Whitelisting ERC-20

Overview

The community can propose fungible (ERC-20) tokens on Ethereum or other EVM compatible chains connected by ZetaChain to be whitelisted. If whitelisted, such ERC20 tokens can be managed by ZetaChain omnichain smart contract via a ZRC20 contract on ZetaChain’s EVM.

Note: The protocol has strict considerations for whitelisting tokens in order to protect users of the Mainnet network. These restrictions ensure compatibility, performance, economic security, and overall system integrity. The whitelisting process is necessary to prevent potential risks and vulnerabilities associated with non-compliant or malicious tokens that can harm users and the ecosystem. Any changes to the policies set out here or the protocol itself can be proposed through governance.

Background

The zetacored state maintains a list of whitelisted foreign fungible assets, including ERC20 tokens on external chains in the foreign_coins construct. Each of the foreign_coin is manageable by a ZRC20 contract on Zeta EVM.

By default all native gas assets on connected chains will be whitelisted. Other fungible tokens need to be whitelisted.

The reason ZetaChain requires whitelisting process is because:

1. Compatibility: the ZetaChain system, by design, only works with regular ERC20 tokens, not arbitrary ones.
2. Performance: tracking unbounded number of token contracts cause performance issues.
3. Economic security: zombie tokens, infinite mints, economically unviable tokens may cause cascading problems on ZetaChain.
4. Security: irregular ERC20 contracts may increase attack surface of ZetaChain system (re-entry, self-destruct, etc).

Considerations for ERC20 contracts to be whitelisted

Must means necessary conditions; should means strong preference.

1. Must be ERC20 compliant and be regular ERC20.
2. Must not rebase.
3. Must not have transfer fees.
4. Must not be involved in any scams.
5. Must be verified on Etherscan or equivalent explorers on other chain(s).
6. Must have a working product, utility, and an active community/userbase.
7. Must be audited.
8. Should be economically valuable/viable.
9. Should not be ERC777 or equivalent that can execute arbitrary code upon receiving funds.
10. Should have a proven track record without recent security, operational, or implementation issues.
11. Should have a source of initial liquidity.

Procedure

First, a non-binding governance proposal that articulates the token and its suitability (satisfaction of the above considerations) and benefits of whitelisting the fungible token should be raised and passed.

Proposals that are passed will be reviewed, and if a decision is made to go ahead with whitelisting the ERC20, according to the above requirements and preferences as criteria, the protocol admin group 2 will sign a MsgWhitelistERC20 transaction and broadcast it. The ZetaChain network will do the following procedure:

1. Deploy a ZRC20 contract on Zeta EVM to track and manage the foreign ERC20 token;
2. Add an entry to the state variable viewable at {IP}:1317/zeta-chain/fungible/foreign_coins;
3. Whitelist the ERC20 contract address on the ERC20Custody contract on that external chain;

After these steps are done, the ERC20 whitelisting is finished. Liquidity for the given asset should promptly begin deposits in order to provide a smooth experience for users interested in interacting with the token.