An Ethereum Improvement Proposal (EIP) dubbed EIP-7281, a “Sovereign Bridged Token” standard, was recently made with intentions to standardize how tokens are bridged between networks. Arjun Bhuptani, the founder of the Connext bridging protocol, co-authored the proposal. According to Bhuptani, this new protocol will shield against problems like the recent incident on Multichain, labeled by some experts as a “hack.”
The proposal enables token issuers to designate a list of canonical bridges. Only these bridges, once added to the list by issuers, can mint an official version of the issuer’s token. Issuers can also limit the number of tokens a bridge is allowed to mint. These parameters can be changed virtually anytime by the issuer.
The proposal is seen as ensuring that token ownership moves away from bridges to issuers themselves, curtailing losses if a bridge’s security is breached. In scenarios where a bridge is compromised, the issuer’s risk is restricted to the rate limit of that bridge, averting a complete loss. Without needing to go through a rigorous migration process with users, issuers can also smoothly delist a bridge.
Bhuptani also pointed out how this could avoid user experience issues in decentralized finance since every bridge will now issue the same official token, eliminating the need for different versions of the same token over time.
Now to spice things up, despite its promising nature, there might be possible challenges. Some may fear added complexity or regulatory scrutiny with this protocol in place. Questions may also arise about how exactly issuers will handle breaches, whether they can act swiftly and capably, and what provision is there for users during any probable transition periods. Unfortunately, these potential problems, like many other facets of emerging technology such as blockchain and crypto, still lacuna in the grand scheme.
Cross-Chain Transfer Protocol (CCTP), a similar initiative, was already created by stablecoin issuer Circle for its token, US Dollar Coin (USDC). The protocol permitted them to list official bridges. EIP-7281 aims to further implement the fundamental concept behind CCTP but also strives to broaden its application to all tokens.
Both Circle and Tether blacklisted some of the addresses used in the Multichain incident, successfully preventing $65 million worth of USDC and Tether from being moved out of these addresses. Whether EIP-7281 and other similar proposals will forever end these kinds of unfortunate incidents still hangs in the balance, but it’s clear that some effort is being made towards that end.
Source: Cointelegraph
