The Ultimate Guide About Token Extensions on Solana

Only possible on Solana. Have you seen or heard this before? It’s their slogan for all the innovations taking place on Solana. One of their newest innovations is Token Extensions. These allow you to add new features on top of the original Token Program functionality.

This opens a lot of new options and possibilities. So, let’s take a closer look at what Solana is making possible this time around.

What Are Token Extensions on Solana?

Token Extensions are one of the newer Solana features. It allows you to add features to an existing Token Program functionality. Furthermore, you create non-transferable tokens. That’s of importance since these tokens have specific functions. For example, they can have custom attributes, like a revenue model. 

Furthermore, the Token Extensions don’t need a third-party tool. Here are some more samples or use cases for them.

  • Build better stablecoins — Provide native support and monetization options.
  • Simplify payments — You can couple native metadata with transactions. It offers institutions simplified payment settlements.
  • Offer consumers permanent delegation — You can gate token transfers. For example, NFTs or loyalty cards. It allows updating RWA assets that are tied to ownership.
  • Protect privacy — Native support can, for instance, mask account balances. This also works for transferred amounts.

So, this allows for new business standards and use cases. As shown above. Here are some advantages that Token Extensions offer. For example:

  • Developers have great flexibility. They can now customize how tokens behave. 
  • Solana built the extensions into the existing protocol layer. That’s why you don’t need any third-party tools.  
  • The Token Extensions are well-tested and audited. This reduces risks and protects your funds and protocols.
  • It saves devs and protocol on testing costs. You only need to add an already audited extension to the code.
  • Everything is ready to go, so you can deploy pilot projects fast.  
  • Enterprises have fast and low-cost options on their hands. They can add advanced token economics and behavior.

The Available Token Extensions

Currently, there are two types of Token Extensions. These are, 

1) Mint Extensions  

These extend token abilities. You add them on top of an existing Token Program. Current mint extensions include, for example:

  • Confidential transfers — This doesn’t reveal the transferred amount. However, the transfer itself is not anonymous.
  • Transfer fees — You can send the transfer fees to a predetermined account.
  • Transfer hooks — With each token transfer, they can call a specific program. For example, it’s useful with royalties. It doesn’t need complicated proxy layers.
  • Metadata — You can incorporate them natively through custom fields.
  • Non-transferable tokens — They are permanently minted and linked to specific wallets. For example, as pre-order tokens for goods or services. The Saga 2 has such a token if you pre-ordered it.

There are many more mint extensions available. 

2) Account Extensions 

These add features that are account-related. You add them on top of Solana accounts. Current account extensions include, but are not limited to,

  • Immutable owner — You can’t reassign account ownership.
  • Memo required on transfer — Each token transfer requires an attached memo. This can be useful for regulatory compliance, or it increases audit trails.

Another great feature is that you can mix and match all these extensions. The video below is an explanation of Token Extensions.

Use Cases by Verticals

There are also plenty of verticals that can take advantage of Token Extensions. So, we take a look at some of them and see how they can profit from these extensions.

1) Gaming  

Blockchain games can use non-transferable tokens like soulbound tokens. Either for a UUID or Universal Unique IDentifier or social profiles. Another sample is transfer hooks. These would make sure that players are human and not bots. With a percentage of transfer fees, the devs can keep developing the game. Or, if a player violates a rule, the transfer hook can freeze them.

Confidential transfers can also be of great use for games. For example, by airdropping tokens. However, players only can use them upon reaching specific levels.

2) DAOs

Non-transferable, immutable owner tokens are good for governance. For example, in elections. Furthermore, a confidential transfer also works well. You can see who donated, but not how much they donated.

3) DeFi

RWA would have a few use cases. For example, combining interest-earning tokens that ask for KYC with transfer restrictions.

4) Stablecoins

With transfer hooks, you can make stablecoins compliant. For example, by enforcing KYC. The permanent delegation would allow an authority to burn or transfer tokes. When it detects fraud or other criminal activities, it can freeze an account.

5) Payments

Solana is fast, scalable, and offers low-cost transactions. Hence, it attracts payment options and solutions. For example, they can include a tax on each payment. However, the payment amount remains confidential. Memos can make tracking payments easier.

You can use the Solana FM Explorer to see if a token has an extension. Paste the token hash in the search box. Check the ‘Token Extension’ to see if it shows a ‘True’. This indicates it is a Token Extension. See the picture below by the City of Girls on Drip Haus. For example, this mint enabled token extensions. However, it doesn’t use any yet.

Solana

Source: Solana FM

Conclusion

Solana introduced a new token feature, Token Extensions. They are natively included in the token programming functionality. This gives plenty of new advantages and use cases.

Coins

Disclaimer

The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment and informational purposes only. Any information or strategies are thoughts and opinions relevant to accepted levels of risk tolerance of the writer/reviewers, and their risk tolerance may be different from yours.

We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments, so please do your due diligence.

Copyright Altcoin Buzz Pte Ltd.

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