The SPL token standard on Solana reflects how NFTs and fungible tokens work on the Solana blockchain and ensures that SPL tokens are interoperable with Solana wallets and smart contracts. Unlike Ethereum’s ERC, which has different token standards for tokens such as ERC-20 and ERC-721 (NFT), the SPL token standard applies to all tokens on Solana, where differences Operational differences are determined at the token creation stage. Solana’s Token-2022 will provide developers and users with new mining and account features.
Solana Network
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. These smart contract tokens are developed according to Solana Primary Library (SPL) standards. They are known as SPL tokens and are often referred to as “Solana tokens”.
The operation of the Solana blockchain has a major influence on how the SPL token operates. Here’s a little background information on the Solana blockchain.
The Solana blockchain is a Layer 1 PoS (Proof of Stake) and PoH (Proof of History) network. It boasts a transaction speed of 65,000 TP and a block time of 800 milliseconds. The POH consensus mechanism is an improvement of the POW consensus mechanism, which works using timestamps. Each block is identified by its hash and the exact time it was added to the blockchain. A verifiable delay function (VDF) is implemented to ensure consistency in block production and placement.
As an L1 blockchain network, Solana operates a native token – Solana. Solana is the tax currency of the Solana blockchain; meaning transaction fees on the network are paid in SOL. It plays a very important role in the network security system. Validators in 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 through smart contracts and also supports smart contract token generation. The smart contract token on the Solana network is called the SPL token.
What is SPL token?
Basically, the SPL token is a token that operates on the Solana blockchain. SPL establishes a set of rules that define how tokens on the Solana network operate, where compliance with these standards ensures interoperability with Solana wallets and smart contracts.
The SPL token runs parallel to the native Solana coin and can be used like any other cryptocurrency. However, they are not present in the core operations of the Solana blockchain, unlike other native coins. As a result, SPL tokens are not used in the network’s consensus process, and every transaction involving SPL tokens comes with network fees paid in native Solana coins.
However, the native Solana token is also technically an SPL token as it complies with SP Library regulations. But unlike other SPL tokens, it is integrated into the core operations of the network right from its formation stage.
Characteristics of SPL tokens
The SPL token is unique to the Solana blockchain and does not follow the usual Ethereum-based systems on other blockchains such as TRON’s TRC-20 and BSC’s BEP-20. Here are some features of the SPL token:
They can be NFTs or fungible tokens
SPL defines operating standards for fungible tokens and NFTs on the Solana blockchain. Unlike ERC, where different standards are set for different types of NFTs and fungible tokens, Solana Primary Library does not have specially calculated standards for different types of tokens.
So, the SPL standard applies to fungible and non-fungible Solana tokens. Differences in operations are identified at the token generation stage; but essentially this comes down to the number of tokens created, divisibility, and additional attributes that can be removed.
Compatibility
Solana Primary Library is compatible and the SPL token has inherited this attribute. The source code of the SPL token can be reused to create another SPL token. This makes it easier for developers to create new tokens. Depending on the creator’s intent, some features (such as token names and supply metrics) may be changed at creation time, but the majority of the codebase can be deployed without modification and still deliver. results as expected.
Efficiency
The network conditions of the Solana blockchain have a direct impact on the SPL token. Solana’s prized fast transaction processing speed has been applied to the SPL token. Therefore, transactions using SPL tokens can be faster and more efficient than other tokens running on other blockchain networks.
How are SPL tokens created?
SPL tokens are created by interacting with the smart contract base of the Solana blockchain through code snippets developed in the programming language of the Solana blockchain (Rust). This process is called token minting.
To mint SPL tokens, we can write code from scratch or modify the codebase for an existing SPL token. Certain applications have also been developed to help creators generate SPL tokens without needing to do multiple rounds of encryption. During the token minting phase, the core properties of the token will be determined. For example, to create a non-fungible SPL token, the supply is set to 1 and the decimal function is removed. For fungible tokens, the developer defines a decimal function to allow tokens to be sent in parts. Additionally, the data provided is tailored to the project’s tokenomic strategy.
Once created, the token will behave like any other crypto asset, unless otherwise specified by the creator at the token minting stage.
What can SPL tokens be used for?
SPL tokens can be used just like any other crypto asset. Some use cases for SPL tokens include:
ICO and IEO
Mainstream companies or native cryptocurrency projects looking to raise funds for their project development can conduct ICOs (initial coin offerings) or IEOs (initial exchange offerings) using How to use SPL tokens. Tokens are minted to represent project valuation, much like stocks. The project team can mint an amount of SPL tokens to represent equity and also determine future distribution data to accommodate the project as it develops. Token holders are shareholders of the project, and dividends can also be determined by receiving a portion of newly created 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 for submitting and voting on proposals. Each SPL token issued for this purpose represents an opinion, where the number of SPL tokens an individual holds is proportional to their level of influence on community decisions.
Utility tokens
SPL tokens can also be used as utility tokens for blue chip projects in any field. Projects like this integrate tokens into their project routines. They are the project’s native token and provide the owner with certain perks or are designed to be an access point to the application. Utility tokens are also used as incentives in many modern projects.
MemeCoin
Community-building and entertaining projects can also issue SPL tokens as an indicator of their community strength and marketing capabilities. Projects like this are often called memecoins. The flexibility of SPL tokens means they can be configured to meet memecoin’s token requirements, like implementing high supply statistics and several other features that memecoin is known for. token minting stage.
NFT
Digital asset creators can create unique SPL tokens as digital signatures for their media assets, games, or any known use case for NFTs. In this case, the creator creates the SPL token with the supply set to “one” and no decimal function. This removes the “fungible” aspect and such tokens can function as an NFT. There are provisions for additional functions such as defining NFT properties and arranging transfer. Some notable NFTs on Solana include Mad Lads and Famous Fox Federation.
Real World Assets (RWA)
SPL Tokens can also be created to represent real-world Assets. The method of operation is determined by the token creator, but the SPL standard must be consistent with known RWA token processes. Future implementation could make the SPL token more suitable for RWA than it is now, with discussions on the Solana Developer Forum mentioning the possibility of creating a token standard that caters to RWA needs such as escrow facility, freezing/disabling tokens, etc.
SPL Token vs ERC-20
ERC-20 is an Ethereum standard for creating fungible tokens. SPL tokens and ERC-20 tokens have significant similarities as they both specify an operational setup for crypto assets running on the blockchain. The ERC-20 standard has been around for quite some time and is used by more crypto projects, but the SPL token is also becoming increasingly relevant. Here are some differences between both:
Network
SPL tokens work on the Solana blockchain, ERC-20 tokens work on the Ethereum blockchain or any other EVM (Ethereim Virtual Machine) blockchain. These blockchains have different properties that are inherited by the tokens. Technological differences in blockchain also affect the operations and applications of both 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 that operate on the Solana blockchain or any other network that uses virtual machines similar to those used by the Solana blockchain. On the other hand, the ERC-20 standard is designed for tokens that operate on the Ethereum blockchain or blockchains that use EVM. Token operations are tailored to complement these virtual machines. For example, the code to create them is written in a language that the virtual machine understands, 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 created using specific standards ( ERC-721 and ERC-1155 ). However, the SPL standard can be used to create both NFTs and fungible tokens, and it is also used as the token standard for all tokens on Solana.
Manage skill
ERC-20 tokens can be managed using EVM compatible wallet applications such as MetaMask while SPL tokens are held in Solana wallet applications such as Phantom wallet. Although many wallet applications are multi-chain, wallets specific to any of these networks (Ethereum or Solana) do not support tokens from the other network. In simpler terms, users cannot trade Solana tokens from their MetaMask wallet (except using Solana MetaMas walletk) and ERC-20 tokens cannot be held on Solana wallets like Phantom. Snap
| Token SPL | Token ERC | |
| Network | Blockchain Solana | Blockchain Ethereum |
| How manage |
Compatible with Solana wallet and DApps | EVM wallet and DApp compatible |
| Operational standards | Operating according to the regulations of Solana Primary Library (SPL) | Operates as prescribed by the respective ERC standard |
| Asset type | Use the same SPL standards for NFTs and fungible tokens | There are different ERC standards for NFTs and fungible tokens |
Token of Solana-2022
The Solana Token Program is set to launch several new features as part of the Token-2022 program currently in development. Token-2022 aims to enhance the functionality of the SPL token, making room for new capabilities alongside existing properties. The new launch of Token-2022 will expand the mining and spending attributes of the SPL token and will allow users to explore even more use cases for the SPL token. They are classified into Foundry and Account functions. Some of them include:
New coin minting function
Interest-bearing tokens: Allows creators to add interest-bearing logic to the SPL token.
Transfer fees: Developers may introduce additional fees when transferring SPL tokens.
Transfer functionality: Developers can specify advanced transfer operations for SPL tokens. Tokens can also be made non-transferable.
New account functionality
Transfer Memo: This will allow users to add notes to the SPL token transfer process.
Account Ownership: Allows users to define rigid ownership data for an account. This cannot be changed once set.
Account status: Allows the user to calculate a set of conditions that apply only to the selected account.
According to official information, the Token-2022 program is still under development and has not been fully utilized until stable release. Pending full release, the newly introduced functionalities of the Token-2022 program could be a significant upgrade to the token system on the Solana blockchain.
Conclude
The Solana ecosystem is an important ecosystem. The SPL token has seen a surge in adoption. This article has given an overview of the SPL standard and how the SPL token works to enable flexible token creation on the Solana network. SPL tokens have a performance advantage over ERC tokens on the Ethereum network; This is thanks to enhanced speed and overall performance. While there are concerns surrounding the level of decentralization within the network, the flexibility associated with the Solana network is inherited by the chain’s SPL tokens.
When comparing SPL tokens and ERC tokens, both tokens have strengths that make them suitable for specific purposes on their respective blockchains. As both cryptographic token standards are developed further, this will become even more apparent. However, please note that this article only explains the SP Library and the SPL token and should not be considered financial advice. Always do your own research before investing in any asset.
