Non-Fungible Tokens: Can They Be Transferred across Blockchains?

With recent advances in technology, non-fungible tokens are becoming popular among investors. From digital art to gaming to real estate, NFTs are on the rise across all industries. 

If you are a crypto enthusiast and wondering what these digital tokens are and whether you can transfer assets across different blockchains? Then, keep reading this blog till the end.

In this blog, we will learn the basics, how they work, and how we can transfer these tokens between different blockchains. We will also look at examples to create a clear understanding.

What Are Non-Fungible Tokens?

The term non-fungible tokens meaning refers to something that is “unique” or “irreplaceable.”

These tokens are unique digital assets that consist of a wide range of items, including videos, games, photos, artwork, and more. As these tokenized assets are unique, it is impossible to replicate them. Even if a digital asset like an image or an in-game character is copied, its value cannot be equal to the original artwork. Because with NFTs, only a limited number of tokens can be formed. It creates the digital scarcity of that asset, as the managing director of Yellow Umbrella, Array Yu, once expressed.

How do NFTs work?

Any digital item, such as a video, an image, or an in-game character, can be minted into digital assets. These digital assets are stored on a blockchain as a token. This blockchain serves as a secure ledger of ownership that records each transaction, and these NFTs are mostly traded with cryptocurrencies. 

Other cryptocurrencies, including Bitcoin and Ethereum, are fungible. This means they are exchangeable and can be traded across different blockchains. In contrast, these virtual tokens are unique and cannot be exchanged between various blockchains. Each token has a unique identifier and metadata that distinguishes it from the rest of the tokens. 

For example, two different pieces of art cannot be interchanged for each other because they do not have the same artistic value and the same ownership.

Non-Fungible Tokens Examples

A great range of digital and physical assets are used as NFTs. For example, digital art, music and media, games, collectibles and more. Let’s have a look at a few examples below.

1. Digital Art:

   Digital arts are widely used in blockchain and have been the key reason for its sudden popularity. Artists can create artwork that can be tokenized and can be sold directly to the collectors. One of the most remarkable examples is Beeple’s digital artwork. "Everyday: The First 5000 Days" was sold for an unbelievable price of $69 million at a Christie’s auction. It shows NFT has made these digital artworks so precious and valuable.

2. Music:

   Musicians can sell their exclusive content in the form of NFTs and can earn huge revenues. For example, the musician Grimes sold a collection of digital artwork and music for nearly $6 million.

3. In-Game Assets:

   Game developers are incorporating NFTs to create exclusive and unique in-game items such as characters, weapons, and scenarios. A very famous example is Axie Infinity. In this game, players can create, collect, and fight creatures known as Axies. Each of these is represented as a tokenized asset.

Can Non-Fungible Tokens Be Transferred from One Blockchain to Another? 

When NFTs were first launched in 2017, it was not possible to transfer them across different blockchains. Although it is not a simple process, it is now possible to transfer these assets across blockchains. It requires cross-chain bridges or platforms that use specialized protocols to ensure smooth interoperability. 

Moreover, some NFT projects have also developed cross-chain capabilities. One of the famous examples is YOOts. In 2023, it allowed its consumers to use bridges to transfer from Solana to Polygon. With this technology, a digital token can be converted or wrapped to be compatible with the destination blockchain. 

How Cross-Chain Transfers Work 

A process that involves the transfer of NFTs from one blockchain to another is known as "bridging." Let’s understand how it works.

1. Locking the NFT on the Original Blockchain: 

   At the initial step, the digital token is locked or frozen in a smart contract on the source blockchain to ensure security. 

2. Minting a Wrapped NFT: 

   Then, a corresponding “wrapped” NFT is formed at the target blockchain. This wrapped token is identical to the locked token that represents the original one on this new blockchain.

3. Maintaining Linkage:

   The original NFT remains locked until the wrapped version is burned on the new blockchain. This step ensures that only one version is active at any given time, and it is the core mechanism behind cross-chain transfers for NFTs.

Benefits of Cross-chain NFTs

There are various benefits of cross-chain digital assets. Let’s explore some of them below:

• Increased Liquidity

The chances of finding new buyers increase with these cross-chain virtual tokens. It also helps enhance the platform's liquidity.

• Extended Reach

By crossing chains, NFTs can reach communities that might not be present on the original blockchain. It increases the exposure and fosters greater adoption.

• Wider Utility

Cross-chain NFTs enable the use of tokenized assets in multiple decentralized applications (dApps) across different blockchain networks. This increases their functional use cases in gaming, DeFi, and virtual worlds.

• Lower Transaction Costs

By enabling NFT transfers between chains, users can choose blockchains with lower gas fees. It reduces transaction costs for buying, selling, or transferring unique digital tokens.

Potential Risks 

Although there are multiple benefits of multi-chain NFTs, the potential risks associated with them cannot be ignored. Before you decide to perform a multi-blockchain NFT transaction, do not forget to consider the following key points.

• Security Vulnerabilities 

Cross-chain bridges can introduce security vulnerabilities as they are often targeted by hackers. If the bridge is compromised, NFTs may be lost or stolen. 

• Smart Contract Bugs 

Cross-chain interactions rely on smart contracts to execute transfers. Bugs present in these contracts can lead to loss of assets or failures in the transfer process. 

• Double-Spending or Fraud 

There is a potential risk of double-spending in cross-chain NFT transactions. If the bridge does not correctly lock the NFT on one chain before releasing it on another, it could allow malicious people to exploit the system and create duplicate or fraudulent NFTs. 

• Compatibility Issues 

Most of the blockchains operate independently. This can create compatibility issues when trying to transfer NFTs between chains. It leads to problems like lost or unrecognized tokens on the destination chain.

Conclusion 

Non-fungible tokens have completely changed the digital ownership scenario in recent years. It does not only provide authenticity but also uniqueness for assets. It has opened new doors of opportunities for all industries, including art, music, gaming, and more. 

Although transferring NFTs between blockchains is still developing, projects like Yoots have successfully used cross-chain bridges for migration. However, it's very important to assess the technical, security, and market implications before moving assets across different blockchain ecosystems.