Solana's 'Token Extensions': An Attraction for Compliance-Minded Developers

• Solana Blockchain's Advanced Token Programmability
• Enhancing Compliance Controls for Businesses
• Benefits to Stablecoin Issuers
• Available Extensions for Developers
• Transfer Hooks
• Transfer Fees
• Confidential Transfers
• Permanent Delegate Authority
• Non-transferability

Solana Blockchain's Advanced Token Programmability

The Solana$104 5.03% blockchain now supports enhanced programmability of its tokens. Developers can now incorporate rules that control the ownership and usability of these tokens. This advancement has been made possible by the Solana Foundation's token extensions upgrade to Solana's SPL token standard. Formally known as Token-2022, the upgrade has been in development for over a year.

Enhancing Compliance Controls for Businesses

The key purpose of this service is to improve compliance controls for businesses creating tokens on Solana. With token extensions, businesses can embed numerous features into their tokens, such as whitelisting, automatic transfers fees, and confidentiality on transfers, which were not possible before.

Benefits to Stablecoin Issuers

This new feature could be particularly interesting for stablecoin issuers, as stated by the Solana Foundation. Companies like Paxos and GMO Trust from Japan are already issuing stablecoins on the Solana blockchain that make use of token extensions. The Solana Foundation spokesperson suggests that token extensions provide issuers with the flexibility to adapt to a fluctuating regulatory environment.

Available Extensions for Developers

Developers have five extensions at their disposal, which they can mix and match according to their needs. The extensions are as follows:

Transfer Hooks

Each time a token is transferred, a transfer hook initiates a program that verifies whether the transfer is permissible and revokes the transfer if it is not.

Transfer Fees

Tokens will automatically pay a fee upon transfer, similar to the royalties some NFTs pay to their artists when sold on the secondary market. However, unlike NFT royalties, fees implemented through token extensions cannot be bypassed.

Confidential Transfers

Tokens will employ zero-knowledge proofs to keep confidential information, such as payment amount, secret during transfers. While blockchain detectives can see that tokens were sent from one address to another, they will not be able to determine the amount sent.

Permanent Delegate Authority

Token issuers can maintain control over their tokens, particularly the ability to transfer or even destroy them, regardless of who holds them. This could be advantageous for stablecoins, securities tokens, and credentials.

Non-transferability

Token holders are not allowed to send their asset to another wallet. This can prove beneficial for credentialing purposes.

Edited by Jonathan Stoker