A new EIP aims to revamp the tokenized vaults standard for RWAs

If EIP-7540 passes, protocols that have asynchronous workflows can benefit from yield-bearing vaults

article-image

Sergey Nivens/Shutterstock modified by Blockworks

share

A new Ethereum Improvement Proposal, or EIP, aims to introduce asynchronous deposit and redemption flows as an extension to the existing ERC-4626 tokenized vault standard.

ERC-4626 itself is a standard designed to introduce parameters for yield-bearing vaults. These vaults are smart contract platforms that execute strategies, providing rewards for the token depositor.

The standard, though, is designed to ensure that the vaults are atomic, meaning that swaps have a deposit and redemption limit. Another way to explain atomic vaults would be “all or nothing” — If X happens, Y must happen at the same time. 

In an interview with Blockworks, Asad Khan, a DeFi politician at Centrifuge, explains that with atomic transactions, a user who deposits something to lend immediately receives a token that represents what they share.

EIP-7540, in this instance, would ensure that asynchronous deposits and redemption flows are possible. 

This EIP has the potential to benefit protocols that deal with real-world assets (RWAs), cross-chain lending and liquid staking, according to Khan.

“The asynchronous request is you deposit a token, and you may not get the token back until the request is complete later on, this can be based on a number of parameters,” Khan said.

An example of an asynchronous request would be, if X happens, Y can only happen under the conditions that Z is met. 

In this case, X could be a lender who deposits collateral into a pool, Y would be the share that the lender receives only after Z, a borrower, actually borrows money from the pool.

As it currently stands, Khan explains, every RWA protocol has to deal with its own unique off-chain processes. The purpose of EIP- 7540, would be to standardize how protocols can handle these on and off-chain transactions. 

Asynchronous transactions could potentially lead to greater security risks, however. ERC-4626 vaults have been designed to be atomic to prevent one party from controlling multiple assets at the same time. 

Jeroen Offerijns, Centrifuge’s chief technology officer and co-author of EIP-7540, told Blockworks that asynchronous deposit and redeem flows are inherently more complex than atomic flows when it comes to implementation because of the additional state transitions that are required. 

“More attention should be to extensive testing of the flows, and auditing of any asynchronous vault implementation,” Offerijns said. “Standardizing can help by creating reusable property test suites, similar to what has been developed for ERC-4626.”

Offerijns noted that asynchronous flows will add pressure to protocols that must ensure an execution of a request operates fairly. Offerijns added that Cenfrigue has built an epoch mechanism that can bundle orders and even the playing field for requests and protect against frontrunning. 

EIP-7540 is still in its early stages. The proposal must first be discussed on the Ethereum Magicians forums before moving onto next stages. 

“Once consensus has been reached, the proposal will move to review, last call and in the end a final stage, at which point it is accepted,” Offerijns said.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Though the opposing flow trend is likely to slow over time, industry watchers note, bitcoin fund assets could one day eclipse the $90 billion gold ETF space

article-image

Celestia had the first mover advantage. EigenDA has staked ether. What sets Avail apart?

article-image

Bitcoin moved 1% higher Monday morning in New York, Matrixport analysts say $62,000 could happen next month

article-image

It’s hard to believe right now that crypto — even with all of its flexibility and massive capabilities — could ever be like cash on the internet

article-image

Michael Saylor announced Monday morning that MicroStrategy bought 3k more bitcoin after the X account was compromised over the weekend

article-image

Plus, Pudgy Penguins grows its brand and a group of Autoglyphs sell for $14.5 million