The growing complexity of blockchain ecosystems has led to fragmented liquidity, making it difficult for assets to move seamlessly across different networks. Layer 1 and Layer 2 solutions often face a cold start problem, where they launch without a diverse range of tokens, while token issuers struggle to maintain liquidity across multiple chains. Additionally, users must navigate bridges, wallets, and liquidity depth issues just to execute trades efficiently. As blockchain adoption scales, seamless asset availability is crucial for improving the on-chain trading experience. Universal Protocol addresses these challenges by enabling frictionless trading for any token across multiple chains.

What is Universal Protocol?

Universal Protocol was conceived to address one of the most pressing challenges in the crypto space—liquidity fragmentation across multiple blockchains. In June 2024, the team released its whitepaper, outlining a vision for seamless on-chain asset trading, enabling users to trade any token on any blockchain through a unified wrapped asset system. The project quickly gained attention from major investors, securing funding from Data Tech Fund, FourCities Capital, Coinbase Ventures, and a16z Crypto Investments. The backing from a16z Crypto, a leading venture firm co-founded in 2009 by Marc Andreessen and Ben Horowitz, signaled strong institutional confidence in Universal Protocol’s approach to cross-chain liquidity. With $19.2 billion in assets under management, including $3.1 billion in crypto investments, a16z provided strategic resources, industry expertise, and access to an extensive network of executives, engineers, and financial leaders.

Following its funding round, Universal Protocol launched its wrapped asset infrastructure, introducing uAssets, allowing assets like XRP, SUI, SOL, and DOGE to be wrapped and traded efficiently across different networks. This innovation aimed to streamline liquidity and enhance accessibility, eliminating the need for multiple wallets or complex bridging mechanisms. Adoption grew rapidly, and within months, trading volume surpassed $950 million, demonstrating strong market demand for a seamless, on-chain trading experience.

By the end of 2024, Universal Protocol had integrated 80+ wrapped assets, providing a standardized API for developers to enable cross-chain trading. With a commitment to expanding liquidity and improving user experience, Universal Protocol continues to push forward, positioning itself as a core infrastructure layer for the decentralized financial ecosystem.

How Does Universal Protocol Work? Technology and Token Issuance

Universal Protocol is a wrapped asset protocol designed to facilitate seamless cross-chain trading, enabling any token to be used across multiple blockchain ecosystems. It is built on a secure and verifiable custody model, similar to wBTC, USDT, and USDC, but introduces significant improvements in minting speed, cross-chain efficiency, and non-EVM asset support. Universal eliminates liquidity fragmentation by ensuring 1:1 asset backing and optimizing the minting and redemption process for wrapped tokens (uAssets), making it more efficient than traditional bridging solutions.

At the core of the Universal Protocol are three key participants: Custodians, Merchants, and Users. Custodians are responsible for securely holding the underlying assets that back Universal Tokens. These are regulated financial institutions that store collateral, ensuring full 1:1 asset backing and maintaining compliance and transparency. Merchants are permissioned entities that facilitate the minting and redemption of Universal tokens, acting as liquidity providers who ensure efficient cross-chain execution. Users are the end participants who utilize uAssets for transactions, trading, and integration into DeFi applications.

Source: universal protocol whitepaper

The Universal Network operates through a burn-and-mint mechanism, which improves cross-chain liquidity management. Unlike traditional lock-and-mint bridges, where assets are locked on one chain and minted on another, Universal ensures that tokens are burned on the source chain before being minted on the destination chain. This method eliminates liquidity fragmentation and provides instant settlement, making wrapped assets more efficient and secure.

Universal also enables off-chain assets like DOGE, XRP, and other non-EVM assets to be wrapped and traded on EVM-compatible blockchains. This innovation expands the reach of DeFi, allowing previously isolated assets to be used in on-chain financial applications, such as DEXs, lending protocols, and staking platforms.

The issuance and redemption process is managed by Authorized Merchants who interact with Custodians to deposit and withdraw collateral. When a user wants to mint a uAsset, the Merchant deposits the underlying collateral with a Custodian, which then authorizes the issuance of the equivalent uAsset on the Universal Network. This process ensures full collateralization and prevents over-minting or liquidity manipulation. Similarly, when a user wants to redeem an asset, the uAsset is burned, and the equivalent collateral is released back to the Merchant, who then distributes it to the user.

Token Issuance

Token issuance within the Universal Protocol refers to the process of increasing the supply of Universal tokens (uAssets) in circulation through minting, ensuring that each token is fully collateralized by its respective underlying asset. This process is strictly managed by the Universal network and can only be initiated by authorized Merchants. The system ensures that every issued uAsset is backed on a 1:1 ratio, guaranteeing security, stability, and transparency in token supply. Additionally, to maintain compliance and security, Universal tokens can only be minted to whitelisted destination addresses belonging to authorized Merchants.

The issuance process begins with a Merchant, who signals their intent to mint Universal tokens by sending a transaction to the Universal token contract. This transaction specifies the blockchain and the recipient address where the newly minted tokens should be delivered. The Merchant then transfers the equivalent underlying assets to the designated Custodian, ensuring that the deposited assets match the exact value of the Universal tokens being requested. The Custodian plays a crucial role in validating and securely storing the underlying assets, maintaining the integrity of the system.

Once the assets are deposited, the Universal network performs verification checks to confirm that the received collateral matches the requested issuance amount. If verified successfully, the network executes a minting transaction, creating the specified number of Universal tokens. The newly minted tokens are then transferred to the Merchant’s designated address on their chosen blockchain. This automated, permissioned process ensures that no over-minting or collateral mismatch occurs, preserving the fully backed nature of Universal tokens.

Source: universal protocol whitepaper

Token Redemption and Burning

Token redemption is the reverse issuance process, reducing the supply of Universal tokens by exchanging them for their underlying collateral assets. Similar to issuance, only Merchants are allowed to initiate redemption, ensuring the process remains secure and controlled. The redemption flow begins when a Merchant calls the burn function in the smart contract, specifying the exact amount of tokens to be redeemed.

Upon executing the burn function, the specified token amount is deducted from the Merchant’s Universal token balance on-chain, and the total supply of Universal tokens decreases accordingly. Once the tokens are successfully burned, the Merchant receives the equivalent amount of the underlying asset, completing the redemption process. This ensures that Universal maintains a transparent, fully collateralized supply, preventing any circulating tokens from exceeding the actual reserve held by Custodians.

Source: universal protocol whitepaper

Universal Token Liquidity & Acquisition

Universal tokens are essential for facilitating cross-chain liquidity, and Merchants play a key role in maintaining an efficient supply and demand balance. By minting new tokens, they ensure that liquidity is available on centralized (CEXs) and decentralized exchanges (DEXs), allowing traders to acquire and trade Universal tokens easily.

Token holders can purchase Universal tokens directly from available markets, benefiting from the liquidity provided by Merchants. The Universal relayer further ensures smooth price discovery and execution, reducing slippage and improving trading efficiency. If users wish to exit their positions, they have the option to sell their tokens back to Merchants, who then proceed to burn the repurchased tokens, effectively reducing the circulating supply and maintaining the integrity of the Universal ecosystem.

Source: universal protocol whitepaper

Universal Protocol Use Cases

By introducing wrapped uAssets, it ensures liquidity efficiency, reduces fragmentation, and improves accessibility in the DeFi ecosystem. Below are three primary use cases for Universal Protocol:

• Cross-Chain Asset Interoperability: Universal allows users to trade non-EVM assets like DOGE, XRP, and SOL across EVM-compatible blockchains. By wrapping assets into uAssets, traders can use them on decentralized exchanges (DEXs), lending platforms, and liquidity pools, expanding DeFi accessibility and eliminating the need for multiple wallets or manual bridging.
• Institutional-Grade Asset Custody and Liquidity: Institutions can utilize Universal Custodians and Merchants to mint and redeem assets securely, ensuring that all uAssets are fully backed on a 1:1 basis. This allows for high-volume cross-chain trading, settlement of financial instruments, and access to on-chain liquidity without the counterparty risks associated with traditional exchanges.
• Seamless DeFi Integration for Developers: Universal provides developers with a standardized API to integrate wrapped asset functionality into trading platforms, yield aggregators, and DeFi protocols. This removes the complexity of managing cross-chain liquidity and allows for better price execution, deeper liquidity pools, and improved user experience for decentralized applications.

Universal Protocol Main Features

uAssets

uAssets (such as uBTC, uSOL, and uXRP) are ERC-20 wrapped tokens issued by Universal Protocol to solve liquidity fragmentation across blockchains. These tokens allow users to trade, transfer, and utilize non-native assets across supported DeFi ecosystems.

The issuance process is managed by Authorized Merchants, who mint new uAssets by depositing an equivalent amount of the underlying collateral with a regulated Custodian. The redemption process works in reverse—Merchants initiate a burn request, and once the token is burned, the underlying collateral is released. This ensures that every uAsset remains fully backed 1:1 by reserves held in custody.

Unlike traditional bridge-based systems, Universal uses a burn-and-mint model, eliminating liquidity fragmentation and ensuring instant token movement across blockchains. Additionally, the protocol enhances scalability by enabling non-EVM assets (like XRP, DOGE, and SOL) to be traded in DeFi ecosystems. Future cross-chain bridging improvements will include Fast Bridge, where liquidity providers front assets for instant transfers, and Slow Bridge, which moves assets securely after chain finality.

Every uAsset is backed at least 1:1 by reserves custodied by Coinbase Prime, ensuring that all wrapped tokens maintain real asset backing. The Universal Protocol integrates Reclaim Protocol’s zkTLS to generate verifiable proof-of-reserves, allowing users to independently audit collateral holdings.

Source: universal.xyz

Building with uAssets

The Universal Protocol enables developers to integrate uAssets into their applications, expanding cross-chain liquidity and asset availability. By offering 80+ wrapped assets and a Just-in-Time (JIT) liquidity system, Universal allows protocols to facilitate trading, lending, and derivatives without relying on fragmented AMM pools.

Developers can leverage the Universal Relayer API to integrate off-chain order book liquidity, allowing for better execution, deeper market depth, and efficient cross-chain transactions. Instead of relying on passive liquidity pools, Universal ensures that orders are executed dynamically through instant minting and redemption mechanisms.

Universal’s flexible integration model makes it fully composable with DEXs, lending platforms, structured DeFi products, and wallets. For example, DEXs can offer CEX-level liquidity by using uAssets for high-volume trading pairs, while lending markets can expand collateral options by including previously illiquid assets like uDOGE, uXRP, and uSOL. Wallets can also natively support uAssets, enabling users to hold and trade cross-chain assets without requiring bridges.

Providing Liquidity

Universal Protocol enables users to provide liquidity by depositing assets into liquidity pools, earning trading fees and incentives while supporting cross-chain market depth. Liquidity providers stake stablecoins, ETH, or wrapped assets into Universal’s pools, which are used for executing orders, improving market efficiency, and reducing slippage in trading pairs.

Live liquidity pools offer high-yield rewards, with some APR rates exceeding 3,000%, depending on the asset pair and trading volume. For example, the WETH/uLINK pool offers a 1,912% APR, while WETH/uSUI pools yield over 450% APR. These pools enhance cross-chain liquidity, allowing traders to execute low-slippage trades while providers earn fees from every transaction.

Universal uses concentrated liquidity models, where liquidity is dynamically allocated to high-traffic trading ranges, maximizing capital efficiency. Additionally, Merchants play a key role in maintaining liquidity across CEXs and DEXs, ensuring smooth token availability and efficient price discovery.

Source: universal.xyz

Universal.xyz Review

One of Universal’s key strengths is its liquidity efficiency. By working with authorized Merchants and Custodians, it ensures instant minting and redemption of assets while maintaining full collateral backing. This allows DeFi users, institutions, and developers to access a broad range of assets without managing complex bridging mechanisms. Additionally, Universal integrates off-chain order book liquidity, enabling better price execution compared to traditional automated market maker (AMM) models.

However, Universal’s centralized aspects could concern users who prioritize fully decentralized solutions. Since only authorized Merchants can mint and redeem uAssets, the system relies on permissioned entities, which may introduce counterparty risks despite its proof-of-reserves transparency. Furthermore, cross-chain bridging features are still in development, meaning its full potential is yet to be realized.

Overall, Universal.xyz presents an efficient and scalable solution for cross-chain liquidity, catering to institutional and retail users seeking seamless DeFi asset transfers. While its permissioned architecture offers stability and security, the reliance on custodians and Merchants may not appeal to users looking for a fully decentralized protocol.

News on Universal Protocol

As announced on March 5, 2025, on X, Universal.xyz launched its mainnet, reaching $900 million in trading volume. This milestone highlights its role in cross-chain DeFi liquidity, enabling seamless wrapped asset trading across multiple blockchains. By improving liquidity efficiency and asset accessibility, Universal aims to provide a scalable solution for cross-chain transactions. As adoption grows, its infrastructure could play a significant role in enhancing interoperability within decentralized finance.