In a concerted move towards enhancing security and reducing physical and digital losses, Connext and Alchemix have launched a new cross-chain token standard. This step finds its origins in an earnest endeavour to help limit the extent of destruction bridge exploit losses can bring about.
Essentially, the cross-chain bridging protocol from Connext will facilitate the introduction of a new token standard known as the “xERC-20”. The new standard empowers token issuers with the ability to maintain an official record of bridges and exercise control over the number of tokens each bridge can mint. This comes as a part of a larger announcement made on July 24th.
The conversation around the creation of this standard is not new. It can be traced back to July 7, when Ethereum Improvement Proposal (EIP) 7281 was made. The proposal, co-authored by Connext’s founder, Arjun Bhuptani, revolves around the notion of minimizing bridge hack losses. The proposed standard would greatly limit unofficial versions of a token being issued by each bridge on every network. Instead, bridges would be allowed to mint “official” versions of each token, but only with the specific consent of the token issuer.
However, this raises questions over the repercussions of such a system. Under the EIP-7281 provision, bridges still retain the power to mint their own versions of tokens, though they would not be recognized as “canonical” versions. Consequently, consumers could potentially discard unofficial versions of coins, placing the responsibility of avoiding bridge hacks squarely on the shoulders of each token-issuer, thereby aiming to protect end-users from suffering losses.
Another significant development is the announcement that the standard will be introduced in Connext and Alchemix in advance of its official approval. This is to facilitate immediate reliance by end-users on the new system. The protocol will remain “forward compatible” with the official version, if and when it is approved by the EIP Editors.
Regardless of the important potential it bears, the xERC-20 token standard does not escape criticism. The issue of bridge security is a crucial topic of concern, especially after an alarming incident on July 7 when over $100 million was puzzlingly withdrawn from the Multichain bridging protocol. The absence of a mechanism to differentiate between “official” and “unofficial” versions of coins may lead to a distorted perception of the real value represented by the coins. This makes further scrutiny and comprehensive testing essential before any wider implementation of such a system can take place.
Source: Cointelegraph
