Solana Strategy Lead: Solana’s Token Scaling Plans

Author: Bessie Liu, Blockworks; Compiler: Deng Tong, Golden Finance

Token expansion is a feature on the Solana blockchain that allows developers to integrate functionality into the assets they issue .

These features all have different focuses, such as integrating confidentiality or creating token-gated access to specific goods or services.

In an interview with Blockworks, Solana’s head of strategy described the variety of uses that token scaling can enable and how it can bring institutional interest to the blockchain.

The following is an excerpt from Blockworks’ interview with Federa.

Blockworks: Can you tell us about token scaling on Solana?

Federa: The token expansion is the summary of about three years of work, which actually started at the turning point in 2021. This work is done entirely by Solana Labs’ engineering team, and the goal of the initiative is to build the next generation of token programming on Solana.

Solana is a little different from other blockchains in that every time a token or NFT is deployed, a controller or contract is not actually deployed. On the EVM chain, if I mint an NFT, I actually deploy a contract and then deploy the data, which is why NFTs are more expensive because you have to deploy more contracts.

Solana has adopted a concept called program reusability from the beginning, that is, every program on the network is designed to be used by anyone on the network. So if I were to mint a token, what I do is instead of deploying the entire token program, I basically feed a bunch of data into an existing program on the chain.

So the token extension and this new token program are designed to bring a new set of features and options to the features and options you can build with tokens. You can do everything on the public Solana mainnet that you do on a private blockchain or a private subnet, and it's designed so that you can use this single token program to issue all different types of tokens with different types of Features and functionality.

Blockworks: What features are available? Can you go into some details?

Federa: On the blockchain, it is difficult to limit who can hold your tokens. For example, if you were suddenly added to the OFAC sanctions list, I would not only seize your assets, I would also need to take them away. Or if you lose your password and seed phrase, you won't get a second chance in Web3, which is necessary for many Web2 financial products.

We are seeing a lot of interest from token issuers in a feature called transfer hook permissions. This is a transfer hook token extension, basically a program that can be called on every transfer. This is very important because the program can approve or reject the transfer. It basically leverages on-chain data for compliance checks or just authorized transfer checks. This enables you to build a variety of complex token interactions.

Paxos has just launched PAX USD on Solana, and GMO has just launched two regulated stablecoins, zUSD and JPY stablecoins. All three stablecoins use different token extensions to perform functions they cannot perform on other networks.

Blockworks: What is the current status of token scaling on Solana? What features are currently available and what else is in the works?

Federa: Token extensions and concepts are not yet complete. It is not an immutable program today and needs to be updated and improved. Some bugs may be discovered at some point, so it's still going through the development process.

The folks at Solana Labs and Foundation are more than happy to add new token extensions if there is demand from the community, but so far most of the feedback has come from large institutions and financial companies. There hasn’t been much feedback from the Degens side, I’m sure they have a lot of creative ideas for new token expansions that we’d love to see.

I think, maybe within a year or two, we can get to a world where people are able to publish their own plans for scaling their tokens, and anyone can submit a pull request. It would be really cool to have a complete repository of token extensions. There are currently about 15 or 16 extensions. So, the token extension is not fully finished yet, but it is also fully available and audited.