How do tokens work on Solana?

Shared programs for every token

Tokens on Solana are called SPL tokens, short for Solana Program Library.¹ On Ethereum, ERC-20 needs a separate contract for each token.² On Solana, Token Programs hold all the rules, for fungible and non-fungible tokens alike.^1,3 Every token is really a data account owned by a Token Program.¹

Solana has two main Token Programs.¹

• The original Token Program. It covers the basics, such as minting and transfers. Solana's docs call it immutable and widely used.¹ Its own docs say it is complete, with no plans to add new features.³
• The Token Extensions Program, also called Token 2022. It has every original feature, and adds optional ones called extensions.¹

The mint account

Each token is identified by the address of its mint account.¹ The mint account stores the token's supply, its decimals, its mint authority and its freeze authority.¹

• Mint authority is the account allowed to create new units of the token.¹
• Freeze authority is the account allowed to freeze tokens in a token account, so they cannot be moved or burned.¹

If a token has no mint authority, its supply is fixed and no more can ever be minted.¹ Removing the mint authority cannot be undone.³ Decimals work as on Ethereum: the number of digits after the decimal point.¹

Token accounts

A token account holds one owner's balance of one token. It records the token, the owner and the amount.¹ So a wallet needs a token account for each token it wants to hold.¹ A wallet can own several token accounts for the same token, but each token account has only one owner.¹

An associated token account is the "default" token account for a given wallet and token. Its address is worked out from the two.¹ Creating one needs a small, refundable deposit of SOL to pay for its storage.^1,3 Anyone can create one for a user, such as their wallet app.³

Delegates, freezing and NFTs

An owner can approve a delegate to transfer or burn up to a set amount, and can revoke that later.³

The freeze authority can freeze a token account. A frozen account cannot be used until it is thawed.³ If the freeze authority is removed, freezing stops for good, and any frozen accounts stay frozen.³

An NFT on Solana is simply a token type where only one token has been minted.³ The docs' example makes a token with 0 decimals, mints 1, then removes the mint authority.³

Token extensions

Extensions are optional features added to a mint or a token account.⁴ Most cannot be added after the account is set up, so a token's features must be planned in advance.⁴ Some cannot be combined. For example, a token cannot be both non-transferable and charge transfer fees.⁴

• Transfer fees. A fee is taken from each transfer, so the receiver gets less.⁵
• Non-transferable. Once minted, holders cannot move the tokens. This suits assets that should stay with one wallet.⁶
• Metadata. The mint can store the token's name, symbol and a link to more details.⁷
• Transfer hook. Custom code runs on every transfer, for example to allow or block certain wallets.⁸

Ethereum and Solana side by side