Interpreting Universal Protocol: The Token Wrapping Protocol Backed by a16z Enabling Cross-Chain Token Trading
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Interpreting Universal Protocol: The Token Wrapping Protocol Backed by a16z Enabling Cross-Chain Token Trading
What Universal needs to do is very straightforward: build an asset wrapping protocol that enables any token to be traded on any blockchain.
Navigating Web3 tides with focused insightsWritten by: TechFlow
As the market cools down, it might be better to look for opportunities in new alpha projects.
Beyond AI and memes, full-chain or chain abstraction narratives have consistently remained noteworthy trends.
In recent days, a new protocol named Universal has emerged, aiming to enable any token to be traded on any blockchain. More importantly, its official Twitter account was just created and currently has few followers—but notably includes a follow from a16z, which stands out.
In crypto, attention is rarely given without reason—there's always alignment in vision or interest.
Given that the protocol hasn't disclosed further details about its investor lineup or listing strategy and remains in a very early stage, we don’t yet know if there’s additional backing. But catching developments early is the right way to uncover potential opportunities.
Wrapped Assets + Coinbase Custody Enable Cross-Chain Trading
What problem does Universal aim to solve?
Looking at the current state of the crypto market, fragmented liquidity remains a persistent challenge. Both blockchains, projects, and users face unspoken difficulties during cold starts:
On day one of launching a new L1 or L2, there are no tokens/assets; when launching a token, projects can't afford to manage liquidity across every L1/L2; users must lock up liquidity on both chains when using bridges; not to mention the hassle of transferring assets between EVM and non-EVM chains.
Therefore, what Universal aims to do is simple—build an asset wrapping protocol enabling any token to be traded on any chain. By offering seamless on-chain trading experiences, it simplifies these cold-start processes and removes complexity for end users.
In a sense, this could also be considered a solution within the chain abstraction or asset abstraction space.
Specifically, Universal uses a wrapping, custody, and issuance system to enable fast and reliable trading:
Universal Tokens are special digital assets created by the Universal Protocol. They represent the value of native crypto assets (e.g., Bitcoin, Ethereum). Each wrapped asset is backed 1:1 by reserves—every wrapped token is secured by an equivalent amount of the underlying native asset.
For example: uBTC represents wrapped Bitcoin, and uETH represents wrapped Ethereum.
Universal supports issuing and trading assets on both EVM (Ethereum Virtual Machine) and non-EVM chains. This means users can seamlessly trade supported assets across different blockchains, without needing cross-chain bridges or moving to centralized exchanges.
The diagram below illustrates how wrapped assets achieve cross-chain liquidity:
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Issuance:
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A user wants to obtain a wrapped asset (e.g., uBTC).
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The user sends the native asset (e.g., Bitcoin) to an authorized merchant.
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The authorized merchant deposits the native asset and issues an equivalent amount of wrapped assets (uBTC) on a 1:1 basis.
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The user receives uBTC and can freely trade it across different blockchains.
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Exchange:
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Users trade wrapped assets (e.g., uBTC) on exchanges (DEXs or CEXs).
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Buyers and sellers complete transactions through the exchange.
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Redemption:
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A user wants to redeem their wrapped asset (e.g., uBTC) back into the native asset (e.g., Bitcoin).
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The user sends the wrapped asset (uBTC) to the authorized merchant.
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The authorized merchant receives the wrapped asset and returns the equivalent amount of native asset (Bitcoin) to the user.
A key role in this process is played by the "authorized merchant." When users purchase Universal Tokens, authorized merchants deposit corresponding native assets as collateral and issue an equivalent number of Universal Tokens based on those deposits.
According to public information, Universal has currently selected Coinbase Custody as its custodial service—the authorized merchant—meaning the original crypto assets will be held in Coinbase’s custody accounts.
By combining wrapped assets with Coinbase custody (via the authorized merchant mechanism), Universal enables free, secure, and efficient trading of various crypto assets across different blockchains.
Join the DC: Early Participation Methods
Currently, the Universal protocol will roll out in three main phases: Developer Preview (now), General Testnet, and General Mainnet.
For regular users, joining the protocol’s official Discord is required to gain access to the preview version.
Although the team hasn't publicly announced specific testnet interaction rules or incentive programs yet, getting involved early—especially while the community isn’t crowded—is a smart move for interested participants to get familiar with the project.
Within the official Universal community, all new members can only speak in a single welcome channel regardless of language or country. The team states this measure is designed to minimize scammers and bots. Real users must introduce themselves, greet others, and interact with the official Twitter account to earn different Discord roles, unlocking access to other channels.
Currently, the official Discord features four role tiers, each reflecting different levels of community engagement and contribution. Interested users can click here to join the Discord community and begin their journey toward earning testing privileges for the product preview.
Judging from the demo video shared by the team, the preview version’s interface resembles most DeFi products. Users can select assets from any chain to swap into Universal’s wrapped assets (such as uSol shown below), and network fees are currently free.
While this doesn't reflect the final product experience, as liquidity fragmentation worsens and hotspots emerge across multiple chains, a universal asset solution like Universal should find its own market fit.
We will continue monitoring the project’s latest developments. Stay tuned for what comes next.
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