What are token extensions?

Token extensions are new token program-level features, enabled by the new open-source token minting program available on the Solana blockchain. Token extensions enable the next generation of features for digital assets and stablecoins on the Solana blockchain by imbuing the assets with a native set of rich features ranging from confidentiality to token-gated access to required metadata. Assets minted using this program can bring to life the promise of true programmability of money and assets on the blockchain

What are the benefits of using token extensions versus the legacy Solana token standard?

Token extensions takes the core functionality of tokens on Solana and imbues them with an entirely new, native set of features that open up a whole new set of use cases for digital assets. In the past, application developers had to rely on a mix of ad-hoc protocols, code bases and projects to enable true programmability. Minting tokens that have token extensions enabled allows the developer to natively have access to all of those programmability features, with the flexibility to decide which features to enable or disable.

A few examples of what is possible natively with token extensions:

💥Confidential transfers: The ability to mask token balances and the amounts of token transfers, with auditability from the issuer of the token

💥Token gated transfers: The ability to control which wallets can receive tokens based on KYC identifiers

💥Transfer Fees: The issuer of the token can charge transfer fees to assist in monetization of transactions

💥Required metadata: Metadata about transfers can be mandatory, allowing payment attribution data to be bound to the transaction itself.

Some stablecoin issuers using Solana have already started implementing token extensions. Paxos, for example, recently leveraged permanent delegation, metadata pointer, transfer hooks, and more to launch their USDP stablecoin. GMO Trust announced the first regulated Japanese yen stablecoin as well as their own U.S. dollar stablecoin on the Solana network, which uses permanent delegation, default account state, and the metadata pointer.

Solana, already a leading blockchain network due the protocol’s scalability-focused design and ecosystem-wide innovations such as state compression, has become the place for developers to innovate and build businesses using blockchain technology. Recent reports noted that the Solana network processed 40.7m daily user transactions in Q4 2023, and Solana was the top non-EVM chain for new developers. The last twelve months have seen payments giants Visa and Mastercard choose to build with Solana, the launch of new stablecoins like Paxos, and the rise of new business use cases from Helium’s decentralized sensor network to real-life tea house company Boba Guys’ Solana-powered loyalty program.