Lukas Kairys is a blockchain researcher and architect having experience working on various global blockchain solutions. Previously he worked with WePower.Network (40M USD raised in ICO) blockchain project and lead technology domain in blockchain and smart contracts development company. He has already worked with over 10 blockchain projects and helped to kickstart project ideas, find a synergy with blockchain, create a solution architecture, and develop secure smart contracts. Lukas is now an independent technical blockchain consultant and developer. Lukas is also a certified blockchain developer by IBM, NEM Blockchain, and AWS Blockchain initiative.
From ICOs to STOs. What’s the Tech Difference?
At the very beginning, ICO had nothing else, but just a smart contract deployed to Ethereum blockchain. No limitations, owners’ control, etc. A pure contract that exchanged Ether to a freshly issued token and transferred back.
Later on, as regulation requirements increased, hacks started appearing, and various people came into the industry, a smart contract was not as trustless anymore as before. ICOs started collecting funds in different currencies, KYC was required for investors, owners wanted to be able to burn tokens (in case of some scam). Therefore, a smart contract just became a way to have a decentralized accounting log of what happened when.
This is how we ended up with STO’s. Fully regulated and compliant way to raise funds.
As a result, it is required, that platform owners would know exactly between whom transactions are happening, would be able to take over tokens (in case of a court order), and limit p2p transfer abilities. Therefore, security token smart contracts are now being used as a transparent accounting system for all the transfers and action, which is used to report to the regulator.
A blockchain is a fresh form of digital technology that generally prevails independently of government authorities or private institutions, and there is absolutely no central server, no administrator, no owner. Therefore, storing securities on a blockchain is a perfect fit, as it can be used as an accounting system for all transactions with full traceability.
Why Public Blockchain?
There is a need to understand the difference between Public and Private Blockchains. A Public Blockchain is a permissionless blockchain. Anyone can join the blockchain network, meaning that they can read, write, or participate with a Public Blockchain. Public Blockchains are decentralized, no one has control over the network, and they are secure in that the data can’t be changed once validated on the blockchain. On the other hand, a Private Blockchain is a permissioned blockchain. Permissioned networks place restrictions on who is allowed to participate in the network and in what transactions.
As securities transaction should happen transparently and traceably, ROKKEX sees public blockchain as a perfect fit for storing securities registry.
How Do You Make Sure It Is Secure?
We use public Ethereum blockchain, which is Proof of Work secure blockchain, used by thousands of projects/tokens. Our smart contract has been developed using open-source and audited libraries from OpenZepplin (used by Coinbase, Brave, Bitgo). And our smart contract was also audited by a third-party auditor which did not find any vulnerabilities.
What Are the Key Requirements for Security Token Smart Contract?
There are several key requirements for security tokens, that should be implemented to be compliant:
- Transfer between whitelisted (known) participants.
- Ability to seize tokens (in case of a court order, death).
- View all transactions happening.
What Solutions Are Available?
We did research among all the existing solutions and protocols. Polymath and DS Protocol (Securitize) seemed the most advanced solutions with a lot of flexibility and custom abilities. Both solutions are pretty advanced and implement most of the required features. However, most of the solutions are very heavyweight (in terms of code amount and gas cost usage) and complexity, which, as a result, leaves a high risk for unexpected behavior or breaches.
What Approach Did You Take at ROKKEX?
As the industry is moving rather quickly, we decided not to take a risk by inventing something on our own or taking existing, but a complex and heavyweight solution. Therefore, we decided to divide our security token development into two phases:
- Simple ERC-20 token development with complete central control by the platform. This means that we use the Ethereum blockchain for accounting and transparent action log/trace. The platform has all the control required for token transfers, burning, and issuing. While on the other hand, investors (token holders) have the ability to view what is happening, the amount they own and initiate a transaction through the platform.
- Implementation of a full security token protocol with upgradability feature, which would enable us to hold a whitelist on a blockchain, enable peer to peer transfers by giving more control to the users, as well as reduce our control over it.
Also, if you are interested in helping us build a safe, fair, and reliable cryptocurrency exchange future, do not hesitate to join us by investing in our STO.
At ROKKEX, we take security extremely seriously, and our crypto exchange is built on ‘Security First’ principle. We want to share our expertise with the broader public for the world to become happy, safe, and wise.
If you have any ideas and suggestions, contact us at