HyperLink Capital has announced that they are releasing their SFT Protocol which will be an expanded ERC20 token standard for tokenized securities. The protocol will be an open-source project.
HyperLink Capital has been involved for some time in blockchain-based capital markets, but they have been increasingly focusing their attention on tokenized securities. Now they have just announced a protocol that is looking to create an Ethereum standard for this new blockchain-based asset class.
The Secured Financial Transaction Protocol
HyperLink Capital has devised an open source protocol that allows for compliance on-chain for the Ethereum network. Written in Solidity, the Secured Financial Transaction Protocol (SFT) will allow for the tokenization of debt and equity-based securities.
Although there exist other ideas on new token standards for Ethereum, SFT is not rent-seeking and aims to be completely transparent in its design. According to HyperLink Capital, “protocols dedicated to security tokens that require a utility token introduced unnecessary friction in an area where adoption is key.” Even more so, this problem oftentimes makes issuers and investors dependent on the technology provider to the entire industry’s detriment. There should be no gatekeepers, but instead we should acknowledge that it is in the blockchain space’s common interest to come up with a unified plan.
Thus, the SFT Protocol aims to be a model that allows for the widest range of market participants to interact with the least amount of friction.
The Philosophy Behind the SFT Protocol
Now, you might be wondering: why do we need another token standard? SFT Protocol differentiates itself on account of its underlying structure and philosophy:
- A security token protocol must be accessible, open-source, and non-rent seeking.
- Compliance must be handled on-chain whenever possible.
- A token standard must extend beyond the life-cycle of any singular company.
- Identity is a prerequisite to participation and this involves building trust.
- Above all else, real-world use cases must be front and center.
Too many times, the cryptocurrency space has suffered from what can be called “walled gardens.” This means that tokens are often issued and traded within their designated ecosystem without incorporating interoperability between different marketplaces. These walls do nothing to advance the space, but instead scare away new investors and distract or confuse newcomers.
In short, the current token standards obfuscate the potential that blockchain brings. SFT Protocol hopes to be the on-chain, open-source solution that solves the compliance question for security tokens on the Ethereum blockchain.
What do you think of Hyperlink Capital’s proposal? Do we need another token standard? Let us know in the comments down below.
Image courtesy of Hyperlink Capital.