What is an SPL Token
SPL tokens function as Solana blockchain's native token standard and work similar to ERC-20 tokens on Ethereum. SPL stands for Solana Program Library. This library includes a set of on-chain programs that define the behavior of a token on Solana. Developers use SPL tokens to build everything from fungible tokens to non-fungible tokens (NFT) and semi-fungible tokens on one of crypto’s fastest blockchains.
All SPL tokens follow the technical standards set by Solana Token Program. This means any token built with SPL will have the option to transfer, mint, burn or freeze, regardless of the token use case. It also means that any SPL token can interact directly with Solana wallet applications, trading platforms and DeFi programs when they are launched without any additional custom integrations.
Due to Solana's parallel processing model where multiple transactions are executed at once (as opposed to serial, one-by-one executions) on Solana, SPL tokens benefit from a high throughput network that processes transactions up to 65,000 times per second and costs less than a penny per transaction. Every token has its own Solana account where all the information is stored independently of the program to simplify state management and reduce computation cost.
How SPL Tokens Power the Solana Ecosystem
SPL tokens have been widely adopted across the entire Solana ecosystem. DeFi protocols like Raydium and Jupiter use them as a governance token or an LP token for liquidity mining or yield farming. RAY from Raydium, the governance token for one of the most active DEX on Solana, and JUP, which acts as a governance token for the Jupiter ecosystem, are great examples of SPL tokens in action. Gaming projects also issue SPL tokens to be used as in-game currencies and collectibles, while Magic Eden is the top NFT marketplace on Solana and handles a large volume of SPL NFTs per day.
Another development within Solana is Token Extensions, formerly known as Token-2022, that allows for more complex token configurations with built-in transfer fees, mint interest and confidential token transfers. These Token Extensions are backwards compatible and do not impact the existing SPL token standards that were created before Token Extensions was released. It also lowers the barrier for creating various financial products with Solana. Instead of building a whole new protocol to execute complex financial contracts, developers could now easily build them through a few configurations when launching a new token.
Thanks to Solana’s high composability, SPL tokens act as the building blocks of DeFi protocols on Solana. Tokens can be locked in a liquidity pool protocol to generate a receipt token to use as collateral in another DeFi protocol, then the same token can be traded in a decentralized exchange for a derivative token. This process takes just seconds, costs a fraction of a penny to execute and does not require extra effort to coordinate between different protocols because the tokens can flow and interact anywhere they are deployed to. That is the power of SPL token on Solana.
Interacting with SPL Tokens
Interacting with SPL tokens on Solana is a relatively straightforward process. All you need is a Solana wallet like Phantom, Backpack or Solflare (our personal favorite), which will automatically detect all your SPL tokens and allow you to transfer, receive and swap without any additional setup. Transactions are confirmed within seconds and the interface is intuitive enough for a first-time user.
Creating an SPL token on Solana has also been made easier. You have options to use a command-line tool if you are familiar with the Solana command line and development tools. For those looking for an easier and quick solution, there are platforms such as Solana Token Creator that provide a no-code solution where you can create a new token through an easy user interface. You just need to decide on the total supply, name, symbol, add a couple of metadata to identify your token, set any additional options, and deploy the new token for just a few dollars worth of SOL.
SPL tokens do require some SOL deposit to be rent-exempt (or to cover the storage rent required on the blockchain for every account). The rent exemption amount is around 0.002 SOL per each token account (or $0.31 at current market price). This is in contrast to the Ethereum network, where a single token transfer transaction at times of heavy network congestion could cost around $50 or more in gas fees. This cost-efficiency is part of what makes SPL tokens viable to be used as micropayments, game rewards and so on.
