Security Tokens Might Have New Standard on Ethereum – ERC-1400

Blockchain developer Stephane Gosselin, together with Adam Dossa, Pablo Ruiz, and Fabian Vogelsteller proposed on Monday a new security token standard based on the Ethereum network. The standard, called ERC-1400, is meant to help entities organize security token offerings (STOs) and better comply with regulations.

According to the authors, who presented their security token standard via Github, the new resulting token should be compliant with both ERC-20 and ERC-777 standards. On the other side, the token will differ from utility tokens as it will be backed by real-world assets. Also, the token will have to ensure a complex connectivity environment between on-chain and off-chain actors. Thus, the security token imposes a completely new standard.

Gosselin and his associates have defined a list of parameters that they think are needed for a standard to be implemented in the security token space:

Thus, the new standard imposes the ability to generate forced transfers when fund recoveries or legal actions are needed. Besides, the tokens have to be non-fungible or at least partially-fungible and must be able to transfer attachments or modifiable metadata to the partial balance of a token holder. In other words, according to the proposed standard, security issuers would have the possibility to reject or approve various transactions.

Also, as a partially-fungible token, holders won’t be able to exchange it with another token of the same type. A good example of non-fungible tokens is CryptoKitties, which rely on the ERC-721 standard.

ERC-1400 is currently in its draft phase, meaning that the Ethereum community accepted it as worthy of review. However, the final verdict should come after a longer period.