What is SRC-20 Token and How Do They Work?

SRC-20 token is a type of cryptographic token built on the Ethereum blockchain in accordance with the ERC-20 token standard.

The term “SRC” means “Security Token Representing a Compatible Contract.” Unlike traditional ERC-20 tokens, SRC-20 tokens are specifically designed for security token offerings (STOs) and are compliant with regulatory frameworks.

The SRC-20 standard includes additional features to improve security and regulatory compliance; this makes it suitable for representing ownership in real-world assets such as real estate, stocks, or other types of securities. These tokens enable the representation of ownership and transfer of value in a secure and transparent manner on the blockchain.

SRC-20 tokens often come with built-in functionality to ensure compliance with legal requirements such as investor accreditation and jurisdiction-specific regulations. This makes them a preferred option for projects seeking tokenization and securities trading while adhering to regulatory standards.

In summary, SRC-20 tokens provide a secure and compliant means of representing ownership in assets on the blockchain, making them well-suited for applications in security token offerings and traditional financial instruments.

How do SRC-20 tokens work?

SRC-20 tokens operate according to the ERC-20 standard, which defines a set of rules for creating fungible tokens on the Ethereum blockchain. However, SRC-20 tokens have additional features and functionalities specifically designed to meet the requirements of security token offerings (STOs) and comply with regulatory standards. Here's a basic overview of how SRC-20 tokens work:

Smart Contract Creation:

SRC-20 tokens are created by deploying a smart contract on the Ethereum blockchain. This smart contract defines the behavior of the token, including its issuance, transfer rules, and additional features specific to security tokens.

Regulatory compliance:

SRC-20 tokens include features to ensure compliance with relevant regulations. This may include restrictions on who can hold tokens (e.g., accredited investors) and mechanisms to enforce compliance with local securities laws.

Ownership and Transfer:

Like ERC-20 tokens, SRC-20 tokens represent ownership of a certain value on the blockchain. They can be transferred between Ethereum addresses in a peer-to-peer manner.

Security precautions:

Security is a major concern, especially when dealing with tokenized securities. SRC-20 tokens implement robust security measures in their smart contracts to prevent unauthorized access, fraud, and other security threats.

Token Issuance and Management:

The issuance and management of SRC-20 tokens are generally controlled by a set of administrative functions within the smart contract. These functions may include minting new tokens, burning existing ones, or changing certain parameters.

Interoperability:

SRC-20 tokens are designed to be compatible with existing Ethereum infrastructure, including wallets, exchanges and other dApps (decentralized applications). This provides seamless integration into the broader Ethereum ecosystem.

Essentially, SRC-20 tokens leverage the benefits of blockchain technology, specifically the Ethereum platform, to provide a secure, transparent and compliant way to represent ownership in tokenized securities. Smart contracts governing SRC-20 tokens define rules and behaviors that facilitate the issuance, transfer and management of these security tokens on the Ethereum blockchain.