Arjun Bhuptani, the founder of the Connext bridging protocol, has co-authored an Ethereum Improvement Proposal (EIP) called EIP-7281, which seeks to standardize the bridging of tokens between networks. This proposal introduces the concept of “Sovereign Bridged Tokens,” allowing token issuers to establish official bridges across multiple networks. The primary goal of this standard is to enhance token security and mitigate risks associated with bridge hacks.
The proposed EIP-7281 enables token issuers to designate a list of canonical bridges. These authorized bridges alone will be able to mint the official version of the issuer’s token. Moreover, token issuers have the flexibility to limit the number of tokens that can be minted by a particular bridge. These parameters can be modified by issuers at any time, granting them full control over their tokens.
According to Bhuptani, implementing this standard will shift token ownership away from bridges and into the hands of the issuers themselves. In the event of a bridge’s security breach, the potential losses for token issuers will be limited to the rate limit set for that specific bridge. Additionally, issuers will have the ability to delist a compromised bridge seamlessly, avoiding the need for complex and time-consuming migration processes.
Furthermore, Bhuptani believes that the Sovereign Bridged Token standard will address user experience challenges in decentralized finance (DeFi) by ensuring that all bridges issue the same official token. Over time, this will eliminate the existence of multiple versions of the same token, contributing to a more streamlined and efficient DeFi ecosystem.
Circle, a stablecoin issuer, has already developed the Cross-Chain Transfer Protocol (CCTP) to establish official bridges for its US Dollar Coin (USDC). EIP-7281 aims to build upon the principles of CCTP and extend its application to all tokens, making this solution more inclusive across the entire token ecosystem.
It is worth noting that Circle and Tether have already blacklisted certain addresses involved in the recent Multichain incident, preventing approximately $65 million worth of USDC and Tether (USDT) from being moved out of those addresses. This incident serves as an example of the risks associated with token bridges and reinforces the need for enhanced security measures.
The proposal for the ‘Sovereign Bridged Token’ standard represents a significant step towards fortifying token security and minimizing vulnerabilities arising from bridge hacks. By establishing canonical bridges and empowering token issuers, this standard aims to create a safer and more reliable tokenized ecosystem for various blockchain networks.