Announcing the SX1411 token standard: a framework for managing complex on- and off-chain assets

Swarm Markets’ new SX1411 token standard is a modular framework to support a wide spectrum of asset classes, compliance needs, and interoperability.

Swarm Markets has developed a crucial piece of infrastructure required to create new types of asset-backed tokens. The SX1411 token standard opens up a new world of possibilities for managing an asset’s complete lifecycle while accommodating various roles involved in the constellation of trust required to mint, administer, and transact complex assets.

The smart contract codifies the relationship between a SX1411 token’s underlying asset and the entities responsible for managing those assets.

The Swarm Markets SX1411 token standard is born out of the necessity to use smart contracts that accommodate new functions unavailable using existing standards.

The token is designated as SX1411 because the 1400 token standard series has traditionally been used for securities compliant tokens (though SX1411 is equally suitable for non-regulated assets). With such a huge leap in functionality and utility, naturally Swarm Markets had to turn it up to 11.

Attributes

A major advantage to the SX1411 standard is the ability to use or not use the various attributes depending on the specific needs of an individual asset.

It’s a tokenization Swiss Army Knife!

Blockchains: SX1411 is a system agnostic standard which can be applied to EVM-compatible smart contracts on multiple blockchains.

Off-chain assets: works with blockchain native assets as well as off-chain assets.

Interest: support for interest-bearing assets and assets which pay ongoing dividends.

Custody: entities responsible for the underlying asset’s custody as well as their roles can be identified in the smart contract.

Provenance: an extensible, holistic, on-chain reference to create transparency as to the token’s underlying assets.

Redemption: optional feature for issuers to support redemption processes where individuals can redeem tokens for underlying assets.

Safeguard: empowers token holders to trigger liquidation by a pre-identified Guardian, initiating the redemption of all tokens.

Roles: support for various custody arrangements, liquidation processes, and issuer/administrator relationships.

Compliance: support to connect with dynamic whitelists/blacklists, know your asset (KYA), and KYC.

How it works

SX1411 tokens are the digital representation of underlying assets. Such assets can either be on-chain or off-chain assets.

An Issuer using the SX1411 framework embeds the proof of existence of the underlying asset into the token contract and authorizes the minting of tokens. SX1411 then allows the Issuer to connect with an Agent, e.g. a platform such as Swarm Markets, to help distribute or trade the token. The SX1411 smart contract identifies these various roles along with the attributes, parameters, proofs, etc. which can be managed over the lifecycle of the tokens.

A key trust element for a digital asset is to have clarity and confidence in the documentation as well as the involvement of trusted entities in each role. This can ideally involve, for example, banks, regulators, Big Four accountancies, and other traditional finance sector entities. However, a DAO or a trustee obliged to work in the interest of a DAO would be equally well suited. In the event of loss of trust in any aspect of the token, the safeguard function can be employed by token holders.

The safeguard feature of the SX1411 ensures that token holders play a role in the governance of the token and introduces checks and balances to the set-up. If token holders stake a predetermined percentage of tokens into the token’s safeguard function within the smart contract, the asset is frozen, and contract administration is handed over to a Guardian who triggers any predefined liquidations, materializing the value of underlying assets for token holders.

Going forward

As the asset tokenization space is evolving rapidly, the SX1411 aims to contribute to the tools available to issuers and presents a modular solution for various use cases.

SX1411 supports the work Swarm Markets has undertaken in the last few months to bring new kinds of assets to the crypto market.

Now that the smart contract has been audited and the security of the standard is confirmed, Swarm Markets will be using the SX1411 to bring completely new tokens to the industry and to the Swarm Markets platform.

View the SX1411 smart contract audit on our documentation site here: https://docs.swarm.markets/reference/smart-contract-audit.