A new Ethereum Improvement Proposal (EIP) has been submitted with the goal of standardizing the connection process of tokens between networks. This "Sovereign Bridged Token" standard, or EIP-7281, would allow token issuers to create official bridges between multiple networks, enhancing security and limiting potential losses from bridge hacks.
Arjun Bhuptani, the founder of Connext bridging protocol, co-authored the proposal. He indicated that this standard would aid in preventing situations like the Multichain incident, which occurred on July 6 and has been termed as a hack by some experts.
The EIP-7281 proposal provides the ability for token issuers to designate a list of canonical bridges. Only bridges added to this list would be able to mint an official version of the issuer's token. Furthermore, issuers can limit the number of tokens a bridge can mint and modify these parameters at any given time.
Bhuptani believes this standard will transfer token ownership from bridges (canonical or third-party) to token issuers themselves, limiting losses in case of a bridge's security compromise. This also provides the flexibility for issuers to delist a bridge seamlessly, avoiding a lengthy migration process for users.
The proposal could also enhance user experience in DeFi protocols, as all bridges would issue the same official token. Over time, this could eliminate the need for multiple versions of the same token.
Circle, a stablecoin issuer, has already developed the Cross-Chain Transfer Protocol (CCTP) to list the official bridges for its token, USD Coin (USDC). EIP-7281 aims to apply the CCTP concept more broadly to all tokens, according to the proposal notes.
