethereum coins or tokens on the Binance Smart Chain? Traditionally, you couldn&rsquo;t &nbsp;- these are two completely different networks! <strong>However, crypto bridging allows you to do just that!</strong></p>\n<p>Up until this point, we&rsquo;ve talked about some pretty vague examples of blockchain bridging. Let&rsquo;s change that - allow me to give you a very specific example of what is bridging in crypto, and how you can use it, too!</p>\n<p>Imagine that you&rsquo;ve found an awesome yield-earning platform. The premise behind it is very simple - <strong>you put in some cryptocurrency that you hold, and then earn a passive interest over time.</strong> This platform supports a wide list of cryptocurrencies, so you start browsing and looking for the best numbers.</p>\n<p>During your research, you notice something interesting - if you were to deposit your ETH coins into it, you would earn a 1% annual yield. However, if you would instead deposit ETH coins that are based on the Binance Smart Chain, that percentage would double!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is bridging in crypto: ETH coins VS BSC-based ETH coins.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_crypto_bridging_04-62ea3364626cf.o.png/" alt=\"What is bridging in crypto: ETH coins VS BSC-based ETH coins.\" width=\"981\" height=\"224\" /></p>\n<p>So, all that you need to do now is find a blockchain bridge, exchange your ETH coin to Binance Smart Chain Ethereum, and start earning a passive yield!</p>\n<p>An alternative example that you could think about would have to do with cryptocurrency <strong>lending</strong> <strong>and</strong> <strong>borrowing.</strong> This can be done in two types of platforms - centralized institutions, and some anonymity-preserving, decentralized applications. In most cases, however, crypto lending and borrowing are considered to be a form of DeFi, or decentralized finance.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is bridging in crypto: Bitcoin bridging.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_crypto_bridging_05-62ea3459711ee.o.png/" alt=\"What is bridging in crypto: Bitcoin bridging.\" width=\"1000\" height=\"257\" /></p>\n<p>Most modern blockchain networks are advanced enough to allow their coin or token holders to participate in lending and borrowing. Older blockchains <em>(such as Bitcoin and Dogecoin)</em>, however, do not - <strong>in order to borrow or lend them out, you would need to bridge these assets</strong> on special applications that would allow you to do so, and that are based on other, &ldquo;smarter&rdquo; networks. <em>Makes sense?</em></p>\n<h2>Best Blockchain Bridges</h2>\n<p>Now, I admit - this is a pretty complex topic to tackle! That being said, though, now that you know what is bridging in crypto, and where these bridges are used, in the first place, there&rsquo;s one more thing that I&rsquo;d like to discuss - <strong>the best blockchain bridges, and how to find them!</strong></p>\n<p>First things first - this won&rsquo;t be a list of blockchain bridges for you to check out. Instead, I&rsquo;d like to tell you about<strong> the types of bridges that you might come across</strong>, and what to look for with each of those types, as well.</p>\n<p>So, to start things off, you should note that there are two major types of blockchain bridges - <strong>centralized, and decentralized ones.</strong> They are both very preference-based, and will thus suit different people, too. However, if you&rsquo;re just starting out, I&rsquo;d recommend you go with the centralized bridges - these are much simpler to use and get into, in general.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is bridging in crypto: Best blockchain bridges.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_crypto_bridging_06-62ea34556ceb6.o.png/" alt=\"What is bridging in crypto: Best blockchain bridges.\" width=\"1000\" height=\"555\" /></p>\n<p>Essentially, some of the most popular centralized crypto bridges are those that are located on trusted and well-known crypto exchanges. These bridges work with the help of exchange-based <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-liquidity-pool/">liquidity pools</strong></a>. Now, it&rsquo;s a huge topic, in of its own, so if you&rsquo;re not familiar with it, I highly recommend reading <a href=https://www.bitdegree.org/"/crypto/learn/what-is-liquidity-pool-in-crypto/">a section about liquidity pools</strong></a>.</p>\n<p><strong>Put simply, though, the exchange houses two different pools - say, that of Bitcoin, and Ethereum-equivalent of BTC coins.</strong> When you visit the centralized exchange, and deposit your Bitcoin into it, you will receive an equivalent amount of Ethereum-based BTC. Your original BTC coins are locked up in the first pool - you can exchange your newly-acquired ETH-Bitcoins for your original coins at any point in time!</p>\n<p>The process looks pretty complex, when you put it that way, but swapping your crypto like this is actually pretty simple - many centralized institutions have special interfaces that allow you to do so in a clear and beginner-friendly manner.</p>\n<p>Now, if you decide to use the best centralized blockchain bridges, just keep in mind that <strong>you will need to really trust the platform that you&rsquo;ve chosen! </strong>I mean, think about it this way - it&rsquo;s like you meeting a stranger, and them telling you: <em>&ldquo;Hey, if you give me your money, I promise that I won&rsquo;t steal it from you, and that it won&rsquo;t magically disappear one day!&rdquo;.</em></p>\n<p>Well, I do admit that this is a bit of an exaggeration, but the general idea remains the same - <strong>you should use only the most-trustworthy cross-chain bridges!</strong></p>\n<p>The second type of crypto bridges that you can encounter are decentralized ones. These bridging options are quite a bit more complex than their centralized counterparts, and they do come with their own benefits and drawbacks, too.</p>\n<p><strong>Decentralized bridges work with the help of smart contracts. </strong>Once you deposit your cryptocurrency into a smart contract, it gets locked up, and you are automatically paid out the equivalent crypto, immediately. Since your original coins get locked up in the contract, there are no new cryptos coming into the market, and thus, there aren&rsquo;t any complex inflationary problems being caused, either.</p>\n<p>Decentralized cross-chain bridges are wonderful for anyone who wants to remain <strong>anonymous</strong> in their crypto swapping ventures. However, this comes with the drawback of these bridges often being <strong>less-secure than centralized ones. </strong>So, if you&rsquo;re adamant about using a smart contract-powered crypto bridging solution, you should take the time and do some thorough research!</p>\n<p>That concludes our discussion of what bridging in crypto is. As you&rsquo;ve probably gathered by now, bridging is a very important part of the cryptocurrency world! It is thus equally important that you educate yourself on the topic.</p>","meta_title":"What is Bridging in Crypto and Why is It Useful?","meta_description":"Can't find a decent explanation about what is bridging in crypto? You're in luck because you'll find everything you need to know right here!","meta_keywords":"what is bridging in crypto, blockchain bridges, list of blockchain bridges, what are blockchain bridges, how do blockchain bridges work, best blockchain bridges","order":5,"language":"en","created_at":"2022-08-01T12:03:24.000000Z","updated_at":"2023-05-04T10:25:24.000000Z","modified_content":"<p>In this section, I&rsquo;m going to tell you what is bridging in crypto!</p>\n<p>Imagine that you&rsquo;ve decided to visit a friend, who lives in a different city. It&rsquo;s a pretty long drive, so you pack up your things, and hit the road. Approaching the city where your friend&rsquo;s house is located, you notice that there&rsquo;s a river that needs to be crossed.</p>\n<p>Since you&rsquo;re driving a simple car, and not a futuristic car-boat, you can&rsquo;t just swim over the river! However, luckily, you notice that there&rsquo;s a bridge - you can use it to cross over, and meet your friend on the other side. <strong>From a somewhat philosophical point of view, this is how blockchain bridges work, too!</strong></p>\n<p>In this section, we&rsquo;re going to answer the question - what is bridging in crypto? Specifically, I&rsquo;m going to tell you about the problem that many blockchains face, what is crypto bridging &amp; how it can help eliminate that problem, and we&rsquo;ll also talk about the best blockchain bridges and how to spot them, too!</p>\n<p><em>Now, let&rsquo;s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"What is a Crypto Bridge? (Explained with Animations)\"\n title=\"What is a Crypto Bridge? (Explained with Animations)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: The Key Notion Behind the Concept of Bridging in Crypto</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"The Key Notion Behind the Concept of Bridging in Crypto\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"T4yAxcluIho\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">What is a Crypto Bridge? (Explained with Animations)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/T4yAxcluIho/hq720.jpg/"/n alt=\"What is a Crypto Bridge? (Explained with Animations)\"\n title=\"What is a Crypto Bridge? (Explained with Animations)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"What is a Crypto Bridge? (Explained with Animations)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"T4yAxcluIho\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>The Communication Problem of Blockchains</h2>\n<p>So, for starters, allow me to elaborate on the example I gave in the introduction, as we move on to discuss what are blockchain bridges, and how do they work.</p>\n<p>In the example, both you and your friend represent two different blockchain networks. For the sake of this example, let&rsquo;s say, <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin and <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum. As you might be aware, both of these blockchains are very different from one another!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is bridging in crypto: The communication problem of blockchains.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_crypto_bridging_01-62ea3457bd369.o.png/" alt=\"What is bridging in crypto: The communication problem of blockchains.\" width=\"1000\" height=\"543\" /></p>\n<p><strong>Ethereum</strong> is this super-smart global computer that allows its users to create and participate in <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-smart-contract/">smart contracts</strong></a>, <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-defi/">decentralized finance (or, DeFi)</strong></a>, and a variety of other revolutionary activities. On the flip side, <strong>Bitcoin</strong> is usually seen as the &ldquo;dumb&rdquo; blockchain - essentially, it has no &ldquo;smart&rdquo; functionality, and is mostly only used as a store of value.</p>\n<p>Note that, if some of the terms I&rsquo;ve mentioned earlier aren&rsquo;t familiar to you, do make sure to check out other sections in the Crypto 101 Handbook - you'll find dedicated sections on all of those topics! Moving on, though, you might ask - <em>so, where&rsquo;s the problem?</em></p>\n<p>Well, what if you want to, say, participate in some sort of a cool, new <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-are-decentralized-applications-dapps/">dApp on Ethereum, but you&rsquo;re only holding Bitcoin? <strong>This is where blockchain bridges come in to save the day!</strong></p>\n<p>You see, this is kind of the biggest problem that all blockchain networks face, in general - they have a pretty difficult time communicating with one another! Since many of these protocols are built using very different technology, they aren&rsquo;t able to connect with each other - it&rsquo;s like trying to install an Xbox game on your personal computer!</p>\n<h2>What is a Blockchain Bridge, and Where is it Used?</h2>\n<p>Moving on, in order to help different blockchain networks connect and &ldquo;communicate&rdquo; with one another, you need bridges. To answer the question of what is bridging in crypto simply, you can think of these bridges as<strong> special connections that allow two completely different blockchains to share data, coins &amp; tokens, and various other information.</strong></p>\n<p><strong><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is bridging in crypto: Coin VS Token.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_crypto_bridging_02-62ea345b00706.o.png/" alt=\"What is bridging in crypto: A blockchain bridge.\" width=\"1000\" height=\"726\" /></strong></p>\n<p>Notice how I mention &ldquo;coins &amp; tokens&rdquo; - this part is very important! If you&rsquo;d like an in-depth explanation of what are the differences between crypto coins and tokens, <a href=https://www.bitdegree.org/"/crypto/learn/coin-vs-token/">check out this section</strong></a> - for now, though, just know that <strong>crypto coins have their own blockchains, while cryptocurrency tokens are built on the blockchains of other coins.</strong></p>\n<p><em>Feeling confused? </em>Well, look - let&rsquo;s illustrate that with an example.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is bridging in crypto: Ethereum VS BNB.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_crypto_bridging_03-62eb65a09adde.o.png/" alt=\"What is bridging in crypto: Ethereum VS BNB.\" width=\"1000\" height=\"363\" /></p>\n<p>Once again, let&rsquo;s look at Ethereum - this is a blockchain that has a native coin of its own, by the same name. However, Ethereum is also home to a huge variety of different tokens, too - the Shiba Inu token, Bancor, the Basic Attention Token, and so on.</p>\n<p>Then, you have another network, such as the <strong>Binance Smart Chain.</strong> The native coin of this blockchain is BNB. Binance Smart Chain also has a variety of tokens built on it, too.</p>\n<p>Where do blockchain bridges come in? Well, think about it this way - what would happen if you wanted to use your Ethereum coins or tokens on the Binance Smart Chain? Traditionally, you couldn&rsquo;t &nbsp;- these are two completely different networks! <strong>However, crypto bridging allows you to do just that!</strong></p>\n<p>Up until this point, we&rsquo;ve talked about some pretty vague examples of blockchain bridging. Let&rsquo;s change that - allow me to give you a very specific example of what is bridging in crypto, and how you can use it, too!</p>\n<p>Imagine that you&rsquo;ve found an awesome yield-earning platform. The premise behind it is very simple - <strong>you put in some cryptocurrency that you hold, and then earn a passive interest over time.</strong> This platform supports a wide list of cryptocurrencies, so you start browsing and looking for the best numbers.</p>\n<p>During your research, you notice something interesting - if you were to deposit your ETH coins into it, you would earn a 1% annual yield. However, if you would instead deposit ETH coins that are based on the Binance Smart Chain, that percentage would double!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is bridging in crypto: ETH coins VS BSC-based ETH coins.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_crypto_bridging_04-62ea3364626cf.o.png/" alt=\"What is bridging in crypto: ETH coins VS BSC-based ETH coins.\" width=\"981\" height=\"224\" /></p>\n<p>So, all that you need to do now is find a blockchain bridge, exchange your ETH coin to Binance Smart Chain Ethereum, and start earning a passive yield!</p>\n<p>An alternative example that you could think about would have to do with cryptocurrency <strong>lending</strong> <strong>and</strong> <strong>borrowing.</strong> This can be done in two types of platforms - centralized institutions, and some anonymity-preserving, decentralized applications. In most cases, however, crypto lending and borrowing are considered to be a form of DeFi, or decentralized finance.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is bridging in crypto: Bitcoin bridging.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_crypto_bridging_05-62ea3459711ee.o.png/" alt=\"What is bridging in crypto: Bitcoin bridging.\" width=\"1000\" height=\"257\" /></p>\n<p>Most modern blockchain networks are advanced enough to allow their coin or token holders to participate in lending and borrowing. Older blockchains <em>(such as Bitcoin and Dogecoin)</em>, however, do not - <strong>in order to borrow or lend them out, you would need to bridge these assets</strong> on special applications that would allow you to do so, and that are based on other, &ldquo;smarter&rdquo; networks. <em>Makes sense?</em></p>\n<h2>Best Blockchain Bridges</h2>\n<p>Now, I admit - this is a pretty complex topic to tackle! That being said, though, now that you know what is bridging in crypto, and where these bridges are used, in the first place, there&rsquo;s one more thing that I&rsquo;d like to discuss - <strong>the best blockchain bridges, and how to find them!</strong></p>\n<p>First things first - this won&rsquo;t be a list of blockchain bridges for you to check out. Instead, I&rsquo;d like to tell you about<strong> the types of bridges that you might come across</strong>, and what to look for with each of those types, as well.</p>\n<p>So, to start things off, you should note that there are two major types of blockchain bridges - <strong>centralized, and decentralized ones.</strong> They are both very preference-based, and will thus suit different people, too. However, if you&rsquo;re just starting out, I&rsquo;d recommend you go with the centralized bridges - these are much simpler to use and get into, in general.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is bridging in crypto: Best blockchain bridges.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what_is_crypto_bridging_06-62ea34556ceb6.o.png/" alt=\"What is bridging in crypto: Best blockchain bridges.\" width=\"1000\" height=\"555\" /></p>\n<p>Essentially, some of the most popular centralized crypto bridges are those that are located on trusted and well-known crypto exchanges. These bridges work with the help of exchange-based <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-liquidity-pool/">liquidity pools</strong></a>. Now, it&rsquo;s a huge topic, in of its own, so if you&rsquo;re not familiar with it, I highly recommend reading <a href=https://www.bitdegree.org/"/crypto/learn/what-is-liquidity-pool-in-crypto/">a section about liquidity pools</strong></a>.</p>\n<p><strong>Put simply, though, the exchange houses two different pools - say, that of Bitcoin, and Ethereum-equivalent of BTC coins.</strong> When you visit the centralized exchange, and deposit your Bitcoin into it, you will receive an equivalent amount of Ethereum-based BTC. Your original BTC coins are locked up in the first pool - you can exchange your newly-acquired ETH-Bitcoins for your original coins at any point in time!</p>\n<p>The process looks pretty complex, when you put it that way, but swapping your crypto like this is actually pretty simple - many centralized institutions have special interfaces that allow you to do so in a clear and beginner-friendly manner.</p>\n<p>Now, if you decide to use the best centralized blockchain bridges, just keep in mind that <strong>you will need to really trust the platform that you&rsquo;ve chosen! </strong>I mean, think about it this way - it&rsquo;s like you meeting a stranger, and them telling you: <em>&ldquo;Hey, if you give me your money, I promise that I won&rsquo;t steal it from you, and that it won&rsquo;t magically disappear one day!&rdquo;.</em></p>\n<p>Well, I do admit that this is a bit of an exaggeration, but the general idea remains the same - <strong>you should use only the most-trustworthy cross-chain bridges!</strong></p>\n<p>The second type of crypto bridges that you can encounter are decentralized ones. These bridging options are quite a bit more complex than their centralized counterparts, and they do come with their own benefits and drawbacks, too.</p>\n<p><strong>Decentralized bridges work with the help of smart contracts. </strong>Once you deposit your cryptocurrency into a smart contract, it gets locked up, and you are automatically paid out the equivalent crypto, immediately. Since your original coins get locked up in the contract, there are no new cryptos coming into the market, and thus, there aren&rsquo;t any complex inflationary problems being caused, either.</p>\n<p>Decentralized cross-chain bridges are wonderful for anyone who wants to remain <strong>anonymous</strong> in their crypto swapping ventures. However, this comes with the drawback of these bridges often being <strong>less-secure than centralized ones. </strong>So, if you&rsquo;re adamant about using a smart contract-powered crypto bridging solution, you should take the time and do some thorough research!</p>\n<p>That concludes our discussion of what bridging in crypto is. As you&rsquo;ve probably gathered by now, bridging is a very important part of the cryptocurrency world! It is thus equally important that you educate yourself on the topic.</p>","preview_url":"https://www.bitdegree.org/crypto/learn/what-is-bridging-in-crypto","youtube_video":{"id":105,"channel_id":1,"sort":29,"video_title":"What is a Crypto Bridge? (Explained with Animations)","description":"What is a crypto bridge?\n\nCryptocurrency bridges are some of the most important elements of the crypto world. However, they are also a complex topic that not many people are truly familiar with! Truth be told, you might have even used a cross-chain bridge before, without even knowing it! \n\nIn this video, I’ll tell you all about what is bridging in crypto. Furthermore, I will reveal the biggest problem that all cryptocurrencies face, and will also explain how crypto bridges help solve that problem, in general. We will also look into the best blockchain bridges, and how to find them.\n\nHave you ever used a blockchain bridge before? Share your experiences, in the comment section below!\n\nVideo Time Table:\n\n0:00 Introduction to What is a Crypto Bridge\n0:59 How do the Crypto Bridges Work?\n3:38 Example of Bridging in Crypto\n5:10 Best Blockchain Bridges\n7:57 Wrap-up: What is a Crypto Bridge? \n\n? Best Types of Blockchains Explained\nhttps://www.youtube.com/watch?v=sCp9U3vr9RI\n? Blockchain Transaction Easily Explained\nhttps://www.youtube.com/watch?v=h1zkHIBFiS4\n? What is a Smart Contract?\nhttps://www.youtube.com/watch?v=0VCMtKx9AxU\n? What is DeFi in Crypto?\nhttps://www.youtube.com/watch?v=GVeoES3lKfQ\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#WhatisaCryptoBridge #HowtoBridgeCrypto #WhatDoesitMeantoBridgeinCrypto","video_id":"T4yAxcluIho","duration":510,"view_count":498,"thumbnail_url":"https://i.ytimg.com/vi/T4yAxcluIho/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-08-04 14:33:11","created_at":"2022-08-04T23:00:02.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}},"featured_image":{"id":7662,"uuid":"67564127-d9df-451e-8767-c28930039dc8","public_url":"https://assets.bitdegree.org/crypto/storage/media/what-is-crypto-bridging-featured-image.o.jpg","path":"crypto/storage/media/what-is-crypto-bridging-featured-image.o.jpg","original_path":"crypto/storage/media/what-is-crypto-bridging-featured-image.jpg","name":"what-is-crypto-bridging-featured-image.o.jpg","original_name":"what-is-crypto-bridging-featured-image.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"106.21KB"}},"chapterList":[{"id":1,"title":"Blockchain","slug":"blockchain","updated":null,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/learn-blockchain.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/blockchain-101.jpg","rating":100,"sections":[{"slug":"what-is-blockchain","title":"What is the Blockchain?","featured_image_id":6412,"status":"published","chapter_id":1,"language":"en","order":1,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/what-is-blockchain","featured_image":{"id":6412,"uuid":"152ba579-ce8d-488a-9e06-bcd99e976b7d","public_url":"https://assets.bitdegree.org/crypto/storage/media/what-is-blockchain-626fbe085a0cd.o.jpg","path":"crypto/storage/media/what-is-blockchain-626fbe085a0cd.o.jpg","original_path":"crypto/storage/media/what-is-blockchain-626fbe085a0cd.jpg","name":"what-is-blockchain-626fbe085a0cd.o.jpg","original_name":"what-is-blockchain.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"93.86KB"},"youtube_video":null},{"slug":"decentralized-blockchain","title":"Anonymous & Decentralized Blockchains: The Cornerstone of Crypto","featured_image_id":7205,"status":"published","chapter_id":1,"language":"en","order":2,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/decentralized-blockchain","featured_image":{"id":7205,"uuid":"c5d6f6a7-4914-4d6b-9fdd-e94dfb0bae82","public_url":"https://assets.bitdegree.org/crypto/storage/media/decentralized-blockchain-featured-image.o.jpg","path":"crypto/storage/media/decentralized-blockchain-featured-image.o.jpg","original_path":"crypto/storage/media/decentralized-blockchain-featured-image.jpg","name":"decentralized-blockchain-featured-image.o.jpg","original_name":"decentralized-blockchain-featured-image.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"136.00KB"},"youtube_video":null},{"slug":"blockchain-transaction","title":"What is a Blockchain Transaction in Crypto?","featured_image_id":7397,"status":"published","chapter_id":1,"language":"en","order":3,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/blockchain-transaction","featured_image":{"id":7397,"uuid":"e60dff45-4c5d-4b44-a2c1-a27e49f700e7","public_url":"https://assets.bitdegree.org/crypto/storage/media/blockchain-transaction-featured-mage.o.jpg","path":"crypto/storage/media/blockchain-transaction-featured-mage.o.jpg","original_path":"crypto/storage/media/blockchain-transaction-featured-mage.jpg","name":"blockchain-transaction-featured-mage.o.jpg","original_name":"blockchain-transaction-featured-mage.jpg","title":null,"alt":null,"width":768,"height":478,"disk":"spaces","status":"uploaded","readable_file_size":"85.83KB"},"youtube_video":null},{"slug":"crypto-fees","title":"The Different Types of Crypto Fees 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Chapter 1: Blockchain

The Key Notion Behind the Concept of Bridging in Crypto

Did you know that a blockchain bridge can be perceived by its literal meaning since it links two different blockchains?
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In this section, I’m going to tell you what is bridging in crypto!

Imagine that you’ve decided to visit a friend, who lives in a different city. It’s a pretty long drive, so you pack up your things, and hit the road. Approaching the city where your friend’s house is located, you notice that there’s a river that needs to be crossed.

Since you’re driving a simple car, and not a futuristic car-boat, you can’t just swim over the river! However, luckily, you notice that there’s a bridge - you can use it to cross over, and meet your friend on the other side. From a somewhat philosophical point of view, this is how blockchain bridges work, too!

In this section, we’re going to answer the question - what is bridging in crypto? Specifically, I’m going to tell you about the problem that many blockchains face, what is crypto bridging & how it can help eliminate that problem, and we’ll also talk about the best blockchain bridges and how to spot them, too!

Now, let’s get to it!

What is a Crypto Bridge? (Explained with Animations)

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Video Explainer: The Key Notion Behind the Concept of Bridging in Crypto

Reading is not your thing? Watch the "The Key Notion Behind the Concept of Bridging in Crypto" video explainer

What is a Crypto Bridge? (Explained with Animations)

What is a Crypto Bridge? (Explained with Animations) What is a Crypto Bridge? (Explained with Animations)

The Communication Problem of Blockchains

So, for starters, allow me to elaborate on the example I gave in the introduction, as we move on to discuss what are blockchain bridges, and how do they work.

In the example, both you and your friend represent two different blockchain networks. For the sake of this example, let’s say, Bitcoin and Ethereum. As you might be aware, both of these blockchains are very different from one another!

What is bridging in crypto: The communication problem of blockchains.

Ethereum is this super-smart global computer that allows its users to create and participate in smart contracts, decentralized finance (or, DeFi), and a variety of other revolutionary activities. On the flip side, Bitcoin is usually seen as the “dumb” blockchain - essentially, it has no “smart” functionality, and is mostly only used as a store of value.

Note that, if some of the terms I’ve mentioned earlier aren’t familiar to you, do make sure to check out other sections in the Crypto 101 Handbook - you'll find dedicated sections on all of those topics! Moving on, though, you might ask - so, where’s the problem?

Well, what if you want to, say, participate in some sort of a cool, new dApp on Ethereum, but you’re only holding Bitcoin? This is where blockchain bridges come in to save the day!

You see, this is kind of the biggest problem that all blockchain networks face, in general - they have a pretty difficult time communicating with one another! Since many of these protocols are built using very different technology, they aren’t able to connect with each other - it’s like trying to install an Xbox game on your personal computer!

What is a Blockchain Bridge, and Where is it Used?

Moving on, in order to help different blockchain networks connect and “communicate” with one another, you need bridges. To answer the question of what is bridging in crypto simply, you can think of these bridges as special connections that allow two completely different blockchains to share data, coins & tokens, and various other information.

What is bridging in crypto: A blockchain bridge.

Notice how I mention “coins & tokens” - this part is very important! If you’d like an in-depth explanation of what are the differences between crypto coins and tokens, check out this section - for now, though, just know that crypto coins have their own blockchains, while cryptocurrency tokens are built on the blockchains of other coins.

Feeling confused? Well, look - let’s illustrate that with an example.

What is bridging in crypto: Ethereum VS BNB.

Once again, let’s look at Ethereum - this is a blockchain that has a native coin of its own, by the same name. However, Ethereum is also home to a huge variety of different tokens, too - the Shiba Inu token, Bancor, the Basic Attention Token, and so on.

Then, you have another network, such as the Binance Smart Chain. The native coin of this blockchain is BNB. Binance Smart Chain also has a variety of tokens built on it, too.

Where do blockchain bridges come in? Well, think about it this way - what would happen if you wanted to use your Ethereum coins or tokens on the Binance Smart Chain? Traditionally, you couldn’t  - these are two completely different networks! However, crypto bridging allows you to do just that!

Up until this point, we’ve talked about some pretty vague examples of blockchain bridging. Let’s change that - allow me to give you a very specific example of what is bridging in crypto, and how you can use it, too!

Imagine that you’ve found an awesome yield-earning platform. The premise behind it is very simple - you put in some cryptocurrency that you hold, and then earn a passive interest over time. This platform supports a wide list of cryptocurrencies, so you start browsing and looking for the best numbers.

During your research, you notice something interesting - if you were to deposit your ETH coins into it, you would earn a 1% annual yield. However, if you would instead deposit ETH coins that are based on the Binance Smart Chain, that percentage would double!

What is bridging in crypto: ETH coins VS BSC-based ETH coins.

So, all that you need to do now is find a blockchain bridge, exchange your ETH coin to Binance Smart Chain Ethereum, and start earning a passive yield!

An alternative example that you could think about would have to do with cryptocurrency lending and borrowing. This can be done in two types of platforms - centralized institutions, and some anonymity-preserving, decentralized applications. In most cases, however, crypto lending and borrowing are considered to be a form of DeFi, or decentralized finance.

What is bridging in crypto: Bitcoin bridging.

Most modern blockchain networks are advanced enough to allow their coin or token holders to participate in lending and borrowing. Older blockchains (such as Bitcoin and Dogecoin), however, do not - in order to borrow or lend them out, you would need to bridge these assets on special applications that would allow you to do so, and that are based on other, “smarter” networks. Makes sense?

Best Blockchain Bridges

Now, I admit - this is a pretty complex topic to tackle! That being said, though, now that you know what is bridging in crypto, and where these bridges are used, in the first place, there’s one more thing that I’d like to discuss - the best blockchain bridges, and how to find them!

First things first - this won’t be a list of blockchain bridges for you to check out. Instead, I’d like to tell you about the types of bridges that you might come across, and what to look for with each of those types, as well.

So, to start things off, you should note that there are two major types of blockchain bridges - centralized, and decentralized ones. They are both very preference-based, and will thus suit different people, too. However, if you’re just starting out, I’d recommend you go with the centralized bridges - these are much simpler to use and get into, in general.

What is bridging in crypto: Best blockchain bridges.

Essentially, some of the most popular centralized crypto bridges are those that are located on trusted and well-known crypto exchanges. These bridges work with the help of exchange-based liquidity pools. Now, it’s a huge topic, in of its own, so if you’re not familiar with it, I highly recommend reading a section about liquidity pools.

Put simply, though, the exchange houses two different pools - say, that of Bitcoin, and Ethereum-equivalent of BTC coins. When you visit the centralized exchange, and deposit your Bitcoin into it, you will receive an equivalent amount of Ethereum-based BTC. Your original BTC coins are locked up in the first pool - you can exchange your newly-acquired ETH-Bitcoins for your original coins at any point in time!

The process looks pretty complex, when you put it that way, but swapping your crypto like this is actually pretty simple - many centralized institutions have special interfaces that allow you to do so in a clear and beginner-friendly manner.

Now, if you decide to use the best centralized blockchain bridges, just keep in mind that you will need to really trust the platform that you’ve chosen! I mean, think about it this way - it’s like you meeting a stranger, and them telling you: “Hey, if you give me your money, I promise that I won’t steal it from you, and that it won’t magically disappear one day!”.

Well, I do admit that this is a bit of an exaggeration, but the general idea remains the same - you should use only the most-trustworthy cross-chain bridges!

The second type of crypto bridges that you can encounter are decentralized ones. These bridging options are quite a bit more complex than their centralized counterparts, and they do come with their own benefits and drawbacks, too.

Decentralized bridges work with the help of smart contracts. Once you deposit your cryptocurrency into a smart contract, it gets locked up, and you are automatically paid out the equivalent crypto, immediately. Since your original coins get locked up in the contract, there are no new cryptos coming into the market, and thus, there aren’t any complex inflationary problems being caused, either.

Decentralized cross-chain bridges are wonderful for anyone who wants to remain anonymous in their crypto swapping ventures. However, this comes with the drawback of these bridges often being less-secure than centralized ones. So, if you’re adamant about using a smart contract-powered crypto bridging solution, you should take the time and do some thorough research!

That concludes our discussion of what bridging in crypto is. As you’ve probably gathered by now, bridging is a very important part of the cryptocurrency world! It is thus equally important that you educate yourself on the topic.