Nearly all tokens on Solana have been built with the same technical foundation: the Token Program. Anytime you mint, transfer, or burn a token, your wallet or app interacts with this program behind the scenes
For over four years, the Token Program powered Solana's economy. But as new developers enter the ecosystem with fresh ideas for what tokens can do, there's been no way to support these use-cases natively.
To solve for this, Solana launched a new token program named Token-2022. Token-2022 aims to expand the native features available to tokens through a set of tools called Token Extensions.
What are token extensions?
On the surface, Token-2022 is a near-identical copy of the existing Token Program.
What makes Token-2022 different is the suite of additional developer tools dubbed token extensions. Over a dozen types of token extensions exist, each aiming to standardize solutions to common problems with the current token program.
For creators, token extensions are opt-in and purely additive. Token-2022 is deployed to a separate address from the current Token Program, and both SPL token standards will be supported by the network going forward.
How do token extensions work?
Whenever a new token is created with the Token-2022 program, the creator can opt-in to enabling one or more types of token extensions. Once enabled, extensions imbue the token with a particular capability, like confidentiality or the ability to add custom logic to every transfer.
As a native feature of Solana, token extensions give developers a standardized, plug-and-play solution to explore new use cases. Token issuers can spend less time patching together various smart contracts and more time focused on their core business logic.
Developers also benefit from token extensions’ built-in compatibility, as apps and wallets only have to integrate an extension once in order to provide robust support for each new token.
Token extensions use cases
Token extensions enable a whole host of new use cases—from fun, crypto-native ways of coordination to improved efficiencies in traditional finance. Here are examples of few early adopters:
BERN
Token extensions used: Transfer Fees
As the first token built with Token-22, BERN offers a fun way to engage with Solana’s famous community coin, BONK. Whenever a holder transfers BERN, the Transfer Fee extension ensures that 6.9% of the transferred amount is automatically taken as a fee.
Of this fee, 1% is used to burn BONK, 0.5% is used to burn BERN, and 5% is distributed back to holders of BERN. To date, nearly $1.5 million of BONK has been burned, and over $500,000 of BERN has been distributed to holders. (Source)
Wen New Standard (WNS)
Token extensions used: Metadata & Metadata Pointer, Transfer Hook, Immutable Owner, Group & Group Pointer, Member & Member Pointer
Born from meow's 'A Love Letter to Wen Bros’, Wen New Standard (WNS) is a new NFT standard built on top of token extensions. As an open-source public good, WNS aims to maximize compatibility and eliminate unnecessary fees from third parties.
By leveraging the Immutable Owner and Transfer Hook extensions, WNS allows creators to configure royalties on their collections. Through the power of token extensions, these royalties are enforced at the protocol level, ensuring that they can’t be bypassed.
WNS also makes developers lives easier by simplifying how metadata is associated with each token. By implementing the Metadata and Metadata Pointer extensions, WNS stores core info like each token’s Name, Symbol, and URI directly in the token mint itself. This eliminates the need for external metadata accounts or additional programs. WNS’s use of the Group and Group Pointer extensions also makes it easy for individual NFTs to associate themselves with their parent collection.
AssetDash Elementals are already the first major NFT collection to embrace WNS, and we expect more collections to migrate to the standard in the future.
Paxos USDP Stablecoin
Token extensions used: Mint Close Authority, Permanent Delegate, Confidential Transfer, Transfer Hook, Metadata & Metadata Pointer
Paxos is regulated by the New York Department of Financial Services (NYDFS) as a trust company and is a fully-backed, US-dollar stablecoin issuer. For the launch of its Pax Dollar (USDP) stablecoin, Paxos chose to enable token extensions.
While Solana itself is a permissionless blockchain that allows anyone to create transactions, the NYDFS requires that Paxos prevents bad actors from accessing USDP. To do this, Paxos specifically enabled the Permanent Delegate extension. If funds are used for illegal purposes, this powerful extension allows Paxos to clawback funds, therefore meeting the strict regulatory requirements set by the NYDFS.
USDP also enabled the Confidential Transfer extension, a privacy-enabling feature that encrypts token balances and transfer amounts via zero-knowledge proofs. With Confidential Transfers, USDP can be used by businesses to make B2B payments, manage their treasury, pay their employees entirely on-chain and more.
USDP paints a compelling picture for how token extensions can be used by regulated companies to create a safer, more efficient user experience and bring economic activity on-chain.
Looking forward
We believe that token extensions represent a new frontier for use cases that are Only Possible on Solana. Phantom is proud to be leading the way on token extension adoption, and we are committed to providing comprehensive support for all extensions.
For more information on how Phantom supports token extensions on Solana, check out our Developer Documentation.
