Tokens built on the Solana blockchain are getting a bit more programmable, with their developers now able to implement rules around who can hold them and what they can do with them.
The Solana Foundation, a key group in managing the Solana blockchain said Wednesday that its “token extensions” upgrade to Solana’s SPL token standard is now live after well over a year in development; it used to be called Token-2022.
No matter the name, this service means to enhance compliance controls for businesses building tokens on Solana, according to the Solana Foundation. Token extensions will allow these businesses to hard-code various features into their tokens, like whitelisting, automatic transfer fees and confidentiality on transfers, that didn’t exist before.
This could have particular appeal to stablecoin issuers, the foundation said in a press release. Paxos and the Japanese company GMO Trust are both issuing stablecoins on the Solana blockchain that utilize token extensions. A spokesperson for the Solana Foundation said token extensions give issuers “optionality to comply within a changing regulatory environment.”
There are five extensions that developers can mix and match, according to briefing materials reviewed by CoinDesk.
Transfer hooks: Any time a token is transferred a “transfer hook” will invoke a program that checks whether that transfer is permissible, and revoke the transfer if it’s not.
Transfer fees: Tokens automatically pay a fee upon transfer, much like the royalties NFTs sometimes pay to their artists when they’re sold on the secondary market. But unlike NFT royalties, which have suffered from various marketplaces refusing to enforce them, fees implemented through token extensions can’t be bypassed.
Confidential transfers: Tokens will use zero-knowledge proofs to hide confidential information like payment amount during transfers. Chain sleuths will be able to see that x address sent tokens to y address, but not how much they sent.
Permanent delegate authority: Token issuers can retain control over their tokens, particularly the ability to transfer or even destroy them no matter who their holder is. The briefing materials envision this being useful for stablecoins, securities tokens and credentials.
Non Transferability: Token holders cannot send their asset to a different wallet. This could be useful for credentialing.
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