What is the SPL Token Standard and Solana Token-2022

What is the SPL Token Standard on Solana?

Solana's SPL token standard is a definition of how token and NFT creation works on the Solana blockchain, and ensures that SPL tokens are interoperable with Solana wallets and smart contracts. In contrast to Ethereum's ERC20, which has different token standards for different types of tokens such as ERC-20 and ERC-721 (NFT), the SPL token standard applies to all types of tokens on Solana, the differences in operation of which are determined at the time of token creation. stage. Solana Token-2022 will offer new creation and account features to developers and users.

The main point 

• The Solana Primary Library (SPL) defines how smart contract tokens on the Solana blockchain operate. Operational standards are described in the library and must be adhered to by any token created on the Solana blockchain. This token is known as the SPL token.
• SPL is similar to the Ethereum Request for Communication (ERC) standard in Ethereum.
• The SPL token runs parallel to the native Solana token on the Solana network and leverages the network infrastructure. Transaction fees involving SPL tokens are paid in Solana coins (SOL).
• Solana Token-2022 will enhance the functionality of the SPL token by allowing developers to add interest logic, transfer fees, and other account-specific functions. 

Solana is the 6th largest crypto asset by market capitalization at the time of writing, with a total market capitalization of over $26 billion. It has an ecosystem of decentralized applications and smart contract tokens, including NFTs and fungible tokens. This smart contract token was developed according to the Solana Primary Library (SPL) standard. They are known as SPL tokens and are commonly referred to as 'Solana Tokens'. 

Solana blockchain operations have a major influence on the functioning of the SPL token. Here's a little background on the Solana blockchain.

Check Price :

What is the Solana Blockchain ?

The Solana blockchain is a Layer 1 Proof of Stake (PoS) and Proof of History (PoH) network. It offers a transaction speed of 65,000 TP and a block time of 800 milliseconds. The POH consensus mechanism is a refinement of the POW consensus mechanism which operates using timestamps. Each block is identified by its hash and the exact time it was added to the blockchain. Verifiable Delay Function (VDF) is implemented to ensure consistency in block production and setup.

As an L1 blockchain network, Solana operates a native token – Solana. Solana is the tax currency of the Solana blockchain; that is, transaction fees on the network are paid in SOL. This is also important for network security systems. Validators on the network stake Solana coins on their nodes and are rewarded with newly produced Solana coins when they successfully verify a block.

Solana is a smart contract blockchain. It supports applications that operate via smart contracts and also supports the creation of smart contract tokens. Smart contract tokens on the Solana network are known as SPL tokens.

What are SPL tokens?

Basically, the SPL token is a token that operates on the Solana blockchain. The SPL defines a set of rules that determine how tokens should operate on the Solana network, where compliance with these standards will ensure interoperability with Solana wallets and smart contracts.

The SPL token runs parallel to the native Solana coin and can be spent like any other cryptocurrency. However, these coins are derived from the core operations of the Solana blockchain, unlike the original coins. Therefore, SPL tokens are not used in network consensus, and any transactions involving SPL tokens are subject to network fees paid in native Solana coins. 

However, Solana's native coins are technically also SPL tokens because they comply with the terms of the SP Library. But unlike other SPL tokens, it is integrated into the network's core operations from an early stage.

SPL token features

The SPL token is unique to the Solana blockchain, and does not follow the Ethereum-based systems common on other blockchains such as TRON's TRC-20 and BSC's BEP-20. Here are some of the SPL token features:

It Can be NFTs and Fungible Tokens

The SPL defines the operating standards for fungible and non-fungible tokens on the Solana blockchain. Unlike ERC, which sets different standards for different types of non-fungible and fungible tokens, Solana Primary Library does not have standards calculated specifically for different types of tokens. 

So, the SPL standard applies to both fungible and non-fungible Solana tokens. The differences in operation are determined at the token creation stage, but essentially these relate to the number of tokens minted, their shareability, and additional attributes that can be abstracted.

comparability

The Solana Primary Library is composable and the SPL token inherits this attribute. The source code for the SPL token can be reused to create other SPL tokens. This makes it easier for developers to create new tokens. Depending on the creator's intent, some features (such as token names and supply statistics) may be changed at build time, but most of the codebase can be implemented without modification and still produce the expected results.

Efficiency

The state of the Solana blockchain network has a direct impact on the SPL token. Solana's recognized fast transaction processing speed applies to SPL tokens. Therefore, transacting with SPL tokens may feel faster and more efficient than other tokens running on different blockchain networks.

How are SPL Tokens Created?

SPL tokens are created by interacting with the smart contract facilities of the Solana blockchain through code snippets developed using the Solana blockchain programming language (Rust). This process is known as Minting.

To create an SPL token, you can write code from scratch or modify the code base for an existing SPL token. Certain applications have also been developed to help creators create SPL tokens without doing a lot of coding. During the creation phase, the core properties of the token are determined. For example, to create a non-fungible SPL token, the supply is set to one and the decimal function is omitted. For fungible tokens, developers define a decimal function to allow tokens to be sent separately. Additionally, supply data is tailored to the project's tokenomics strategy.

Once created, the token functions like any other crypto asset, unless otherwise specified by the creator at the creation stage. 

What Can SPL Tokens Be Used For?

SPL tokens can be used just like any other crypto asset within its limits. Some use cases of SPL tokens include:

ICOs and IEOs

Mainstream companies or native cryptocurrency projects that want to raise funds for the development of their projects can conduct an ICO (initial coin offering) or IEO (initial exchange offering) using SPL tokens. Tokens are minted to represent the valuation of a project, like shares. The project team can mint any number of SPL tokens to represent equity and also determine future distribution data to suit the project as it grows. Token holders are shareholders in the project and dividends can also be defined in the form of receiving a share of newly generated tokens. 

KNIFE

Decentralized autonomous organizations (DAOs) can also tokenize project governance using SPL tokens. Projects can issue SPL tokens to their communities and develop voting portals that accept these tokens to submit and vote on proposals. Each SPL token issued for this purpose represents an opinion, where the number of SPL tokens held by an individual is proportional to their influence on the community's decision.

Utility Token

The SPL token can also be used as a utility token for blue chip projects in any sector. Projects like these integrate tokens into the routine operations of their projects. They are the native token of the project and either grant certain privileges to their holders or are designed to be an access point to the application. Utility tokens are also used as incentives in many contemporary projects.

MemeCoin

Community-building and fun-based projects can also issue SPL tokens as an index of their community strength and marketing prowess. Projects like this are popularly referred to as memecoins. The flexibility of SPL tokens means they can be configured to meet memeCoin's tokenomics requirements, such as implementing high supply statistics and several other features memecoins are known for at the minting stage.

NFT

Digital asset creators can mint unique SPL tokens as digital signatures for multimedia, gaming assets, or any known NFT use case. In this case, the creator mints SPL tokens with the supply set to 'one' and no decimal function. This removes the fungibility aspect and the token can function as an NFT. There is provision for additional functionality such as defining NFT attributes and transfer settings. Some famous NFTs on Solana include Mad Lads and Famous Fox Federation.

RWA

SPL tokens can also be created to represent Real World Assets (RWA). The operating mode is determined by the manufacturer, but the SPL standard corresponds to known RWA tokenization procedures. Future implementations could make SPL tokens more suitable for RWA than they are today, with discussions on the Solana Developer Forums mentioning the potential for creating a token standard that meets RWA needs such as escrow facilities, token freeze/cancel, and more.

Token SPL vs. ERC-20

ERC-20 is Ethereum's standard for creating fungible tokens. SPL tokens and ERC-20 tokens have significant similarities in that they both define operational settings for crypto assets running on the blockchain. The ERC-20 standard is much older and used by more cryptocurrency projects, but SPL tokens are also increasingly relevant. Here are some differences between the two;

Network

SPL tokens operate on the Solana blockchain, ERC-20 tokens operate on the Ethereum blockchain or other EVM blockchains. These blockchains have different attributes that are inherited by the tokens. Technological differences in blockchain also affect the operation and implementation of the two token standards. ERC-20 tokens can only be used on EVM dApps, while SPL tokens can only be used on Solana dApps.

Operational Standards

The SPL standard is designed for tokens operating on the Solana blockchain or other networks that adopt virtual machines similar to those used by the Solana blockchain. The ERC-20 standard on the other hand is designed for tokens operating on the Ethereum blockchain or blockchains that use EVM. Token operations are tailored to complement this virtual machine. The generation code is written in a language that the virtual machine understands, for example, most ERC-20 token contracts are written in Solidity while SPL token contracts are written in the Rust programming language. 

Asset Type

The ERC-20 token standard only defines the operation of fungible tokens, and NFTs on Ethereum and other EVM networks are created using specific standards ( ERC-721 and ERC-1155 ). However, the SPL standard can be used to create both Fungible and Non-fungible tokens, and is also used as the token standard for all tokens on Solana.

Handling

ERC-20 tokens can be managed using EVM-compatible wallet applications such as MetaMask while SPL tokens are stored in Solana wallet applications such as Phantom wallet. While many wallet applications are multi-chain, wallets specific to one of these networks (Ethereum or Solana) do not support tokens from other networks. Simply put, you cannot transact Solana tokens from your MetaMask wallet (unless using MetaMask's Solana wallet) and ERC-20 tokens cannot be stored in Solana wallets like Phantom.

Token Solana-2022

The Solana token program is set for several new introductions as part of the Token-2022 program currently under development. Token-2022 is intended to enhance the functionality of the SPL token, paving the way for new capabilities in addition to existing attributes. The new introduction of Token-2022 will expand the minting and issuing properties of SPL tokens and will allow users to explore more use cases of SPL tokens. This new introduction is classified into Printing and Accounts functions. Some of them include;

New Printing Function

• Interesting tokens : Allows creators to add interest logic to SPL tokens.
• Transfer fees : Developers may charge additional fees when SPL tokens are transferred.
• Transfer functions : Developers can define advanced transfer operations for SPL tokens. Tokens can be designated as non-transferable

New Account Function

• Transfer memo : This will allow users to add notes to SPL token transfers.
• Account ownership : Allows users to define rigid ownership data for an account. This cannot be changed once set.
• Account states : Allows users to calculate a set of conditions that only apply to selected accounts.

According to official information, the Token-2022 program is still in development and is not intended for full production use until the stable release. While waiting for the full release, the new functionality introduced from the Token-2022 program could be a significant improvement for the token system on the Solana blockchain.

Conclusion

The Solana ecosystem is an important ecosystem. The SPL token has experienced a breakthrough in adoption. This article provides insight into the SPL standard and how the SPL token operates to enable flexible token creation on the Solana network. SPL tokens have performance advantages over ERC tokens on the Ethereum network; This is thanks to the speed and overall performance improvements that the Solana network is known for. While there are concerns surrounding the level of decentralization in the network, the agility associated with the Solana network is inherited by the chain's SPL token.

When comparing SPL tokens and ERC tokens, both tokens have strengths that make them suitable for certain purposes on their respective blockchains. As the two cryptographic token standards develop, this will become clearer. Because of that; note that this article only describes the Solana Primary Library and SPL tokens, and should not be considered financial advice. Always do your own research before investing in any asset. 

Read Also:

DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.