xERC20s
Last updated
Last updated
Each unique GMP solution operates through its distinctive token passing method, often employing variations of the lock/mint process. This involves locking the original token on the source chain and mint a GMP wrapped version of the token on the destination chain (e.g., axlUSDC and lzUSDC).
Yet, handling GMP wrapped iterations of the original token presents certain drawbacks:
Fragmented liquidity: Wrapped tokens lack fungibility between different bridges.
Sovereignty: Ownership of the wrapped token transitions to the GMP, causing the original token issuer on the source chain to relinquish control over the token on remote chains.
Vendor lock-in: The wrapped token contract becomes indefinitely tied to a particular GMP, leading to limited flexibility.
The XERC20 standard (EIP-7281) seeks to overcome these limitations by establishing a distinct token contract capable of achieving cross-chain fungibility.
This extension of the ERC20 standard introduces configurable permissions for specific addresses (bridges), enabling them to perform burns or mints within defined limits over designated time periods (For instance, bridge 0x12.. has a daily burn limit of 10^6 and a daily mint limit of 10^6).
This establishes a protocol for interaction between XERC20 and bridges, outlined as follows:
The issuer deploys the identical XERC20 token contract across desired chains.
The issuer grants burn/mint permissions to bridges on each XERC20 contract.
Bridges execute burn/mint functions on XERC20 contracts, enabling the transfer of value across chains.
This method offers several benefits:
The token issuer retains ownership of all token contracts.
Fungibility remains intact as all tokens are represented by identical contracts.
There's no lock-in to a specific GMP; if the token issuer wishes to support a new bridge, they can simply set rate limits for the new bridge within their XERC20 token. Similarly, if the token issuer opts to cease support for a bridge, they can set rate limits to 0 for that specific bridge.
Bridges are rate limited, reducing risk over time
If the issuer has previously deployed a traditional ERC20 on the source chain, XERC20 offers a LockBox mechanism—a straightforward contract supporting 1:1 lock/mint and burn/unlock operations.
When a user locks (deposits) a specific amount of the legacy ERC20 token, an equivalent amount of the XERC20 token is minted. This allows users to convert their legacy ERC20s into XERC20s, enabling cross-chain transfers through Glacis.
When users transfer XERC20 tokens back to the source chain (token home), they can withdraw the initial amount of ERC20 tokens through this mechanism by burning the equivalent amount of XERC20 tokens.
Developers who wish to develop an xERC20 token can use Glacis as an underlying bridge. Glacis provides many additional security features on top of xERC20, which can help developers with advanced security features.
For example, inheriting from the SimpleTokenMediator allows a developer to write different security assumptions based off of the token amount- such as requiring different bridges & different quorums for token payloads above 10,000. Using Glacis for your xERC20 also helps simplify the process by using a single interface for multiple bridges.
If interested in using Glacis for xERC20 routing, please reach out to the team. We can help guide &/or develop use of your token as well as provide seamless onramping into the Li.Fi ecosystem via Glacis Airlift.
xERC20 is one of many cross-chain standards that attempts to give developers the power to develop their own cross-chain tokens. While developers have shifted from the lock & mint model through a specific bridge to a self-deployed burn & mint model, xERC20 is still the most bridge-agnostic approach. All other cross-chain token standards are created by their own bridge, and many of them feature vendor lock-in with their creator.
If you are interested in bridging tokens via these alternative token standards, we recommend using our cross-chain token sending product, Airlift. Glacis Airlift allows users to easily send tokens across chains, all through a single interface.
