Author：@BriefKandle, ResearchDAO

1. Introduction

Multiverse, a concept in quantum physics, has been explored (way too) many times in fantasy, sci-fi novels, TV shows, and movies. The multiverse communicates with itself through the deus ex machina ideology. A few examples of names for this multiverse communication are "rainbow bridge" and "wormhole.” But how does it actually work?

Physically, an Einstein-Rosen Bridges folds space-time and opens up another membrane/world/universe that is unreachable by the normal beings like us who are constrained by the speed limit of light.

Conceptually, a cliché is easily achievable by a piece of napkin and a spoon Arthur was eating his breakfast with (The Restaurant at the End of the Universe).

NFT-wise, a cross-chain bridge connects multiple chains to NFTs freely and with precision. What’s the similarity between NFTs and other multiverses? Imagine each chain represents its own unique ecosystem, and thus the MetaVerse is the combination of all these ecosystems existing together. Each MetaVerse (or chain) has its own unique:

• Cosmological Constants: ex., PoS, gas fee, efficiency settings
• Star Systems: ex., native IPs, KOLs, node runners, founder fund
• Civilizations: ex., liquidity infrastructure, launchpad, DeFi, GameFi, guild, DAO

With the further development of NFTs, a multi-chain MetaVerse will be developed. Anything intangible, such as digital products (music, texts, images), rights, obligations, certificates, or shares can be tokenized. In this scenario, consider NFTs as lego pieces that connect directly with and exist in the same space as each other despite being from a different lego worlds (for example, Lego Star Wars & Lego Harry Potter). Future forms of NFTs may create more complex usage scenarios as more chains are combined and integrated together.

Imagine the Ethereum network as the center universe of the multiverse due to its high usage volume. It also has high gas fees and low network speeds as the space becomes congested with users. However, Uniswap, AAVE, Compound, and MakerDAO all have crossed over the multiverse to make new utilities. Based on the large Ethereum volume, the gravitational force is too tremendous on the Ethereum universe. Etherum is suitable for the thriving Whales, institutions, and immortal KOLs, but not for the survival of common people, like you and me.

In a more equitable scenario, we will migrate our assets to the other interesting chains, where the gravitational force is lower. This allows magic to be possible and where we can have a fresh start. For example, we may want to migrate an NFT bought on the ETH network to the Solana network. The reason is to get the best of both worlds for the NFT: the NFT is part of the large popular network on ETH and its utility on the Solana network is cheap and can expand rapidly. With more possibilities being built up every day, NFTs are waiting for the arrival of the future MetaVerse.

2. Demand for Cross-Chain Adoption

We believe that through cross-chain adoption, chemical reactions occur as a result of various NFT utilities being created, which amplifies the inherent value in each NFT.

In the last article, we explained the 4 different utilities of NFTs: artistic, socialization, functionality, and asset tokenization (The NFT Product Report (Part 1): NFT Utilities & Usage Scenario). Presently, the social and artistic effects of NFTs are widely reflected in the ETH network’s larger traffic and higher gas fees. The logic stems from the low liquidity associated with the high gas fees in the Ethereum network. The NFT community has a net positive market expectation as they believe their NFTs are valuable in spite of the high gas fees (which inflate an ETH NFT’s value).

The utility and the tokenization effect of NFTs are seen as more developed in other non-ETH public chains. These chains have high TPS and low gas fees due to the necessity of higher-frequency operations. The current public chain situation makes NFTs unable to exert their full utility combination. Presently, the utility combination of NFTs is more concentrated on (1) socialization + artistic and (2) functionality + asset tokenization. The overlapping connection between these two applications is relatively low.

For example, players who love the high socialization utility from NFTs such as CryptoPunks and BAYC might not care about the daily gold farming income like the Axie NFT holders. Players who earn tokens in P2E games using NFTs are neither willing nor want to participate in expensive NFT transactions.

Excellent NFT artwork should not be satisfied with only cultural expression. And NFTs with more utility, should not have their cultural value ignored. These examples highlight the potential for NFTs to grow together in the future. We are currently unable to see how new possibilities shape NFTs’ role in society and in NFT markets. To solve this problem, it may be a reasonable idea to have cross-chain NFTs.

Cross-chain adoptions are beneficial to the NFT ecosystem:

• Multiplying Effect: The integration of multiple utilities will stimulate more NFT usage scenarios, injecting more narrative and imagination into the NFTs ecosystem.
• Increased Utility: A cross-chain bridge leads to more integration methods, increasing utility. As a result, there are increased NFT uses across different chains, leading to more cross-chain traffic, which creates a positive effect on the whole multi-chain ecosystem.
• Aggregate Consensus and Enhancement: Simultaneous cross-chain prosperity of NFTs will exist on the Ethereum network and on other chains with low cross-chain costs. The aggregate consensus on multiple chains differs from that of distinct communities & specific networks. The siphon effect transfers resources and allows users, who normally us other high-cost chains, a reliable & cheaper cross-chain service.
• Segmentation of Value:
  • Community value stays on the Ethereum network: NFTs’ cultural and socialization attributes are reflected and emphasized
  • Asset-pegged value needs to be cross-chain: the practical aspect of NFT utilities is amplified by the convenience of the cross-chain capability

3. Technologies behind Cross-Chain Applications

In fact, many projects have launched various solutions to solve the high gas fee on the Ethereum network. Examples include:

1. Ronin: ETH side chain developed by Sky Mavis
2. Flow: a public chain specially developed for NFT
3. Immutable X: developed for gaming

Although the above-mentioned chains do provide a more comfortable atmosphere for NFT project development, their user traffic and the community consensus are not at par with the Ethereum network. Take the NFT marketplace, Opensea for example. The NFT market with the highest transaction volume does not provide services for other side-chains except for Polygon and Klaytn networks. From the demand point of view, an NFT cross-chain bridge has become a necessity for the market.

Cross-chain bridges allow tokens and/or NFTs to be transferred from one network to another. They provide a way for both networks used to interoperate securely and provide the key components for developing blockchain multi-chain networks.

There are currently two types of cross-chain bridges:

1) Centralized cross-chain bridge: It relies on a centralized authority to operate and create faster transactions, but it is riskier due to its centralized nature.

2) Decentralized cross-chain bridge: Smart contracts are treated as trustworthy entities through their code as law, which is more secure, but slower due to limitations on gas fees and node runners.

Three cross-chain methods:

• Notary mechanism: Introduce one or more intermediaries to undertake data collection, transaction confirmation, and verification work on the two chains, and perform signatures. Assets will only be unlocked and sent on the premise of receiving signatures. This creates a consensus of inter-chain communication trust and mutual data recognition.
• Sidechain/relay: The side chain is relative to the main chain. The initial proposal of the side chain is to test and develop new features for Bitcoin. Relative to the main chain, the side chain can verify and parse the block data and ledger data in the main chain. The basic technology implemented by the side chain is a two-way peg. Through the two-way peg technology, digital assets can be locked on the main chain, and the equivalent assets can be released in the side chain at the same time. On the contrary, when the related assets in the side chain are locked, the equivalent assets anchored on the main chain can be released.
• Hash lock: Through the smart contract, the trigger conditions (hash lock + time lock) are pre-set, and the correct hash value can be unlocked within a certain period of time, which helps achieve the purpose of cross-chain exchange.

Two cross-chain forms:

• Staking→Generation: Lock the original assets on Chain A, and issue redeemable certificates for the original assets across on Chain B. When the user needs to cross back to Chain A, the mapped assets on Chain B are destroyed through the smart contract in order to redeem the native assets on Chain A.
• Liquidity Aggregation: Chain A and Chain B respectively establish and use liquidity pools as cross-chain asset reserves. When users cross-chain through third-party bridges, they only need to deposit the original assets on one side and store them on the other side. The cross-chain assets that have been cast by the official bridge in advance can be directly taken out from the side, and the cross-chain transaction can be completed in real-time.

Similar to ERC20 tokens, NFTs also need to map all their smart contracts on all networks to truly integrate chains with cross-transfer capabilities. The problem is that there are far more ERC721 contracts than ERC20 ones.

Most cross-chain bridges only support a limited set of tokens. They do not support cross-chain contracts calling for third-party token integration. Presently, few public chains support the cross-chain contract calling function in general. Although Teleport Network provides a full-chain interoperability protocol, it has not yet been tested by the market and will not be elaborated here.

Through the NFT cross-chain application, third-party NFT projects can add cross-chain and refund transactions to their ERC-721 smart contracts. Once the user initiates a cross-chain transfer transaction, the NFT will be burned or transferred to the system address on the source chain and then verified by the relay. The corresponding ERC-721 contract on the target chain will mint a mirror NFT to the user’s target chain wallet address.

In some cases, the NFT itself does not need to be transferred to another chain, but the NFT data on the original chain needs to be accessed on the other chain. For example, NFTs of game items posted on Ethereum can be read by another chain or layer2 which is the operating chain for this game. Cross-chain messages can be implemented through off-chain oracles such as Chainlink.

4. Limitations Faced by Cross-Chain Adoptions

When deciding between the staking method or the liquidity aggregation method, it is highly dependent on the consensus layer in the middle. If the consensus layer is not sufficiently decentralized or acts maliciously, the user's assets are at risk of being stolen. Therefore, the network needs to include as many nodes as possible while setting reasonable economic incentives to ensure maximum security by preventing node operators from doing evil.

All three cross-chain methods mentioned above have their own shortcomings:

• Notaries add centralization threats,
• Relay is technically difficult to implement, and
• Hash lock has the limitation of application scenarios (only realizes the mutual exchange of cross-chain assets, but does not achieve the transfer of assets).

Presently, there is no perfect solution for cross-chain implementation. Furthermore, the development of these cross-chain methods has high requirements for knowledge in mathematics and cryptography. As a result, developers' professional knowledge and coding ability will be tested to launch the project into the market.

How can we ensure technical stability while factoring in the user experience, code friendliness, market consensus, and commercial implementation? This requires a focused effort from the whole project team and ecosystem. Current cross-chain tools, especially NFT cross-chain tools, generally have disadvantages such as long transaction time and complicated processes. Future developments will take into account how to improve the user experience. Examples of factors to consider include operation convenience, transaction speed, transaction confirmation waiting time, transaction fees, and so on.

In addition, at this point in time, the overlap of NFT player groups is low. For example, Solana has attracted a large number of new NFT players to participate with its high performance, high throughput, low NFT prices, and low gas fees. On the other hand, players who tend to define NFTs as luxury goods and works of art are reluctant to leave ETH.

After NFT cross-chain adoption becomes popular, supporting use applications will develop to speed up the cohesion of consensus across different ecosystems. For example, in the scenario of NFT mortgage mining, high-net-worth NFT holders use their valuable NFTs to perform a series of DeFi operations such as mortgage mining and mortgage lending on multiple chains. NFT owners can bring more liquidity and potential benefits to the NFT they hold while maximizing their own interests. For NFT project parties, the more blockchains that can obtain the NFT, the greater the opportunity to intake additional users and capture network value. Therefore, we can expect that NFT cross-chain adoption will replicate the development path of DeFi, from single-chain to multi-chain to the process of multi-chain interoperability.

5. Conclusion

DeFi, GameFi, and NFT, all act as the basic elements of the future metaverse and Web 3.0 era. This has been recognized as the consensus. All serve varying needs for users in the market. Presently, many current Web 3.0 users are primarily focused on the growth of one element into the metaverse. GameFi may be the one example that already links DeFi, GameFi, and NFTs altogether, yet it still lacks overall market volume and popularity.

In the metaverse, NFTs give users ownership and sovereignty over their digital assets. Cross-chain bridges will give those assets the freedom to flow between different blockchains. In the future, it is expected that different blockchain networks will work as one fluid homogeneous network. The ability to have one fluid homogeneous network not only supports cross-chain NFT use, but it also promotes mass Web 3.0 adoption. As the Web 3.0 ecosystem becomes easier to navigate and meet all of and more of our Web 2.0 needs, the future becomes limitless. When looking at action steps to take in the meantime, Cross-chain bridges through NFTs are likely to be one of the key factors in the evolution of culture, utility, market volume, and user retention as we evolve into a metaverse environment.

Join Us Here:

Research DAO - Early Participation Form

About Us：

Twitter: @RealResearchDAO

Medium: https://medium.com/@RealResearchDAO