Bridge

Three designs dominate. Lock-and-mint holds the asset on the origin chain and issues a representation on the destination. Burn-and-mint destroys and reissues where the issuer controls both sides. Liquidity networks hold pools on each chain and settle between them.

In the first two, the representation is only as good as the party holding the original.

That party is almost always a validator or signer set, which makes most bridge risk a key management problem wearing different clothes. Ronin lost approximately $625MM in March 2022 after an attacker obtained 5 of 9 validator keys. Wormhole lost approximately $320MM the previous month to a signature verification flaw that let an attacker mint without depositing. Neither was a failure of the underlying blockchains.

The systemic concern is that bridged assets are claims that circulate as if they were the underlying. A wrapped token used as collateral across several protocols transmits its bridge's failure into all of them simultaneously, which is a concentration pattern that TradFi has encountered before under a different name. See Cross-Chain Bridges: The CDOs of DeFi? for that comparison.