How it works
A bridge locks an asset on one chain and issues a representation of it on another, or swaps it for a native asset on the destination chain. If what you receive is the same asset in different form, many practitioners treat the bridge as non-taxable; if it is a different token, the case for a taxable exchange is stronger. Bridge fees are generally added to basis or treated as transaction costs. The IRS has not addressed bridging directly.
Why it matters
Bridged assets are where software most often loses cost basis, producing phantom gains on the destination chain, and the position taken should be consistent and documented.
Related: wrapped token, crypto reconciliation.
