tZERO Token: Why ERC-20?

We have recently been getting questions on the technical decisions behind the development of tZERO’s security token (with ticker symbol “TZROP”). In response to the questions, we have decided to provide some clarity and context.

Since its early days, tZERO has been a regulatory aware organization, and has put a strong emphasis on legal review and compliance, in no small part, due to legal novelties that arise from the application of blockchain technologies to capital markets.

The development of the security token using blockchain technologies was kind of a discovery process. As we started the development in January 2018, we could not foresee the final form that the token would take. However, several factors played key roles toward eventual development of tZERO token based on the ERC-20 standard.

First, given our emphasis on regulatory compliance, we knew early on that we had to have mechanisms in place to control the transfer and sale of tokens. We determined that using smart contracts would provide the means and flexibility for building the needed controls. We also identified that, at the time, Ethereum and Stellar were the most commonly used public blockchains with smart contract support.

Second, our teams had an earlier successful trial with smart contracts. In 2016, we had used Solidity (the language for writing smart contracts on Ethereum) and a private Ethereum instance to issue security tokens for our parent company, Overstock.com (ticker symbol “OSTKP”).

Third, the ERC-20 technical standard which was proposed in 2015 quickly became a prevalent standard for issuing coins/tokens. Following the standard’s popularity and numerous issuances using it, the developer community contributed to the standard’s ease of use by creating many complementary tools (such as crypto wallets) that supported it.

So to answer the question “why ERC-20?”, the answer is all the above reasons and experiences; the wide adoption of Ethereum as the underlying infrastructure, the flexibility and completeness of Solidity language for implementing the necessary controls on Ethereum, the common adoption of ERC-20 as a token standard, and the availability of tools and features that support the standard made ERC-20 an easy and obvious choice for the design of TZROP.

On a final note, we should add that while we issued TZROP using the ERC-20 standard, we keep an open mind toward using other standards and protocols (either currently available or not conceived yet) that may be better choices for addressing other scenarios.

For further details about the token, see our public Github repo with the contract code at https://github.com/tZERO-dev/T0ken