• Connext and Alchemix have launched a new token standard to reduce losses from bridge exploits
• The xERC-20 standard allows issuers to control the “canonical” minting of tokens through bridges
• The xERC-20 was originally proposed as an Ethereum Improvement Proposal (EIP) 7281
Connext and Alchemix Introduce Cross-Chain Token Standard
Connext and DeFi platform Alchemix Finance have announced the launch of a new cross-chain token standard called xERC-20. This new token standard is designed to reduce losses from bridge exploits by allowing issuers to maintain control over the “canonical” minting of tokens. Through this, they can establish which bridges are allowed to mint their tokens, as well as how many tokens each bridge can mint.
Purpose of xERC-20
The purpose of xERC-20 is to help issuers protect themselves against exploitation on bridges. Bridges are often vulnerable targets for hackers, who can steal funds from users who mistakenly use these third-party services. By allowing issuers to set their own parameters for bridge minting, they can limit the potential damage that could be done by any malicious actors.
Origins of xERC-20
xERC-20 was initially proposed on July 7, 2023 in an Ethereum Improvement Proposal (EIP) authored by Connext’s founder Arjun Bhuptani. In his proposal, Bhuptani argued that this type of system would best protect token issuers from any losses due to bridge hacks. As such, he suggested a system where token issuers could maintain lists of official bridges and decide how many tokens each one could mint.
Impact on DeFi Ecosystem
If successful, this new token standard could have a major impact on the DeFi ecosystem as it would help protect users and projects from exploitation on bridges. It also provides an additional layer of security for those looking to transfer funds across different networks in an efficient manner without having to worry about their money being stolen or lost due to hacks or other malicious activity.
Overall, the introduction of the xERC-20 token standard is a welcome development in the world of DeFi protocols and cross-chain interoperability. With its ability to give issuers more control over how their tokens are used on bridges, it should help reduce losses due to exploitation and provide users with peace of mind when transferring funds between different networks.