Ethereum Developers Propose Token Standard To Protect Issuers From Bridge Hacks
ERC-7281 Would Allow Token Issuers To Limit Exposure To Cross-chain Bridges
By: Samuel Haig • Loading...DeFi News
Ethereum developers are proposing a new token standard to protect token issuers against cross-chain bridge exploits.
On July 7, Arjun Bhuptani, the founder of Connext, a cross-chain interoperability protocol, published a proposal for ERC-7281 to the Ethereum Magicians forum. The implementation would consist of a simple extension to the popular ERC-20 standard allowing issuers to limit their token’s exposure to bridges.
“Token issuers are the ones who get rekt when bridges get hacked,” Bhuptani said. “This means token issuers should be ones to decide which token is ‘canonical,’ supported bridges, [and] risk tolerance per bridge.”
ERC-7281 would implement a token burning and minting interface, customizable rate limits for burns and mints on bridges, and a “Lockbox” consolidating token liquidity on Layer 1 for token issuers.
Bridges Hacks Top $2B
Bridges have historically been notoriously enticing targets for hackers, with four of the five largest DeFi exploits ransacking bridges for more than $2B, according to Rekt.
Bhuptani published ERC-7281 after cross-chain bridges Poly Network and Multichain were exploited last week. The Multichain exploit saw around $130M worth of unauthorized transfers leave the protocol, including $120M from its Fantom bridge. The Poly Network attacker made off with more than $10M after printing trillions of tokens out of thin air.
The incidents highlighted many of the risks asset issuers face from bridges, with Circle freezing $60M worth of USDC and Tether blocking $2.5M USDT stolen by the Multichain hacker. Poly Network also copped flak for failing to pause its protocol until seven hours after the exploit transpired, suggesting token issuers may have been able to act faster if they could limit token outflows through specific bridges, as proposed in ERC-7281.
Bhuptani said the rate limit feature would also incentivize competition among bridging protocols to provide security rather than liquidity to users.
Interchain Security and Layer 3
Bhuptani emphasized the importance of inter-chain security as Ethereum’s multi-chain scaling ecosystem expands.
Leading Layer 2 teams are now pivoting towards symbiotic multi-chain Layer 3 ecosystems to unlock further throughput gains. Examples of growing L3 initiatives include Optimism’s Superchain, Arbitrum Orbit, zkSync’s ZK Stack, and Polygon’s 2.0 roadmap.
“With the rapid proliferation of L2 domains, fungible token liquidity has become increasingly fragmented across domains… [ERC-7281] enables bridging tokens across domains without creating multiple infungible representations of the same underlying asset,” wrote Bhuptani.
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