How the ERC-1400 Has Evolved Into a Suite of Interoperable Security Token Standards
Technology

How the ERC-1400 Has Evolved Into a Suite of Interoperable Security Token Standards

The ERC-1400 security token standard was initially published just three months ago. Since then, the single ERC has evolved into a suite of security token standards. While all standards are self-contained, each one provides a necessary function of security token performance— where they all remain interoperable among each other.


Currently, the ERC-1400 standards are partitioned as follows: the Core Security Token Standard, the Partially Fungible Token Standard, the Document Management Standard, and the Controller Token Operation Standard.

Below is an outline of the primary components of each standard.

The ERC-1594: Core Security Token Standard Explained

The ERC-1594 was designed to provide the core functionality needed for any and all security tokens.

Most notably, the standard features the capability to integrate off-chain data. While ledgers dealing with security tokens will need to incorporate on-chain rules and data, input and authorizations from the real-world are vital. They are important in terms of regulatory compliance, information disclosure, and any pertinent information for the specific asset whose ownership status will be recorded via Distributed Ledger Technology (DLT).

Off-chain data can also include signed authorizations for specific asset transfers, which offers significant potential in reducing costs and simplifying a user’s experience.

Another aspect of this standard includes trading restrictions. It offers the ability to verify whether or not a specific transfer is valid according to on-chain rules. If a transfer is deemed invalid, a detailed status code is returned, displaying the reasons for the rejection.

How the ERC-1410 Brings Transparency to Different Ownership Categories

With the ERC-1410, a user’s balance can be divided to accurately reflect the different specifications that come along with token ownership.

For example, as opposed to merely accessing the quantity of tokens that a holder has in their possession, this standard allows for data such as vesting, time locks, and voting privileges to also be visible.

Such information is especially important when it comes to the treatment of ownership regarding transfer restrictions, capital distribution, and governance.

The ERC-1644: A Method for Controlling and Managing Security Tokens Explained

When it comes to security tokens, there are many asset classes and regulatory jurisdictions which require an authority to have control over tokens. The term ‘control’ in this context means the ability to force a transfer between any addresses.

Controller operations are precisely the main focus of the ERC-1644. The presence of a controlling authority is especially important for the execution of court orders, fraudulent activity, or lost private keys.

In particular, this standard allows for the transparent control of a token issuing authority when it comes to forced transfers. Still however, the issuing authority can choose to negate this controlling ability, should the respective circumstance allow for such an action.

How the ERC-1643 Allows for Document Management

Due to the highly regulated nature of securities, tokenized securities must also comply with their applicable regulations. Such compliance involves a certain level of documentation, which is exactly what the ERC-1643 aims to manage.

The standard allows for notarized documents to be attached to securities, while also notifying token holders of any document-related updates.

Documents can be hashed on-chain to ensure no edits or alterations were made. At the same time, a URI to the underlying document can be stored off-chain, either in some centralized form or in a decentralized manner, such as IPFS.

The Future Plans of the ERC-1400 Explained

Since the ERC-1400 security token suite is still being developed, there are plenty of active discussions concerning future features despite the standard’s recent updates.

A few topics of those discussions include dividends and capital distribution, confidential transactions, checkpoints, and pooled wallets.

What do you think of the continued development of the ERC-1400 security token standard suite? Will the ERC-1400 rise to become a major player of implemented security token standards? Let us know what you think in the comments below.


Image courtesy of Medium.

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January 3, 2019

About Author

GaryStevens Gary Stevens is a full time developer based in Canada. He's an early bitcoin investor and loves everything open source. Gary believes in a decentralized future and has worked with a number of corporate clients helping them understand blockchain technology and innovation.