Security tokens may have their own Ethereum-based token standard called ERC-1400. The standard was proposed this week by four authors.
Blockchain developer Stephane Gosselin, along with Adam Dossa, Pablo Ruiz and Fabian Vogelsteller today proposed a new security token standard based on the Ethereum network. The standard, called ERC-1400, is designed to help entities organize security token (STO) offers and better adhere to regulations.
According to the authors, who have submitted their standard security tokens through Github, the resulting new token should conform to the ERC-20 and ERC-777 standards. On the other hand, the token will be different from the utility tokens as it will be supported by real resources. Furthermore, the token must guarantee a complex connectivity environment between on-chain and off-chain actors. Therefore, the security token imposes a completely new standard.
Gosselin and its associates have defined a list of parameters they consider necessary to implement a standard in the security token space:
- Must have a standard interface for
- Must be able to perform forced transfers during legal actions or fund recovery processes.
- Must have a standard release event for issue and redemption.
- Obligation to allow metadata to be attached to a subset of a user's balance as special rights for shareholders or data on transfer restrictions.
- It must allow for the possibility of modifying metadata at the time of transfer based on off-chain and on-chain data and based on transfer parameters.
- It may require users to sign data before passing them in a transaction to validate in a chain.
- It should not limit the variety of resource classes acros s jurisdictions that can be represented.
- It should be compatible with the ERC-777 and ERC-20 standards.
Therefore, the new standard imposes the ability to generate forced transfers when fund recoveries or legal actions are needed. In addition, tokens must be non-fungible or at least partially fungible and must be able to transfer attachments or editable metadata to the partial balance of a token holder. In other words, according to the proposed standard, issuers of securities would have the possibility to refuse or approve various transactions.
In addition, as a partially fungible token, the owners will not be able to exchange it with another token of the same kind. A good example of non-fungible tokens is CryptoKitties which are based on the ERC-721 standard.
ERC-1400 is currently in the draft phase, which means that the Ethereum community has accepted it as a worthy revision. However, the final verdict should arrive after a longer period.