ERC-7681: Dual Nature Multi Token Protocol

Combining fungible token ERC-20 and multi-token ERC-1155

Metadata

Status: DraftStandards Track: ERCCreated: 2024-04-08

Authors

Sennett Lau (@sennett-lau)

Requires

EIP-20, EIP-1155

Links

GitHub page Discussion on Ethereum Magicians

Abstract

This proposal ERC-7681 delineates the integration of the fungible ERC-20 token contract with the semi-fungible ERC-1155 multi-token standard, enabling cohesive operations between both standards within a single contract framework. It defines a mechanism for combining two token contracts and synchronizing operations between them.

Motivation

Inspired by ERC-7631 Dual Nature Token Pair, which introduced a concept of interlinkable tokens between ERC-20 and ERC-721, a challenge arises due to the duplicated Transfer(address, address, uint256) event, making full compatibility challenging. However, combining ERC-20 and ERC-1155 offers similar benefits of non-fungible token (NFT) fractionalization natively. Here, acquiring ERC-20 tokens could automatically issue ERC-1155 tokens proportionally to the ERC-20 holdings, achieving full compliance with both standards.

Furthermore, analogous to ERC-7631, this proposal allows users to opt out of ERC-1155 mints and transfers during the ERC-20 to ERC-1155 synchronization process.

Specification

The key words "MUST", "MUST NOT", "REQUIRED", "SHALL", "SHALL NOT", "SHOULD", "SHOULD NOT", "RECOMMENDED", "NOT RECOMMENDED", "MAY", and "OPTIONAL" in this document are to be interpreted as described in RFC 2119 and RFC 8174.

Overview

Every ERC-7681 MUST implement both ERC20 and ERC1155 interfaces.

ERC-7681 Interface

The ERC-20 contract MUST implement the following interface.

ERC-7681 Skippable Interface

The ERC-7681 contract MAY implement the following interface.

Rationale

Implementation Flexibility

This proposal intentionally does not prescribe specific token synchronization logic to allow for diverse implementation strategies and novel use cases, such as one-to-one synchronization or fractionalization of ERC-1155 tokens based on ERC-20 holdings. Developers are afforded the flexibility to determine their synchronization approach, provided it remains fully compliant with the specifications of both token standards.

ERC-1155 Token Skipping

For instances where the owner is a smart contract, setting the skip status to true by default can prevent unnecessary ERC-1155 minting for interactions with contracts like DEXs and lending protocols, thereby potentially reducing gas costs.

Backwards Compatibility

This proposal is fully backward-compatible with the existing ERC-20 and ERC-1155 standards, ensuring that contracts reliant on these standards will continue to function seamlessly.

Security Considerations

Out-of-gas Denial of Service

When user transfers ERC-20 tokens, it can trigger the automatic minting, transfer, or burning of various ERC-1155 tokens. This process can lead to gas expenses that grow linearly with the number of actions O(n) rather than the fixed cost O(1) usually seen with ERC-20 token transactions. Additionally, the mechanism for choosing ERC-1155 token IDs might increase gas expenses further. Therefore, any synchronization strategy needs to account for the potential rise in ERC-1155 associated gas costs to avoid running out of gas, which could result in denial of service situations.