In a recent update, Solana (SOL) introduced a new feature called token extensions.
Token extensions use a standard interface to connect to Solana applications. This enables the development of custom tools and functions at the token level. According to the official statement, the aim is to provide a versatile token functionality that complies with regulations and reduces the time and resources required for engineering.
The first token extensions were included in v.1.17 of the Solana Labs validator client. According to the official announcement, the areas where the new feature can be used are as follows:
- Private Transfers: This extension aims to protect the confidentiality of user balances and hide transaction amounts within a transfer. Potential use cases include on-chain payroll, B2B payments and treasury management.
- Transfer Hooks: This extension gives token miners control over which wallets can interact with their tokens and how the tokens and users interact. Potential uses include KYC verification, token-protected access and copyright enforcement.
- Transfer Fees: This extension offers the ability to request fees at the protocol level. Potential uses include perpetual royalties, publisher fees, and transaction fees.
- Persistent Delegation: This extension allows a program to have irrevocable authority over a token. Potential uses include automated subscription services, updating real-world assets to reflect reality, and stablecoin regulatory compliance with freeze and seizure orders.
- Metadata Pointer: This extension enables verifiable connections between tokens and metadata. Potential use cases include token validation and accounts receivable association.
- Default Account Status: This extension allows configuring and applying token account permissions. One potential use case is KYC verification.
- Non-Transferable Tokens: This extension makes it impossible to reassign the owner of a token other than the person who issued the token. Potential uses include managing an external database and non-transferable mints of NFTs or other assets.
*This is not investment advice.