Solana Strategy Director: Solana’s Token Scaling Plan

Token extensions are a feature on the Solana blockchain that allow developers to incorporate 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 multiple uses that token scaling enables and how it could bring institutional interest to blockchain.

Below are excerpts from Blockworks’ interview with Federa.

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

Federa: Token scaling is the culmination of about three years of work, which really started at the tipping point in 2021. This work was done entirely by the engineering team at Solana Labs, and the goal of the program is to build the next generation of token programming on Solana.

Solana is a little different than other blockchains because every time you deploy a token or an NFT, you don't actually deploy a controller or a contract. On an 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, which is that every program on the network is designed to be usable by anyone on the network. So if I want to mint a token, instead of deploying the entire token program, what I do is basically input a bunch of data into an existing program on the chain.

So token expansion and this new token program is designed to bring a whole new set of capabilities and options for what 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 and attach different types of features and functionality.

Blockworks: What features are available? Can you describe them in more detail?

Federa: On the blockchain, it's hard to restrict who can hold your tokens. For example, if you are suddenly added to the OFAC sanctions list, I don't just have to seize your assets, I have to take them away. Or if you lose your password and seed phrase, you don't get a second chance in Web3, which is necessary for many Web2 financial products.

We're seeing a lot of interest from token issuers in a feature called the Transfer Hook Permission. This is a Transfer Hook token extension, which is basically a procedure that can be called on every transfer. This is very important because the procedure can approve or deny the transfer. It basically leverages on-chain data to do compliance checks or just authorized transfer checks. This enables you to build all kinds of complex token interactions.

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

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

Federa: The token extension program and concept is not finished yet. It is not an immutable program today and still needs to be updated and improved. Some bugs may be found at some point, so it is still going through the development process.

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

I think that maybe in a year or two, we could get to a world where people are able to publish their own token extension plans and anyone can submit a pull request. It would be really cool to have a complete token extension repository. There are about 15 or 16 extensions right now. So, the token extension is not completely finished, but it is also fully usable and audited.