⚠️ Notice: Programs from this repository has not been audited yet. Use at your own risk.

Solana Security Token

Environment Setup

The environment is necessary to build and run tests of the project.

Install Anchor 0.30.1 from https://www.anchor-lang.com/docs/installation

Build and test source code

Build programs

$ anchor build

Test programs

Generate payer if it doesn't exist yet

$ solana-keygen new

Run the functional and integration tests. First it builds and deploys the smart contract then tests are executed locally.

$ anchor test

Deployment

Programs

Generate key and airdrop SOL to the generated address. Than specify cluster and path to the keypair.

$ solana-keygen new --outfile PATH_TO_GENERATED_KEYPAIR

Airdrop or get some SOL to deploy programs (~20 SOL)

$ solana airdrop 20 PUBKEY --url CLUSTER_MONIKER_OR_RPC_URL

$ anchor deploy --provider.cluster CLUSTER --provider.wallet PATH_TO_KEYPAIR

Mint and Progrmas Accounts

Generate or add data deployment keypair into deploy/CLUSTER/deployer.json file as buffer (for example: [10, 20 .. 12]).

Configure config.ts where specify mint parameters:

decimals
name
symbol
uri (logo) tokenlock parameters:
maxReleaseDelay
minTimelockAmount
space (in bytes, it is recommended to set 1 Mb) other parameters:
maxHolders
maxTotalSupply
commitment
admins (array of public keys and their role)

Configure RPC URL inside .env (copy .env.example) if it is different from default.

$ yarn deploy:CLUSTER

Deployment Result

Deployment script generates mint.json with keypair and tokenlock-data-pubkey.json with public key. Print information about deployment into console.

Dividends data

Before deploying a new dividends distributor, the following steps are required:

Obtain Investor Balances:

Capture investor balances for a specific block.
Store the data in a CSV file with the format: wallet_address, balance_amount_in_base_unit.

Build and Upload the Merkle Tree: Build the Merkle tree and upload it to IPFS. Use the following command to upload the Merkle tree:

ts-node deploy/dividends/upload-merkle-tree-to-ipfs.ts -f path_to_snapshot.csv

Configure the Distribution:

Specify all parameters for the config object inside the new-dividends-distribution.ts script.
Deploy the new dividends distribution using the following command:

ts-node deploy/new-dividends-distribution.ts --cluster localnet

Overview

This is a Security Token smart contract implementation from Upside. The core purpose of the token is to enforce transfer restrictions for certain groups.

This implementation attempts to balance simplicity and sufficiency for smart contract security tokens that need to comply with regulatory authorities - without adding unnecessary complexity for simple use cases.

Solana Security Token consists of several modules:

Access Management
Transfer Groups and Rules Management
Token2022 Security Token Tansfer

Disclaimer

This open or closed source software is provided with no warranty. This is not legal advice. CoMakery (dba Upside) is not a legal firm and is not your lawyer. Securities are highly regulated across multiple jurisdictions. Issuing a security token incorrectly can result in financial penalties or jail time if done incorrectly. Consult a lawyer and tax advisor. Conduct an independent security audit of the code.

On-Chain Holder/Wallet Management

Active Holder/Wallet management is conducted on-chain and autonomously, with multiple admin configurations that allow flexibility of transfer rule configuration. This greatly simplifies the off-chain accounting and effort required from Transfer (and other) Admins, removing the need to track Wallet holdings across different Holders.

Wallets are not programatically prohibited from assuming multiple Admin roles. We advise against this in practice; however, this must be enforced off-chain.

Holders are allowed to keep multiple Wallet addresses, which can be spread across multiple Transfer Groups (in which case, they would be added to each group's holder count) as well as within Transfer Groups. These Wallets are consolidated under a common holderId.

Ex.: Holder A can have 4 wallets spread across two Transfer Groups, X and Y. The Holder can have Wallets 1 & 2 in Group X, and Wallets 3 & 4 in Group Y. They will still count overall as one single Holder, but it will also be considered as a unique holder in Group X and one unique holder in Group Y.

To manage these Holders and their Wallets:

A initialized Holder account is enforced on SecurityAssociatedAccount creation for wallet, automatically checking that recipient Wallet addresses of tokens are cataloged and assigned holderIds as needed.
If a "new" Wallet address receives a token, a new holderId is created for that Wallet address.
Admins can also separately create Holders from Wallet addresses and append Wallet addresses to existing Holder accounts

Transfer Restrictions

The Security Token can be configured after deployment to enforce transfer restrictions such as the ones shown in the diagram below. Each Holder's blockchain Wallet address corresponds to a different group.

This is enforced by TransferRestrictions Program and Transfer Hook.

Example

Only transfers between wallet address groups in the direction of the arrows are allowed:

stateDiagram-v2
    state "Group 5: Founders (2 Yr Lockup)" as g5
    state "Group 3: Reg S Non-US Approved" as g3
    state "Group 2: Regulated Exchange" as g2
    state "Group 1: Issuer Token Reserves" as g1
    state "Group 0: Default Group" as g0
    g1 --> g5
    g1 --> g1
    g1 --> g2
    g2 --> g2
    g2 --> g1
    g3 --> g2
    g2 --> g3

Here's an example overview of how transfer restrictions could be configured and enforced.

sequenceDiagram
  autonumber
  actor Buyer
  actor Investor
  actor TransferAdmin

  participant TransferRestrictionsProgram
  participant Token22

  Investor ->> TransferAdmin: send AML/KYC and accreditation info
  TransferAdmin ->> TransferRestrictionsProgram: initializeTransferRestrictionHolder(investorAddress)
  TransferAdmin ->> TransferRestrictionsProgram: initializeHolderGroup(investorAddress, transferGroup)
  TransferAdmin ->> TransferRestrictionsProgram: initializeSecurityAssociatedAccount(investorAddress, transferGroup)

  Buyer ->> TransferAdmin: send AML/KYC and accreditation info
  TransferAdmin ->> TransferRestrictionsProgram: initializeTransferRestrictionHolder(buyerAddress)
  TransferAdmin ->> TransferRestrictionsProgram: initializeHolderGroup(buyerAddress, transferGroup)
  TransferAdmin ->> TransferRestrictionsProgram: initializeSecurityAssociatedAccount(buyerAddress, transferGroup)
  TransferAdmin ->> TransferRestrictionsProgram: initializeTransferRule(fromGroup, toGroup, afterTimestamp)

  Investor ->>+ Token22: transfer(buyerAddress, amount)
  Token22 ->>- TransferRestrictionsProgram: execute(from, to, value)
  Note left of TransferRestrictionsProgram: Transfer or Revert depending on the resulting code where execute transfer hook enforces transfer restrictions

The Transfer Admin for the TransferRestrictionsProgram can provision wallet addresses to transfer and receive tokens under certain defined conditions. This is the process for configuring transfer restrictions and executing token transfers:

An Investor sends their Anti Money Laundering and Know Your Customer (AML/KYC) information to the Transfer Admin or to a proxy vetting service off-chain to verify this information.
- The benefit of using a qualified third party provider is to avoid needing to store privately identifiable information.
- We recommend implementations use off-chain mechanisms (such as a 3rd party AML/KYC provider) that ensure a given address is approved and is a non-malicious smart contract wallet. However, generally multi-signature type wallets must be allowed in order to provide adequate security for investors.
- This smart contract implementation does not provide a solution for collecting AML/KYC information.
The Transfer Admin or Wallet Admin calls initialalizeHolder(buyerAddress), initializeHolderGroup(buyerAddress, transferGroup) and initializeSecurityAssociatedAccount(buyerAddress, transferGroup) to provision their account. Initially this will be done for the Primary Issuance of tokens to Investors where tokens are distributed directly from the Issuer to Holder wallets, where:
- buyerAddress: Buyer/Investor wallet address for which to set permissions
- transferGroup: desired transfer group ID for wallet address
A potential Investor sends their AML/KYC information to the Transfer Admin or Wallet Admin or a trusted AML/KYC provider.
The Transfer Admin or Wallet Admin calls initialalizeHolder(investorAddress), initializeHolderGroup(investorAddress, transferGroup) and initializeSecurityAssociatedAccount(investorAddress, transferGroup) to provision the Investor account.
At this time (or potentially earlier), the Transfer Admin or Wallet Admin authorizes the transfer of tokens between account groups with initializeTransferRule(fromGroup, toGroup, afterTimestamp). Note that allowing a transfer from group A to group B by default does not allow the reverse transfer from group B to group A. This would need to be configured separately.
- Ex.: Reg CF unaccredited Investors may be allowed to sell to Accredited US Investors but not vice versa.

Relevant methods:

/**
  * @dev Initialize new transfer group
  * @param groupId Unique id of the group
  * @accounts
  * @param transferRestrictionGroup The transfer restriction group PDA as ["trg", transferRestrictionData, groupId].
  * @param transferRestrictionData The Transfer Restricition data initialized for securityToken
  * @param accessControlAccount Access Control Account.
  * @param payer Wallet which pays transaction fee. Must be Transfer Admin
  * @param systemProgram Solana System Program which is required for new on-chain account data initialization
  */
.initializeTransferRestrictionGroup(groupId)
  .accountsStrict({
    transferRestrictionGroup,
    transferRestrictionData,
    accessControlAccount,
    payer,
    systemProgram,
  })

/**
  * @dev Sets an allowed transfer from a group to another group beginning at a specific time.
  * There is only one definitive rule per from and to group.
  * @param lockedUntil The unix timestamp that the transfer is locked until. 0 is a special number. 0 means the transfer is not allowed.
  * This is because in the smart contract mapping all pairs are implicitly defined with a default lockedUntil value of 0.
  * But no transfers should be authorized until explicitly allowed. Thus 0 must mean no transfer is allowed.
  * @accounts
  * @param transferRule The transfer rule PDA as ["tr", transferRestrictionGroupFrom, transferRestrictionGroupTo].
  * @param transferRestrictionGroupFrom The group the transfer is coming from.
  * @param transferRestrictionGroupTo The group the transfer is going to.
  * @param accessControlAccount Access Control Account.
  * @param payer Wallet which pays transaction fee. Must be Transfer Admin
  * @param systemProgram Solana System Program which is required for new on-chain account data initialization
  */
initializeTransferRule(lockedUntil)
  .accountsStrict({
    transferRule,
    transferRestrictionData,
    transferRestrictionGroupFrom,
    transferRestrictionGroupTo,
    accessControlAccount,
    payer,
    systemProgram,
  })

/**
  * @dev A convenience method for initializing the new holder.
  * @param recipientHolderId The created holderId 
  * @accounts
  * @param transferRestrictionHolder The transfer restriction holder PDA as ["trh", transferRestrictionData, holderId].
  * @param transferRestrictionData The Transfer Restricition data initialized for securityToken
  * @param payer Wallet which pays transaction fee. Must be Transfer or Wallets Admin
  * @param systemProgram Solana System Program which is required for new on-chain account data initialization
  */
.initializeTransferRestrictionHolder(holderId)
  .accountsStrict({
    transferRestrictionHolder,
    transferRestrictionData,
    accessControlAccount,
    payer,
    systemProgram,
  })

/**
  * @dev A convenience method for initializing the new holder.
  * @accounts
  * @param holderGroup The transfer restriction holderGroup PDA as ["trhg", transferRestrictionData, holderId].
  * @param transferRestrictionData The Transfer Restricition data initialized for securityToken
  * @param holder The transfer restriction holder PDA as ["trh", transferRestrictionData, holderId].
  * @param payer Wallet which pays transaction fee. Must be Transfer or Wallets Admin
  * @param systemProgram Solana System Program which is required for new on-chain account data initialization
  */
.initializeHolderGroup()
  .accountsStrict({
    holderGroup,
    transferRestrictionData,
    group,
    holder,
    authorityWalletRole,
    payer,
    systemProgram,
  })

/**
  * @dev A convenience method for initializing the transfer group, lock until.
  * @accounts
  * @param securityAssociatedAccount The security associated account PDA as ["saa", associatedTokenAccount].
  * @param group The desired group account PDA linked with groupId to set for the address.
  * @param holder The holder account PDA linked with holderId
  * @param securityToken The Token 22 address
  * @param transferRestrictionData The Transfer Restricition data initialized for securityToken
  * @param payer Wallet which pays transaction fee. Must be Transfer or Wallets Admin
  * @param systemProgram Solana System Program which is required for new on-chain account data initialization
  */
initializeSecurityAssociatedAccount()
  .accountsStrict({
    securityAssociatedAccount,
    group,
    holder,
    securityToken,
    transferRestrictionData,
    userWallet,
    associatedTokenAccount,
    payer,
    systemProgram,
  })

WARNING: Maximum Total Supply, Minting and Burning of Tokens

The variable maxTotalSupply is set when the contract is created and limits the total number of tokens that can be minted.

Reserve Admins can mint tokens to and burn tokens from any address. This is primarily to comply with law enforcement, regulations and stock issuance scenarios - but this centralized power could be abused. Transfer Admins, authorized by Contract Admins, can also update the transfer rules at any moment in time as many times as they want.

Overview of Transfer Restriction Enforcement Functions

From	To	Restrict	Enforced By	Admin Role
Reg D/S/CF	Anyone	Until TimeLock ends	`mintReleaseSchedule(investorAddress, balanceReserved, commencementTime, scheduleId, cancelableByAddresses)`	Reserve Admin
Reg S Group	US Accredited	Forbidden During Flowback Restriction Period	`initializeTransferRule(fromGroupS, toGroupD, afterTime)`	Transfer Admin
Reg S Group	Reg S Group	Forbidden Until Shorter Reg S TimeLock Ended	`initializeTransferRule(fromGroupS, toGroupS, afterTime)`	Transfer Admin
Issuer	Reg CF with > maximum number of total holders allowed	Forbid transfers increasing number of total Holders (across all groups) above a certain threshold	`setHolderMax(maxAmount)`	Transfer Admin
Issuer	Reg CF with > maximum number of Holders per group allowed	Forbid transfers increasing number of total Holders (within each group) above a certain threshold	`setHolderGroupMax(transferGroupID, maxAmount)`	Transfer Admin
Stolen Tokens	Anyone	Fix With Freeze, Burn, Reissue	`freezeWallet();` `burnSecurities(address, amount);` `mintSecurities(newOwnerAddress);`	Wallets Admin or Transfer Admin can `freezeWallet()` and Reserve Admin can do `mintSecurities()` `burnSecurities()`
Any Address During Regulatory Freeze	Anyone	Forbid all transfers while paused	`pause(isPausedFlag)`	Transfer Admin
Any Address During Regulatory Freeze	Anyone	Unpause from a paused state	`pause(isPausedFlag)`	Transfer Admin
Anyone	Anyone	Force the transfer of tokens for emergencies	`forceTransferBetween(sender, recipient, amount)`	Reserve Admin

Roles

The smart contract enforces specific admin roles. The roles divide responsibilities to reduce abuse vectors and create checks and balances. Ideally each role should be managed by a separate admin with separate key control.

In some cases, such as for the Contract Admin or Wallets Admin, it is recommended that the role's private key is managed through multi-signature (e.g. requiring 2 of 3 or N of M approvers) authentication.

Admin Types

The Admin functionality breaks down into 4 main roles. The contract is configured to expect these wallets. In the contract constructor:

Contract Admin
- Akin to root level access administrator. Can upgrade internal contract dependencies (ie RestrictedSwap, TransferRules) or grant Admin permissions. Recommended to be a secure multi-sig wallet.
Reserve Admin
- Receives initial tranche of minted tokens from deployment. Also can adjust the supply of tokens by minting or burning or forcibly initiate transfers.

Via granted roles (from Contract Admin):

Transfer Admin
- Can set transfer restriction permissions/rules between groups or invoke snapshots.
- Transfer Admin capabilities are a superset of those of Wallets Admin.
Wallets Admin
- Can manage Holder/Wallet transfer group assignments.

Typically any legal entity third-party Transfer Agent will need access to both the roles for Transfer Admin and Wallets Admin. However some agents (such as exchanges) will, for example, be able to assign groups to wallets and permission them (as a Wallets Admin) but will not be able to adjust the transfer rules.

Admin Functionality

Function	Contract Admin	Reserve Admin	Transfer Admin	Wallets Admin
upgradeTransferRules()	yes	no	no	no
snapshot()	yes	no	no	no
mint()	no	yes	no	no
burn()	no	yes	no	no
forceTransferBetween()	no	yes	no	no
pause() or unpause (ie pause(false))	no	no	yes	no
setAllowGroupTransfer()	no	no	yes	no
setHolderMax()	no	no	yes	no
setHolderGroupMax()	no	no	yes	no
fundDividend()	no	no	yes	no
initilizeTransferRule()	no	no	yes	yes
freezeWallet()	no	no	yes	yes
thawWallet()	no	no	yes	yes
setTransferGroup()	no	no	yes	yes
createHolderFromAddress()	no	no	yes	yes
appendHolderAddress()	no	no	yes	yes
addHolderWithAddresses()	no	no	yes	yes
removeHolder()	no	no	yes	yes
createReleaseSchedule()	yes	yes	yes	yes
mintReleaseSchedule()	no	yes	no	no

Note! Anyone can burn owned tokens by Solana SPL design

Use Cases

Initial Security Token Deployment

sequenceDiagram
  autonumber
	actor Deployer
   participant AccessControlProgram
   participant TransferRestrictionsProgram

   actor TransferAdmin
   actor ReserveAdmin
   actor WalletsAdmin

  Deployer ->> AccessControlProgram: initializeAccessControl(...)
  Deployer ->> TransferRestrictionsProgram: initializeExtraAccountMetaList(...)
  Deployer ->> TransferRestrictionsProgram: initializeTransferRestrictionsData(...)

  Deployer ->> TransferRestrictionsProgram: initializeWalletRole(TransferAdmin)
  Deployer ->> TransferRestrictionsProgram: initializeWalletRole(ReserveAdmin)
  Deployer ->> TransferRestrictionsProgram: initializeWalletRole(WalletsAdmin)

  TransferAdmin ->> TransferRestrictionsProgram: initializeTransferRestrictionGroup(fromGroupId)
  TransferAdmin ->> TransferRestrictionsProgram: initializeTransferRestrictionGroup(toGroupId)
  TransferAdmin ->> TransferRestrictionsProgram: initializeTransferRule(fromGroup, toGroup)

  ReserveAdmin ->> AccessControlProgram: mintSecurities(reserveAdminAddress, amount)

  loop EITHER / OR for reserveAdminAddress and walletsAdminAddress
      TransferAdmin ->> TransferRestrictionsProgram: initializeSecurityAssociatedAccount(address, walletTransferGroup), intializeHolder(address,id), initializeHolderGroup(address, groupId)
      WalletsAdmin ->> TransferRestrictionsProgram: initializeSecurityAssociatedAccount(address, walletTransferGroup), intializeHolder(address,id), initializeHolderGroup(address, groupId)
  end

  ReserveAdmin ->>+ TransferRestrictionsProgram: createTransferCheckedWithTransferHookInstruction(walletsAdminAddress, amount)
  loop EITHER / OR
      TransferAdmin ->> TransferRestrictionsProgram: initializeSecurityAssociatedAccount(investorAddress, walletTransferGroup), intializeHolder(address,id), initializeHolderGroup(address, groupId)
      WalletsAdmin ->> TransferRestrictionsProgram: initializeSecurityAssociatedAccount(investorAddress, walletTransferGroup), intializeHolder(address,id), initializeHolderGroup(address, groupId)
  end

  WalletsAdmin ->> TransferRestrictionsProgram: createTransferCheckedWithTransferHookInstruction(investorAddress, amount)
  Token22 Program ->> TransferRestrictionsProgram: execute(from, to, value) // where transfer restrictions are enforced

AccessControl and TransferRestrictions programs are deployed first
Deployer initializes access control data, mint, transfer restrictions data. At the time of deployment, the deployer configures a separate Reserve Admin address, a Transfer Admin address, and a Wallets Admin address. This allows the reserve security tokens to be stored in cold storage since the treasury Reserve Admin address private keys are not needed for everyday use by the Transfer Admin.
The Transfer Admin initializes transfer groups with initializeTransferRestrictionGroup(groupId)
The Transfer Admin authorizes the transfer of tokens between account groups with initializeTransferRestrictionGroup(fromGroup, toGroup, afterTimestamp) .
The Reserve Admin then provisions a Wallets Admin address for distributing tokens to investors or other stakeholders. The Wallets Admin uses initializeTransferRestrictionHolder(investorAddress, holderId), initializeHolderGroup(investorAddress, group)``initializeSecurityAssociatedAccount(investorAddress, transferGroup) to set address restrictions.
The Reserve Admin then transfers tokens to the Wallets Admin address.
The Wallets Admin then transfers tokens to Investors or other stakeholders who are entitled to tokens.

Setup For Separate Issuer Private Key Management Roles

By default the reserve tokens cannot be transferred to. To allow transfers the Transfer Admin or Wallets Admin must configure transfer rules using both updateTransferRestrictionGroup(transferGroup) to configure the individual account rules and initialzeTransferRule/updateTransferRule(account, groupFrom, groupTo) to configure transfers between accounts in a group. A group represents a category like US accredited investors (Reg D) or foreign investors (Reg S).

During the setup process to split transfer oversight across three private key holders, the Transfer Admin can setup rules that only allow the Reserve Admin group to only transfer tokens to the Wallets Admin address group. The Wallets Admin should be restricted to a limited maximum balance necessary for doing one batch of token distributions - rather than the whole reserve. The use of a hot wallet Wallets Admin for small balances also makes everyday token administration easier without exposing the issuer's reserve of tokens to the risk of total theft in a single transaction. Each of these private keys may also be managed with a multi-sig solution for added security.

Multi-sig is especially important for the token Reserve Admin and Contract Admin.

Here is how these restricted Admin accounts can be configured:

Transfer Admin, Reserve Admin and Wallets Admin accounts are managed by separate users with separate keys. For example, separate Nano Ledger X hardware wallets.
Reserve and Wallets Admin addresses can have their own separate transfer groups.
- updateWalletGroup(reserveAdminAddress, reserveAdminTransferGroup)
- updateWalletGroup(walletsAdminAddress, walletsAdminTransferGroup)
Reserve Address Group can only transfer to Wallets Admin Groups after a certain Timestamp.
- initializeTransferRule(reserveAdminTransferGroup, walletsAdminTransferGroup, afterTimestamp)
Wallets Admin Address can transfer to investor groups like Reg D and Reg S after a certain Timestamp.
- initializeTransferRule(walletsAdminTransferGroup, regD_TransferGroup, afterTimestamp)
- initializeTransferRule(walletsAdminTransferGroup, regS_TransferGroup, afterTimestamp)

Then the Wallets Admin can distribute tokens to investors and stakeholders as described below...

Issuing the Token To AML / KYC'd Recipients

sequenceDiagram
  autonumber
  actor Investor
  actor TransferAdmin

  participant TransferRestrictionsProgram
  participant Token22

  actor WalletsAdmin

  Investor ->> TransferAdmin: send AML/KYC and accreditation info
  TransferAdmin ->> TransferRestrictionsProgram: setHolderMax(maxAmount)
  loop
    TransferAdmin ->> TransferRestrictionsProgram: initializeTransferRestrictionHolder(...)
    TransferAdmin ->> TransferRestrictionsProgram: initializeTransferRestrictionGroup(walletsAdminAddress, walletsAdminGroup...)
    TransferAdmin ->> TransferRestrictionsProgram: setTransferGroup(walletsAdminAddress, walletsAdminGroup...)
    TransferAdmin ->> TransferRestrictionsProgram: initializeTransferRestrictionGroup(investorAddress, investorAdminGroup...)
    TransferAdmin ->> TransferRestrictionsProgram: initializeSecurityAssociatedAccount(investorAddress, holder, investorAdminGroup...)
    TransferAdmin ->> TransferRestrictionsProgram: initializeTransferRestrictionRule(walletsAdminGroup, investorAdminGroup...)
  end
  WalletsAdmin ->> Token22: transfer(investorAddress, amount)
  Token22 ->> TransferRestrictionsProgram: execute(from, to, value)
  Note right of TransferRestrictionsProgram: This enforce transfer restrictions on Token22 transfer hook

The Transfer Admin gathers AML/KYC and accreditation information from investors and stakeholders who will receive tokens directly from the Issuer (the Primary Issuance).
(optional) set the Holder max if desired
Transfer Admin configures approved Transfer Group for Wallets Admin.
Transfer Admin then configures approved Transfer Groups for Investor and stakeholders with initializeSecurityAssociatedAccount(address, holder, transferGroup). Based on the AML/KYC and accreditation process the investor can provision the account address with:

a) a transfer group designating a regulatory class like "Reg D", "Reg CF" or "Reg S"

b) the freeze status of that address (with true meaning the account will be frozen from activity)]
The Transfer Admin then must allow transfers between groups with initializeTransferRestrictionRule(walletsAdminGroup, investorAdminGroup...)
The tokens can then be transferred from the Issuer's wallet to the provisioned addresses.
Transfer Restrictions are detected.

Note that there are no transfers initially authorized between groups. By default no transfers are allowed between groups - all transfer groups are restricted.

Lockup Periods

Lockup periods are enforced via:

initializeTrnasferRule(fromGroup, toGroup, unixTimestamp) or setAllowTransferRule(fromGroup, toGroup, unixTimestamp) allows transfers from one Transfer Group to another after the unixTimestamp. If the unixTimestamp is 0, then no transfer is allowed.

Maximum Number of Holders Allowed

By default Transfer Groups cannot receive token transfers. To receive tokens the issuer gathers AML/KYC information and then calls initializeSecurityAssociatedAccount().

A single Holder may have unlimited Wallet addresses. This cannot be altered. The Issuer can only configure the maximum number of Holders allowed (via Transfer Admin) by calling setHolderMax. By default, this limit is set to 2**64-1.

setHolderMax(amount)

Maximum Number of Holders Allowed Per Group

Transfer Admin can configure the maximum number of allowed Holders per group by calling setHolderGroupMax. By default, the holderGroupMax for each group is set to 0, meaning that it won't be applied as a restriction.

Group 0 (the default Holder group) is the only group for which the holder group max variable cannot be applied (an unlimited number of Group 0 Holders are allowed in perpetuity).

setHolderGroupMax(groupID, amount)

`initializeTransferRestrictionGroup`

initializeTransferRestrictionGroup is used to create new transfer group like US accredited investors (Reg D) or foreign investors (Reg S).

`initializeSecurityAssociatedAccount`

initializeSecurityAssociatedAccount is usually used after KYC/AML verification to activate a particular wallet for transfers. Usualy used with initializeTransferRestricitionHolder and initializeHolderGroup if it is a new holder or new group for existing holder.

`initialializeTransferRule`

initilizeTransferRule is used to create new transfer rule for 2 specified groups where ..groupFrom for senders and ..groupTo for reveivers

Timelock Cancellations and Transfers

In order to skip enforcement of transfer restrictions for tokenlock contract escrow account we can call setLockupEscrowAccount(escrowAddress). If we do not do that Escrow address will be processed as usual investor account which enforces additional transfer restrictions on cancelTimelock (escrow -> reclaimer and escrow -> timelock recipient) and transferTimelock (escrow -> recipient)

Cancel Timelock

In the case of cancellations, the transfer restrictions must be enabled between the initial target recipient and the reclaimTo address designated by the canceler.

Timelocks can be configured to be cancelled by a specific canceler address. This canceler can designate a separate reclaim address to receive the locked token portion of the remaining timelock, pending allowed group transfers as described above. The remaining unlocked portion will be transferred directly to the initial target recipient of the original vesting.

Transfer Timelock

For unlocked tokens within a timelock, the initial target recipient can choose to transfer unlocked tokens directly to another recipient. This is a convenience atop the typical transfer method.

In the case of a timelock transfer, the initial target recipient must also be in a group able to transfer tokens to the new recipient.

Example Transfer Restrictions

Example: Investors Can Trade With Other Investors In The Same Group (e.g. Reg S)

To allow trading in a group:

Call updateWalletGroup(address, transferGroup) for trader Wallets in the group
initializeTransferRule(fromGroupX, toGroupX, groupTimeLock) for Wallets associated with groupIDs (for example, Reg S)
A token transfer for an allowed group will succeed if:
- the recipient of a token transfer does not result in a total holder count in a given group that exceeds the defined holderGroupMax (if configured, ie holderGroupMax set to > 0)
- the recipient of a token transfer does not result in a total global holder count that exceeds the defined holderMax

Example: Avoiding Flowback of Reg S "Foreign" Assets

To allow trading between Foreign Reg S account addresses but forbid flow back to US Reg D account addresses until the end of the Reg D lockup period

Call updateWalletGroup(address, groupIDForRegS) to configure settings for Reg S investors
Call updateWalletGroup(address, groupIDForRegD) to configure settings for Reg D investors
initializeTransferRule(groupIDForRegS, groupIDForRegS, addressTimelock) allow Reg S trading
A token transfer for between allowed groups will succeed if:
- the addressTimelock time has passed; and
- the recipient of a token transfer is not frozen (ie freezeStatus is false).

Example: Exchanges Can Register Omnibus Accounts

Centralized exchanges can register custody addresses using the same method as other users. They contact the Issuer to provision accounts and the Transfer Admin or Wallets Admin calls initializeTransferRestrictionHolder(), initializeHolderGroup(), initializeSecurityAssociatedAccount() for the exchange account.

When customers of the exchange want to withdraw tokens from the exchange account they must withdraw into an account that the Transfer Admin has provisioned for them with initializeSecurityAssociatedAccount().

Talk to a lawyer about when exchange accounts may or may not exceed the maximum number of holders allowed for a token.

Group 0 Transfer Restrictions

In general, it is possible to allow Group 0 transfers. They are configurable in the same way that other transfer restrictions across different groups can be configured. This allowance is required for certain real-world situations. For example, if all tokens are freely tradeable under Reg A+ or a public filing, then Group 0 transfers can be allowed.

Transfers Can Be Paused To Comply With Regulatory Action

If there is a regulatory issue with the token, all transfers may be paused by the Transfer Admin calling pause(). During normal functioning of the contract pause() should never need to be called.

The pause() mechanism has been implemented into the TransferRestrictions and Dividends program.

Law Enforcement Recovery of Stolen Assets

In the case of stolen assets with sufficient legal reason to be returned to their owner, the issuer can call freezeWallet() (Wallets Admin, Transfer Admin), burnSecurities(), and mintSecurities() (Reserve Admin) to transfer the assets to the appropriate account.

Although this is not in the spirit of a cryptocurrency, it is available as a response to requirements that some regulators impose on blockchain security token projects.

Asset Recovery In The Case of Lost Keys

In the case of lost keys with sufficient legal reason to be returned to their owner, the issuer can call freezeWallet(), burnSecurities(), and mintSecurities() to transfer the assets to the appropriate account. This opens the issuer up to potential cases of fraud. Handle with care.

Once again, although this is not in the spirit of a cryptocurrency, it is available as a response to requirements that some regulators impose on blockchain security token projects.

Lockup

A "vesting" smart contract that can implement token lockup with scheduled release and distribution:

Can enforce a scheduled release of tokens (e.g. investment lockups)
Smart contract enforced lockup schedules are used to control the circulating supply and can be an important part of tokenomics.
Some lockups are cancelable - such as employee vestings. When canceled, unlocked tokens remain in the recipients account address and locked tokens are returned to an address specified by the administrator that has an appropriate transfer group to receive the tokens.

Note that tokens in lockups cannot be burned by admins to avoid significant complexity.

mintReleaseSchedule

Release schedules can be only minted directly to timelock by the Reserve Admin. In this case, as it is akin to token minting, it does not have to adhere to transfer restrictions, and is purely under the discretion of the Reserve Admin.

This is described in mint_release_schedule.rs.

Vesting Schedule Creation & Timelock Funding

Vesting schedules are created independently of any specific timelock. Timelocks reference schedules to control the release of funds for a recipient starting on a specific commencement date.

Vesting Schedule Creation Code

A vesting schedule can be created with a call to the Solana program like this.

Solana Web3 JS call:

await program.methods
  .createReleaseSchedule(
    uuid,
    releaseCount,
    new anchor.BN(delayUntilFirstReleaseInSeconds),
    initialReleasePortionInBips,
    new anchor.BN(periodBetweenReleasesInSeconds),
  )
  .accountsStrict({
    tokenlockAccount: tokenlockDataPubkey,
    authority: signer.publicKey,
    authorityWalletRole: authorityWalletRolePubkey,
    accessControl: accessControlPubkey,
  })
  .signers([signer])
  .rpc({ commitment });

Timelock Cancelation

Timelocks can be cancelable (like stock vesting plans) or non-cancelable (like investor lockups).

Solana Web3 JS call:

const cancelTimelockInstruction = program.instruction.cancelTimelock(
  timelockId,
  {
    accounts: {
      tokenlockAccount: tokenlockDataPubkey,
      timelockAccount,
      escrowAccount: escrowAccount,
      pdaAccount: escrowOwnerPubkey,
      target,
      targetAssoc,
      authority: signer.publicKey,
      reclaimer: reclaimerTokenAccountPubkey,
      mintAddress: mintPubkey,
      tokenProgram: TOKEN_2022_PROGRAM_ID,
      transferRestrictionsProgram:
        transferRestrictionsProgram.programId,
      securityAssociatedAccountFrom,
      securityAssociatedAccountTo,
      transferRule: transferRulePubkey,
    },
    signers: [signer],
  }
);

// Due to the nature of transfer hooks we are required to add extra account metas for each inner transfer of `cancelTimelock` instruction.
await addExtraAccountMetasForExecute(
  connection,
  cancelTimelockInstruction,
  transferHook.programId,
  escrowAccount,
  mintPubkey,
  reclaimerTokenAccountPubkey,
  escrowOwnerPubkey,
  anyAmount,
);
await addExtraAccountMetasForExecute(
  connection,
  cancelTimelockInstruction,
  transferHook.programId,
  escrowAccount,
  mintPubkey,
  targetAssoc,
  escrowOwnerPubkey,
  anyAmount,
);

// increase compute units in order to cover all load during instruction execution
const modifyComputeUnitsInstruction =
  ComputeBudgetProgram.setComputeUnitLimit({
    units: 400000,
  });

await sendAndConfirmTransaction(
  connection,
  new Transaction().add(
    ...[modifyComputeUnitsInstruction, cancelTimelockInstruction]
  ),
  [signer],
  { commitment }
);

Transfers

Transfer unlocked balances from all timelocks

Called by the recipient.

const transferInstruction = program.instruction.transfer(new anchor.BN(amount), {
  accounts: {
    tokenlockAccount,
    timelockAccount,
    escrowAccount,
    pdaAccount: escrowOwnerPubkey,
    authority: signer.publicKey,
    to: recipientAccount,
    mintAddress: mintPubkey,
    tokenProgram: TOKEN_2022_PROGRAM_ID,
    transferRestrictionsProgram: transferRestrictionsHelper.program.programId,
    authorityAccount,
    securityAssociatedAccountFrom,
    securityAssociatedAccountTo,
    transferRule: transferRulePubkey,
  },
  signers: [signer],
});

// it is required to add transfer hook information for inner transaction (for transferFrom as well)
await addExtraAccountMetasForExecute(
    connection,
    transferInstruction,
    transferHookProgramId,
    escrowAccount,
    mintPubkey,
    recipientAccount,
    escrowOwnerPubkey,
    BigInt(amount),
    commitment
  );

// increase compute units in order to cover all load during instruction execution
const modifyComputeUnitsInstruction =
  ComputeBudgetProgram.setComputeUnitLimit({
    units: 400000,
  });

return sendAndConfirmTransaction(
  connection,
  new Transaction().add(modifyComputeUnitsInstruction, transferInstruction),
  [signer],
  { commitment: "confirmed" }
);

Access Control

Access Control Program implements roles initializeWalletRole, updateWalletRole and ownership under admin security token functions: mintSecurities, burnSecurities, freezeWallet, thawWallet, forceTransferbetween. This is similar to the linux file permission bitmask exposed in the chmod command line function.

Our implementation uses binary bitmask determine the access control roles for an address. This optimizes the compute units usage and the size of the smart contract code itself.

How it works

We use a u8 binary representation of a number, such as 01010101 to represent the roles IDs within the access controls.

Roles are defined by a specific bit position in the bit storage representation.

As example decimal 1 is 00000001 in binary mode, 2 is 00000010, 3 is 00000011, 4 is 00000100, 7 is 00000111 etc.

We describe the roles in use as:

#[repr(u8)]
pub enum Roles {
    ContractAdmin = 1,  // 0001
    ReserveAdmin = 2,   // 0010
    WalletAdmin = 4,    // 0100
    TransferAdmin = 8,  // 1000
    All = 15,           // 1000
}

If you want to use the unused bits in the future to add new roles you can add something like

NewRole = 16;     // 000010000
SecondRole = 32;  // 000100000
All = 63;         // 000111111
...etc

You can grant multiple roles by adding the role number values together to get the correct bitmask representation like this:

WalletAndTransferAdmin = 12; // 0001100

or

const WALLET_AND_TRANSFER_ADMIN_ROLE: u8 = Roles::WalletsAdmin as u8 | Roles::TransferAdmin as u8; // 0001100

For manipulating binary numbers you can use binary operators *&, | and ^.

Example:

const WALLET_AND_TRANSFER_ADMIN_ROLE: u8 = Roles::WalletsAdmin as u8 | Roles::TransferAdmin as u8;

some_number & WALLETS_ADMIN_ROLE > 0 // checking if some_number contains 0100 bit, it can be used for checking the role

The contract implements simple methods to manipulate Access Controls and check the roles. Note that granting new and revoking existing roles must be done in separate transactions.

 fn initialize_wallet_role(u8 role)

 fn updateWalletRole(u8 role)

Appendix

Roles Matrix

Admin permissions are defined with the following binary values. Roles are defined as the OR of a set of admin roles:

Contract Admin: 0001 Reserve Admin: 0010 Wallets Admin: 0100 Transfer Admin: 1000

Role Integer	Admin Roles	Bit Mask Representation
0	None (Default)	`0000`
1	Contract Admin	`0001`
2	Reserve Admin	`0010`
3	Contract Admin + Reserve Admin	`0011`
4	Wallets Admin	`0100`
5	Contract Admin + Wallets Admin	`0101`
6	Reserve Admin + Wallets Admin	`0110`
7	Contract Admin + Reserve Admin + Wallets Admin	`0111`
8	Transfer Admin	`1000`
9	Contract Admin + Transfer Admin	`1001`
10	Reserve Admin + Transfer Admin	`1010`
11	Contract Admin + Reserve Admin + Transfer Admin	`1011`
12	Wallets Admin + Transfer Admin	`1100`
13	Contract Admin + Wallets Admin + Transfer Admin	`1101`
14	Reserve Admin + Wallets Admin + Transfer Admin	`1110`
15	All Roles (Contract, Reserve, Wallets, Transfer)	`1111`

Post-Deployment Configuration

After smart contract deployment, there are certain configurations to complete before token issuance and trading can occur smoothly.

Grant Transfer Admin Role

This is important so that an admin exists which can configure group transfers.
Allow Group Transfers

The Transfer Admin can then allow group transfers, for example between all traders within Group 1. This will allow transfers to occur between all traders placed in Group 1.

This is important so that transfers of tokens are enabled between designated groups.
Whitelist Program Derived Address (PDA)

The Transfer Admin can then set the group of the PDA address itself.

It is important that group transfers are allowed between PDA and recipients. This is necessary to take into account during integration Security Token with your Program. Tokenlockup program escrow account must be whitelisted with setLockupEscrowAccount()

sequenceDiagram
Title: Post-Deployment Configuration
  ContractAdmin->>AccessControlProgram: 1. initializeWalletRole(TransferAdmin_Address, 8)
  AccessControlProgram->>TransferAdmin: Role is granted
  TransferAdmin->>TransferRestrictionProgram: 2. initializeTransferGroup(1)
  TransferAdmin->>TransferRestrictionProgram: 3. initializeTransferRule(1, 1, 1)
  TransferAdmin->>TransferRestrictionProgram: 4. initializeTransferRestrictionHolder(Token_Address, 1)
  TransferAdmin->>TransferRestrictionProgram: 5. initializeHolderGroup(Token_Address_HolderId, 1)
  TransferAdmin->>TransferRestrictionProgram: 6. initializeSecurityAssociatedAccount(Token_Address, 1)
  TransferAdmin->>TransferRestrictionProgram: 7. initializeTransferRestrictionHolder(ReserveAdmin_Address, 1)
  TransferAdmin->>TransferRestrictionProgram: 8. initializeHolderGroup(ReserveAdmin_Address_HolderId, 1)
  TransferAdmin->>TransferRestrictionProgram: 9. initializeSecurityAssociatedAccount(ReserveAdmin_Address, 1)

Troubleshooting

To enable transfers between wallets, ensure that:

both sender and recipient are placed into desired transfer groups (ie invoking initializeSecurityAssociatedAccount or updateWalletGroup)
these transfer groups have approved transfer restrictions (ie invoking initializeTransferRule)
sender has available tokens to be transferred

Note that balance property of AssociatedTokenAccount typically used by wallet providers (ie Phantom) will display wallet balance that includes the amount of simple tokens. Any locked, staked tokens are held by related Tokenlockup program escrow account.

Program Deploy and Upgrade

The programs deployed are not immutable until they are marked as "final" (i.e., not upgradeable) on the Solana blockchain by the admin team. The upgrade authority has super power to change program. In order to deploy not upgradable program use an option --final to use BPFLoader2 at the deployment time (when --final is provided and the program will not be upgradeable). If any changes are required to the finalized program (features, patches, etc…) the new program must be deployed to a new program ID. To verify that program is not upgradable can be done on https://explorer.solana.com/ by checking Upgradeable property or not belong to Owner: BPFLoaderUpgradeab1e11111111111111111111111U

Otherwise program ownership, upgrades and changes must be shared with users.

Dividends

Dividends program is based on merkle-distributor program but with access control and support of Token22. Dividends functionality provides the administrators of the Primary security token the ability to make dividend distributions at certain points in time. Each moment of time is recorded as a Merkle tree root proof, total claim amount and number of nodes of a snapshot that captures the relative ownership of each token holder (invoking newDistributor() method manually by Contract Admin on the Dividends program). Snapshot and Merkle tree are built off-chain in advance and can be stored on IPFS or any other distributed storage. Dividends can be payed in any SPL or SPL 2022 standard tokens. The distributor creator can upload the IPFS hash containing the Merkle tree and all proofs for eligible claimants. It will allow anyone to obtain an on-chain link to the distribution information and claim it themselves.

Investor can claim only all dividends amount for one distribution in 1 instruction.

Anyone can fundDividends who owns dividends distribution tokens.

Investor can start claiming dividends as soon as treasury has enough balance to distribute with readyToClaim distributor parameters true.

See below for the Dividends payment distribution and claim flow utilizing USDC.

sequenceDiagram
    autonumber
    actor R as Recipient
    actor TA as Anyone
    actor CA as ContractAdmin

    participant D as DividendsContract

    CA ->> D: Invoke `newDistributor()` method to create new distribution (1)
    TA ->> D: Invoke `fundDividend()` for specific distribution (1) using USDC
    R ->> D: Invoke `claimDividend()` to claim dividend for distribution (1)
    D ->> R: Transfer dividend payment token

Contract Admin chooses to create new distribution to fund a dividend. Note that this is Contract Admin on the AccessControl data and Security mint. Each security mint has its own set of admins. A distributor account will be generated.
Anyone can fund the dividend using a payment token of specified distribution. This example uses USDC. The dividend must be funded for a specific distributor. Sender wallet must hold the payment token in order to fund the dividend. The payment token is extracted and sent to the Distribution PDA upon successful funding.
Recipient is free to claim the dividend by invoking claimDividend from the Dividends program. Note that claiming is available only when dividends treasury balance has anough tokens to distribute dividends to all investors.
Amount of entitled dividend token is transferred from the Dividends PDA to the rightful recipient.

Relevant Methods

New Distribution Creation Code

A new distribution can be created with a call to the Solana program like this.

Solana Web3 TS call:

await program.methods
  .newDistributor(
    bump,
    toBytes32Array(rootProof),
    totalClaimAmount,
    numNodes,
    ipfsHash
  )
  .accountsStrict({
    base: baseKey.publicKey,
    distributor,
    mint: dividendsMintPubkey,
    authorityWalletRole,
    accessControl: accessControlPubkey,
    payer: signer.publicKey,
    systemProgram: SystemProgram.programId,
  })
  .signers([signer, baseKey])
  .rpc({ commitment });

Fund dividends

Anyone can fund dividends for specific distribution.

Solana Web3 TS call:

await program.methods
  .fundDividends(amount)
  .accountsStrict({
    distributor,
    mint: dividendsMintPubkey,
    from: funderATA,
    to: distributorATA,
    funder: funderPublicKey,
    payer: signer.publicKey,
    tokenProgram: tokenProgramId,
  })
  .signers([funderKeypair, signer])
  .rpc({ commitment });

Claim dividends

Recipient claim dividends by providing proof, index and amount.

Solana Web3 TS call:

await program.methods
    .claim(claimBump, index, amount, proofBytes)
    .accountsStrict({
      distributor,
      claimStatus: claimStatusPubkey,
      from: distributorATA,
      to: claimantATA,
      claimant: claimant.publicKey,
      payer: payer.publicKey,
      mint: dividendsMintPubkey,
      tokenProgram: tokenProgramId,
      systemProgram: SystemProgram.programId,
    })
    .signers([claimant, payer])
    .rpc({ commitment });

Name		Name	Last commit message	Last commit date
Latest commit History 67 Commits
.github/workflows		.github/workflows
app/src		app/src
deploy		deploy
libraries/tokenlock-accounts		libraries/tokenlock-accounts
migrations		migrations
programs		programs
tests		tests
.env		.env
.env.example		.env.example
.gitignore		.gitignore
.prettierignore		.prettierignore
Anchor.toml		Anchor.toml
Cargo.lock		Cargo.lock
Cargo.toml		Cargo.toml
LICENSE		LICENSE
README.md		README.md
package.json		package.json
tsconfig.json		tsconfig.json
yarn.lock		yarn.lock

License

CoMakery/solana-security-token

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⚠️ Notice: Programs from this repository has not been audited yet. Use at your own risk.

Solana Security Token

Environment Setup

Build and test source code

Build programs

Test programs

Deployment

Programs

Mint and Progrmas Accounts

Deployment Result

Dividends data

Overview

Disclaimer

On-Chain Holder/Wallet Management

Transfer Restrictions

Example

WARNING: Maximum Total Supply, Minting and Burning of Tokens

Overview of Transfer Restriction Enforcement Functions

Roles

Admin Types

Admin Functionality

Use Cases

Initial Security Token Deployment

Setup For Separate Issuer Private Key Management Roles

Issuing the Token To AML / KYC'd Recipients

Lockup Periods

Maximum Number of Holders Allowed

Maximum Number of Holders Allowed Per Group

initializeTransferRestrictionGroup

initializeSecurityAssociatedAccount

initialializeTransferRule

Timelock Cancellations and Transfers

Cancel Timelock

Transfer Timelock

Example Transfer Restrictions

Example: Investors Can Trade With Other Investors In The Same Group (e.g. Reg S)

Example: Avoiding Flowback of Reg S "Foreign" Assets

Example: Exchanges Can Register Omnibus Accounts

Group 0 Transfer Restrictions

Transfers Can Be Paused To Comply With Regulatory Action

Law Enforcement Recovery of Stolen Assets

Asset Recovery In The Case of Lost Keys

Lockup

mintReleaseSchedule

Vesting Schedule Creation & Timelock Funding

Vesting Schedule Creation Code

Timelock Cancelation

Transfers

Access Control

How it works

Appendix

Roles Matrix

Post-Deployment Configuration

Troubleshooting

Program Deploy and Upgrade

Dividends

Relevant Methods

New Distribution Creation Code

Fund dividends

Claim dividends

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`initializeTransferRestrictionGroup`

`initializeSecurityAssociatedAccount`

`initialializeTransferRule`

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