Trail notes
- A bridge lets you use value from one blockchain on another, usually by locking tokens on one side and issuing a representation on the other.
- Main designs are lock-and-mint, burn-and-release and liquidity networks; each depends on different parties staying honest.
- A wrapped token is only as good as the bridge holding what backs it.
- Bridges concentrate large pools of assets, which makes them attractive targets.
- Test with a small amount, confirm the destination token and keep records; the CRA has not addressed wrapping as of 2026-10-30.
Why bridges exist
Each blockchain keeps its own ledger. A token on one network cannot simply appear on another, because the second network has no record of it. Bridges solve this by creating a connection: something happens on network A, and a matching action happens on network B.
People use bridges to reach lower fees on a layer 2 network, to use an application that lives on another chain, or to move a stablecoin to where it is needed. Ethereum’s documentation describes bridges as a key part of a multi-chain world, and also as one of its biggest sources of risk.
Three common designs
| Design | What happens | What you depend on |
|---|---|---|
| Lock-and-mint | Your tokens are locked on chain A; a wrapped version is minted on chain B | The lock contract and whoever confirms the lock |
| Burn-and-release | Wrapped tokens are burned on chain B; originals are released on chain A | The same parties, in reverse |
| Liquidity network | You deposit on chain A; a provider pays you from a pool already on chain B | The provider’s pool depth and the settlement system |
Lock-and-mint is the classic model. The original tokens sit in a contract on the source chain, and a matching number of wrapped tokens are created on the destination chain. Burn-and-release is the return journey. Liquidity networks skip minting: providers hold inventory on both sides and swap you across, settling among themselves later.
Bridges also differ in who confirms that something happened on the other chain. Some use a small group of trusted signers. Some use a larger set of validators with their own token. Some use cryptographic proofs that the destination chain can check directly. In general, the fewer parties you must trust, the smaller the attack surface, though every design still carries some risk.
See the full infographic with notes.
Native vs wrapped assets
A native asset is issued directly on a network by its creator. A wrapped or bridged asset is a representation created by a bridge, backed by something locked elsewhere.
This is why bridged assets can trade at different prices from native ones, and why some applications accept one but not the other. When you bridge, check exactly which version you will receive and whether the place you plan to use it accepts that version.
Why bridges are attacked
A lock-and-mint bridge holds every locked token in one place. That pool backs every wrapped token on the other side. If an attacker can fool the bridge into releasing locked tokens, or minting wrapped ones without a real deposit, the backing disappears for everyone.
- Compromised signer keys: if a small group controls releases, stealing enough of their keys can be enough.
- Smart contract bugs: errors in verifying messages from the other chain.
- Upgrade risk: a bridge contract that can be changed by an admin key can be changed maliciously.
- Front-end and phishing attacks: fake bridge sites that ask you to approve a malicious contract.
- Liquidity shortfalls: a liquidity network that cannot pay out during heavy demand.
Holding a wrapped token means you carry the bridge’s risk for as long as you hold it, not just while the transfer is in progress. See bridge risk for how this plays out.
Fees, timing and the return trip
A bridge transfer usually has several costs stacked together: gas on the source chain, a bridge or relayer fee, sometimes a spread if a liquidity network swaps you across, and gas on the destination chain to do anything with the tokens once they land.
Timing is not always symmetric. Some routes settle in minutes, while withdrawing from certain layer 2 networks back to the main chain can involve a waiting period set by the network’s design. Plan for the slowest leg of the trip, not the fastest.
Before and after you bridge
A few checks catch most avoidable mistakes:
- Reach the bridge from a trusted bookmark, not a search ad or a link in a message.
- Confirm the destination network and the exact token you will receive (native or wrapped, and its contract address).
- Make sure you will have some of the destination network’s gas token to move funds once they arrive.
- Send a small test amount first, and wait for it to arrive fully.
- Expect delays: some routes take minutes, others much longer, especially on the way back.
- After the transfer, review and revoke token approvals you gave the bridge. See wallet approvals and signing.
Our bridge checklist walks through these steps one at a time, including what to check before withdrawing back to the original chain.
As of 2026-10-30 the CRA has published no DeFi-specific guidance on wrapping or bridging tokens, so whether a bridge transfer is a disposition is not addressed. Keep records of both sides of every transfer, including dates, amounts, fees, both wallet addresses and Canadian-dollar values, as the CRA’s records page describes. See DeFi transactions and tax.
Your checklist
Questions people ask
What is a blockchain bridge?
A blockchain bridge is a system that lets you move value between networks, usually by locking tokens on one chain and issuing a matching wrapped token on another, or by paying you from a pool already on the destination chain.
What is the difference between a native and a wrapped token?
A native token is issued directly on a network by its creator. A wrapped token is created by a bridge and backed by assets locked elsewhere, so it depends on that bridge staying secure.
Why are bridges hacked so often?
Bridges often hold large pools of locked assets in one place, and they rely on keys, validators or code that verify activity on another chain. Compromising any of those can release the locked assets or mint unbacked tokens.
Is bridging crypto a taxable event in Canada?
The CRA has not said. As of 2026-10-30 it has published no DeFi-specific guidance on wrapping or bridging, so keep full records of each transfer and consider professional advice for your situation.
Sources and dates
- Blockchain bridges — ethereum.orgreference
No date shown on page · checked 2026-10-31. How bridges move assets between networks, and bridge risks. - Layer 2 — ethereum.orgreference
No date shown on page · checked 2026-10-31. Rollups and other scaling networks. - Ethereum security and scam prevention — ethereum.orgreference
No date shown on page · checked 2026-10-31. Wallet security habits and common scams. - Information for crypto-asset users and tax professionals — Canada Revenue Agencyin force
Page date 2025-10-29 · checked 2026-10-30. CRA's current crypto-asset guidance set (replaced the older 'Guide for cryptocurrency users'). - Keeping books and records of crypto-assets for tax filing — Canada Revenue Agencyin force
Page date 2025-11-10 · checked 2026-10-30. What to record per transaction, wallet addresses, yearly balances; export platform history; keep records at least six years.
Education only. Nothing on this page is financial, investment, tax or legal advice, or a recommendation to buy, sell, stake, lend or borrow any crypto-asset. Crypto-assets can lose some or all of their value and are not covered by CDIC. Canadian rules change: check the dated sources above and talk to a qualified professional about your situation. Full disclaimer.