Connext Founder Introduces ‘Sovereign Bridged Token’ Standard After Multichain Incident

Investing in Web 3.0

On July 7, an Ethereum Improvement Proposal (EIP) was made to standardize token bridging between networks. Dubbed the “Sovereign Bridged Token” standard, or EIP-7281, the protocol allows token issuers to create canonical bridges across multiple networks.

Arjun Bhuptani, founder of the Connext bridging protocol, co-authored the proposal. In a July 7 post, Bhuptani suggested that the protocol will help prevent incidents like the July 6 Multichain hack.

The proposal allows token issuers to designate a list of canonical bridges. Only bridges added to this list can mint an official version of the issuer’s token. Additionally, issuers can limit the number of tokens a bridge is allowed to mint. These parameters can be changed at any time by the issuer.

According to Bhuptani, this proposal will shift ownership of tokens away from bridges and into the hands of token issuers. It will also limit losses if a bridge’s security comes into question. In other words, investing in Web 3.0 will be much safer.

Decentralized Finance and Cross-Chain Transfer Protocol

Bhuptani proposed that a unified token could help avoid user experience problems in decentralized finance. According to him, this would eventually make multiple versions of the same token redundant.

Circle’s Cross-Chain Transfer Protocol (CCTP) is an example of this concept, which lists official bridges for its token, USD Coin (USDC). EIP-7281 is an effort to make this solution applicable to all tokens, as mentioned in the proposal notes.

The Multichain incident, which involved $65 million worth of USDC and Tether (USDT), has led both Circle and Tether to blacklist the addresses used in the incident, thus preventing the tokens from being moved out.