Tokens built on the Solana blockchain are becoming a bit more programmable, with their developers now able to implement rules about who can hold them and what they can do with them.
The Solana Foundation, a key group in the management of the Solana blockchain, said on Wednesday that the upgrade of the “token extensions” to Solana’s SPL token standard is now live after more than a year in development; It used to be called Token-2022.
Regardless of the name, this service means improving compliance controls for companies building tokens on Solana, according to the Solana Foundation. Token extensions allow these companies to hardcode various features into their tokens, such as whitelisting, automatic transfer fees, and transfer confidentiality, that did not previously exist.
This could be especially attractive to stablecoin issuers, the foundation said in a press release. Paxos and Japanese company GMO Trust both issue stablecoins on the Solana blockchain that use token extensions. A spokesperson for the Solana Foundation said token extensions give issuers “the ability 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: Whenever a token is transferred, a “transfer hook” will call a program that checks whether that transfer is allowed, and revokes the transfer if it is not.
Transfer fees: Tokens automatically pay a fee upon transfer, much like the royalties NFTs sometimes pay to their artists when sold on the secondary market. But unlike NFT royalties, which have suffered as several marketplaces refused to enforce them, fees implemented through token extensions cannot be circumvented.
Confidential transfers: Tokens use zero-knowledge proofs to hide confidential information, such as payment amount, during transfers. Chain sleuths can see that x address sent tokens to y address, but not how many they sent.
Permanent Delegation Power: Token issuers can retain control over their tokens, specifically the ability to transfer or even destroy them, regardless of who the holder is. The briefing material envisions this being useful for stablecoins, securities tokens, and credentials.
Non-transferability: Token holders cannot transfer their assets to another wallet. This can be useful for identification.