TL;DR: The ERC-20 standard has become a popular way to create digital assets and assign protocol voting rights on the Ethereum blockchain. When evaluating an ERC-20 token for listing, Coinbase performs a security assessment looking primarily for these four qualities:
Verified source code
Industry-standard library use
Limited scope for privileged roles
Simple, modular design
To safeguard users, Coinbase performs a thorough security review of each token before it can be listed. One of the most commonly requested token categories is an Ethereum smart contract standard known as an “.”
You might be asking yourself, “How complicated can these tokens really get?” Spoiler alert: very. Though the ERC-20 standard is fairly simple, the diversity of ERC-20 implementations is remarkable, from simple individual contracts to entire ecosystems.
Below, we outline a set of security guidelines that we recommend for all ERC-20 tokens. These qualities give token holders confidence in ownership of their token and make exchanges such as Coinbase more likely to list that token. If these best practices are not followed, Coinbase may be unable to list your token or your listing may be delayed.
This is the most important step to getting a token listed. Without access to source code, an auditor or security engineer cannot easily analyze the token’s behavior, precluding high confidence reviews. Verifying code, a low effort action for an asset issuer, is the highest leverage step towards getting a token listed.
To effectively verify the token’s code:
Similar to the adage of “don’t roll your own crypto,” avoid writing smart contract code from scratch as much as possible. A single developer or team may, regardless of experience, miss a crucial detail, compromising the integrity of the token. In comparison, popular and well-vetted open source smart contract standards are rigorously scrutinized and tested, making them the most secure known implementations.
Rather than building a token from scratch:
Tokens often have privileged roles, also known as superusers, often termed “owner,” “admin,” or “controller.” In some smart contracts, these roles can wield significant power, such as pausing transactions, modifying balances, or completely changing the token’s logic. Superuser privileges threaten our ability to safely custody customers’ assets, diminishing the likelihood of listing the token on Coinbase.
To limit privileged roles:
Do not allow any roles to freeze, burn, or otherwise modify user funds without permission.
If feasible, use an upgrade pattern where the user must agree to token upgrades rather than allowing the privileged role to unilaterally change the contract’s functionality.
If unable to do the above, provide detailed policies and procedures for quorum-based key management and use, especially for actions that impact user balances. Ideally, keys would be held by a qualified custodian that can certify that the quorum is met before the role is able to take action.
Our favorite tokens to evaluate from a security perspective are the boring ones: they come with no surprises. Though complex protocols may enable advanced features for tokens, the token itself need not be complicated. “Simple” refers to reducing the number of components composing a token project, and “modular” refers to separating logic and responsibilities between contracts.
To lessen the token’s complexity, thus minimizing possibility of failure:
Keep token-related functions minimal by separating the token contract from the rest of the protocol.
Reduce or eliminate external token dependencies.
Prefer to use fewer contracts to implement the token.
Smart contract development is laced with subtleties, and failures can cost millions of dollars. An external audit from a reputable security firm, looking for both smart contract vulnerabilities and business logic flaws, can uncover critical issues and increase confidence in the correctness of the token.
To ensure your token is properly examined for vulnerabilities:
Well-organized and up-to-date documentation accurately describing a project in thorough detail is every engineer’s dream. Without such documentation, reviewers may be forced to spend excruciating time deciphering the project’s intent and structure.
To ease the lives of any onboarding developer or security engineer, ensure the availability of documentation which covers:
The token’s purpose
The project’s architecture and dependencies
Superuser roles which affect the token’s behavior or user funds
Security controls used to manage superuser keys and roles
Solidity, designed for the EVM, regularly evolves not only to empower developers but to defend smart contracts from vulnerabilities by default. The language builds in protections to prevent developers from accidentally making their smart contracts prone to attack; one such improvement with v0.5.0 was rather than .
Up-to-date Solidity versions come with an added benefit: popular tools for automated analysis, such as static analysis and formal verification tools, do not work as well (if at all) with older versions of Solidity.
To be as up to date as possible:
Tokens, especially ones with complexity, should come with a comprehensive set of tests with significant coverage (aspiring for 100%), from unit tests to end-to-end tests. Tests not only catch bugs early but also implicitly describe a token’s expected behavior, a helpful complement to thorough documentation.
To ensure your token is well-tested:
Write unit tests for each newly written function to test basic properties (e.g. a user cannot transfer more than their balance).
Have end-to-end tests that go through important flows to ensure that the project behaves as expected, possibly catching severe bugs.
Deploy the project to a testnet to test vital smart contract functionality and to catch any strange or unexpected issues (such as gas limits) before deploying to mainnet.
Although anyone can create a boilerplate ERC-20 token with relative ease, implementations can vary greatly in complexity and security. By developing tokens with these security best practices in mind, the path towards building an open financial system becomes much safer. At Coinbase, we look forward to embracing new technology and listing innovative projects on our platform and hope this guidance will be useful both to developers and the community at large.
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Implementing Coinbase’s security guidelines does not guarantee an asset to be listed on Coinbase. Coinbase evaluates prospective assets against our to assess factors like security, compliance, and the project’s alignment with our mission of creating an open financial system for the world. To apply for listing, fill out an application .
Coinbase does not endorse or promote any of the projects or cryptocurrencies mentioned in this blogpost. Any descriptions of functionality and services provided are for information only. Coinbase is not responsible for any loss of funds or other damages caused as a result of using any of the projects described above.
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Nov 29, 2023,
3min read time
Nov 28, 2023