Moonscape Blog

Bridges Explained: How to Move Crypto Between Chains (Without Selling It)

You've got $5,000 of ETH on Ethereum. Gas fees are $40 per swap. Your friend tells you: "Just bridge to Arbitrum — fees are like 50 cents there."

Bridge? What's a bridge?

If you've ever felt confused by the process of moving assets between blockchains, you're not alone. Bridges are one of the most important (and misunderstood) pieces of DeFi infrastructure.

Here's everything you need to know.

The Problem Bridges Solve

Blockchains don't talk to each other.

  • Your ETH on Ethereum can't be used on Arbitrum
  • Your USDC on Polygon can't be used on Base
  • Your tokens on one chain are stuck there

This is a problem because:

  • Different chains have different fees (Ethereum = $40, Arbitrum = $0.80)
  • Different ecosystems have different apps (GMX is only on Arbitrum)
  • Best yields move between chains (this week's best staking rate might be on Optimism)

Solution: You need a way to move assets between chains without selling them.

That's what bridges do.

What a Bridge Actually Does

A bridge is not:

  • ❌ Selling your token on one chain and buying it on another
  • ❌ Creating a new asset
  • ❌ A taxable swap or trade

A bridge is:

  • ✅ Moving your asset from Chain A to Chain B
  • ✅ A non-taxable transfer (in most jurisdictions)
  • ✅ Preserving your original cost basis

Think of it like moving money from your checking account to your savings account. It's still your money. You didn't sell anything.

How Bridges Work: The Lock & Mint Model

Most bridges use a Lock & Mint mechanism. Here's the step-by-step:

Step 1: Lock on Source Chain (Ethereum)

You send 1 ETH to the bridge contract address:

Your Wallet → Arbitrum Bridge Contract (0x8315177aB297bA92A06054dE0bF30a3b0676Cf79)

The bridge contract locks (escrows) your ETH. It doesn't disappear — it's held in the contract.

Step 2: Relay the Proof

The bridge system watches the Ethereum blockchain for your transaction.

Once confirmed (typically 12-64 block confirmations for security), it relays a cryptographic proof to Arbitrum:

"User 0xYourWallet locked 1 ETH on Ethereum at timestamp X. Mint equivalent on Arbitrum."

Step 3: Mint on Destination Chain (Arbitrum)

The Arbitrum bridge contract receives the proof and mints 1 ETH to your wallet on Arbitrum.

Arbitrum Bridge Contract → Your Wallet on Arbitrum (1 ETH)

Effectively, you have the same ETH, just on a different chain.

[Visual suggestion: Flowchart showing Lock (Ethereum) → Relay → Mint (Arbitrum)]

Bringing Assets Back: Burn & Release

When you want to return to Ethereum:

Step 1: Burn on Arbitrum

Send your ETH to the Arbitrum bridge contract. It burns (destroys) the tokens.

Step 2: Relay

The bridge system relays proof of the burn to Ethereum.

Step 3: Release on Ethereum

The Ethereum bridge contract releases your original ETH back to your wallet.

This is why official bridges take 7 days to withdraw from L2 to L1. Optimistic rollups have a challenge period for fraud proofs.

Types of Bridges

Not all bridges work the same way. Here are the main types:

🏛️ Official Bridges (Canonical)

Built by the L2 team. Most secure but often slowest.

Examples:

Pros:

  • ✅ Most secure (official contracts)
  • ✅ No additional fees beyond gas

Cons:

  • ❌ Slow withdrawals (7 days L2 → L1 for Optimistic Rollups)
  • ❌ Higher gas fees

⚡ Fast Bridges (Liquidity-Based)

Use liquidity pools to provide instant bridging.

Examples:

How they work:

  1. You send ETH on Ethereum
  2. Liquidity provider fronts you ETH on Arbitrum (instantly)
  3. Provider claims your locked ETH on Ethereum later

Pros:

  • ✅ Fast (1-2 minutes)
  • ✅ Lower gas fees
  • ✅ No 7-day wait for L2 → L1

Cons:

  • ❌ Small additional fee (0.1-0.5%)
  • ❌ Liquidity limits (can't bridge unlimited amounts)
  • ❌ Smart contract risk

🌉 Third-Party Bridges

Connect chains that don't have official bridges.

Examples:

Pros:

  • ✅ Connect many chains (Ethereum, BNB, Avalanche, Fantom, etc.)
  • ✅ Often faster than official bridges

Cons:

  • ❌ Higher smart contract risk
  • ❌ Less battle-tested
  • ❌ Sometimes higher fees

Bridge Transaction Example

Let's walk through a real bridge transaction:

Bridging 1 ETH from Ethereum to Arbitrum

Starting state:

  • 1 ETH on Ethereum (cost basis: $2,000)
  • 0 ETH on Arbitrum

Transaction 1 - Lock on Ethereum:

From: 0xYourWallet
To: 0x8315177aB297bA92A06054dE0bF30a3b0676Cf79 (Arbitrum Bridge)
Value: 1 ETH
Gas: $12
Time: 12:00 PM

Transaction 2 - Mint on Arbitrum (10 minutes later):

From: Arbitrum Bridge Contract
To: 0xYourWallet
Value: 1 ETH
Gas: $0.00 (no gas cost to receive)
Time: 12:10 PM

Ending state:

  • 0 ETH on Ethereum (locked in bridge)
  • 1 ETH on Arbitrum (cost basis: still $2,000)

Tax treatment: Non-taxable transfer. Cost basis preserved.

Common Bridging Mistakes

❌ Mistake #1: Bridging to Wrong Address

If you bridge to an address you don't control, your funds are gone forever.

How to avoid:

  • Always bridge to your own wallet address on the destination chain
  • Double-check the address before confirming
  • Do a small test transaction first

❌ Mistake #2: Not Having Gas on Destination Chain

You bridge 1000 USDC to Arbitrum. Great!

But now you can't do anything because you need ETH for gas on Arbitrum.

How to avoid:

  • Bridge some native gas token first (ETH for Arbitrum, OP for Optimism, etc.)
  • Or use a bridge that includes gas (some do)

❌ Mistake #3: Using Sketchy Bridges

Not all bridges are safe. Some have been exploited for millions.

How to avoid:

  • Stick to official bridges when possible
  • Use well-known third-party bridges (Across, Hop, Stargate)
  • Check L2Beat for bridge security ratings

❌ Mistake #4: Not Importing Destination Wallet (Tax)

You bridge to Arbitrum but only import your Ethereum wallet into tax software.

Result: Software sees "Sent 1 ETH" with no matching receive. Creates phantom taxable income.

How to avoid: Import both wallets into your tax software.

Better yet: Use Moonscape, which alerts you when it detects a missing wallet.

Time & Cost Comparison

Bridge Route Method Time Cost Best For
Ethereum → Arbitrum Official 10-15 min $8-15 gas Large amounts
Ethereum → Arbitrum Across 1-2 min $5 gas + 0.3% Speed
Arbitrum → Ethereum Official 7 days $12 gas Security
Arbitrum → Ethereum Across 1-2 min $0.50 gas + 0.4% Speed
Ethereum → Base Official 10-15 min $8-15 gas Large amounts
Arbitrum → Optimism Hop 5-10 min $1 + 0.3% L2 to L2

Note: Gas costs fluctuate based on network congestion. These are estimates.

The Tax Implication: Non-Taxable Transfer

In most jurisdictions, bridging is not a taxable event.

✅ Correct Tax Treatment

  • Event: Bridge 1 ETH (basis $2,000) from Ethereum to Arbitrum
  • Classification: Non-taxable transfer
  • New basis on Arbitrum: $2,000 (carries over)
  • Taxable event: Only when you sell the ETH later

❌ What Bad Software Does

Many platforms can't link cross-chain transactions:

  1. Ethereum transaction: "Sent 1 ETH"
    • Software: "You disposed of 1 ETH" → Taxable sale with $2,000 proceeds
  2. Arbitrum transaction: "Received 1 ETH"
    • Software: "You acquired 1 ETH" → New basis of $2,000 (market value at receipt)
  3. Later sale on Arbitrum: Sell for $2,500
    • Software: Gain = $500 (correct)

Problem: Step 1 created phantom $2,000 taxable income.

Total tax impact:

  • Correct: $500 gain
  • Bad software: $2,000 disposal + $500 gain = $2,500 taxable events

At 25% tax rate, that's $500 in incorrect taxes paid.

How Moonscape Handles Bridges

Moonscape is purpose-built for cross-chain DeFi:

🎯 Bridge Contract Database

We maintain a database of 40+ bridge contracts:

  • Arbitrum Bridge: 0x8315177aB297bA92A06054dE0bF30a3b0676Cf79
  • Optimism Gateway: 0x99C9fc46f92E8a1c0deC1b1747d010903E884bE1
  • Base Bridge: 0x49048044D57e1C92A77f79988d21Fa8fAF74E97e
  • Hop Protocol: 0x3666f603Cc164936C1b87e207F36BEBa4AC5f18a
  • Across Protocol: 0x5c7BCd6E7De5423a257D81B442095A1a6ced35C5
  • And 35+ more...

🔗 Auto-Match Cross-Chain Transfers

When we see a bridge transaction, we:

  1. Detect: "User sent 1 ETH to Arbitrum Bridge contract"
  2. Search: Look for matching receive on Arbitrum
  3. Match: Amount = 1 ETH, time within 30 min, correct destination
  4. Link: Connect the two transactions as a bridge transfer
  5. Preserve basis: Original cost basis carries to Arbitrum

Accuracy: 95%+ with no manual work.

🚨 Missing Wallet Detection

If we detect a bridge but don't see the destination wallet:

🔵 Bridge Detected
You bridged ETH to Arbitrum but haven't imported an Arbitrum wallet.

Without this wallet, we can't match your bridge transaction.

[Import Arbitrum Wallet →]

One click. Problem solved.

📊 Bridge Transaction Dashboard

View all your bridge transactions in one place:

  • Ethereum → Arbitrum: 1 ETH ($2,000)
  • Arbitrum → Base: 500 USDC ($500)
  • Base → Ethereum: 0.5 ETH ($1,200)

Linked automatically. Cost basis preserved.

When to Use a Bridge

✅ Good Reasons to Bridge

  • Lower fees: Move to L2 to reduce gas costs 50-100x
  • Access specific apps: GMX (Arbitrum), Aerodrome (Base), etc.
  • Better yields: APYs vary significantly across chains
  • Ecosystem participation: Airdrops often require on-chain activity

⚠️ Consider Alternatives

  • Small amounts: If bridging $100 and fees are $10, that's a 10% cost
  • Short-term: If you're only doing one transaction, might be cheaper to stay on Ethereum
  • CEX available: Sometimes easier to sell on CEX and rebuy on different chain (but creates taxable event)

The Bottom Line

Bridges are the highways of the multi-chain world. They let you move assets between blockchains without selling them.

Key takeaways:

  1. Bridging ≠ Selling - It's a transfer, not a taxable trade
  2. Cost basis carries over - Your original purchase price stays the same
  3. Different bridge types - Official (slow, secure) vs Fast (quick, small fee) vs Third-party (multi-chain)
  4. Import both wallets - Tax software needs to see both sides of the bridge

For DeFi users, bridging is essential. But it creates tax complexity that most software can't handle.

Track Your Bridge Transactions Automatically

Moonscape detects, matches, and links bridge transactions across 10+ chains.

✅ Auto-detect 40+ bridge contracts
✅ Match send → receive with 95%+ accuracy
✅ Preserve cost basis across chains
✅ Alert you to missing wallets

Try Moonscape →

Built for people who'd rather track than guess.
Moonscape — your crypto, your taxes, fully decoded.

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Tags: #Bridges #Arbitrum #Optimism #Base #CrossChain #DeFi #CryptoTax