Real World Assets are the next big thing in the blockchain industry and the traditional financial system. Bringing real-world assets on-chain allows for transparency, decentralization, and permissionlessness.
What is ERC-3643? A Compliant Token Standard for Real World Assets
However, as we all know, on-chain is a free world that contains many potential risks, especially when it comes to real-life valuable assets. The limitation in the management activities of the authorities on on-chain is also a limitation on the expansion of this Shard .
Realizing this lack of demand, developers created the ERC-3643 standard specifically for Token real-world assets. In the following sections, we will explore the ERC-3643 standard in detail and its potential.
What is ERC-3643?
ERC-3643 is an open source standard that allows for the issuance, management, and transfer of permissioned or compliant Token . ERC-3643 is an upgrade of ERC-20 designed to comply with regulatory requirements while also providing sophisticated security and governance Token .
ERC-3643 was originally named T-REX protocol (Tokens for Regulated EXchanges) and was developed by the Tokeny team in 2018 to address the need for compliance enforcement through digital identity verification. The standard was finalized and included in the 2021 Network Improvement Proposal (EIP). Three years later, in 2024, the ERC-3643 proposal was adopted and became the official standard on the Ethereum network. This is an important milestone for ERC-3643, reflecting the applicability and necessity of this standard in the context of the convergence between the two markets TradFi and DeFi.
How the ERC-3643 standard works
ERC-3643 is an extension of the ERC-20 standard that adds identity verification and compliance checks for Token and users. Essentially, instead of being transferred directly between two entities on the network, Token issued under this standard require an additional step of approval by a Validator.
ERC-3643's operational model compared to ERC-20. Source: Zeeve
When going into the architectural details of the T-REX protocol or the ERC-3643 standard, we have the main components including Identify Contract, Registry, Security Token and Compliance.
Components of ERC-3643
Identify Contract
Identify Contract is a contract that has the function of authenticating the identity of the participants on the chain. The founders of ERC-3643 developed a dedicated platform for this function called on-chainID .
How on-chainID works
on-chainID is inherited and developed on the basis of two standards ERC-734 and ERC-735. This identity contract is not bound to a specific Token , users only need to initialize it once and use it forever.
on-chainID not only verifies the identity of user wallet addresses but can also be used to verify the ownership of Token assets. It also provides an information update function for users to flexibly update changes at any time.
Registry
This is the component that stores and processes information about issued permissioned Token , including the identity of the owner and other details related to the Token. The registry acts as a decentralized database to Token on the blockchain.
Registry includes Identity Registry, Identity Registry Storage, Trusted Issuers Registry and Trusted Claim Topics Registry.
The Identity Registry Vai as the execution center for the Eligibility Verification System (EVS). This contract connects to the Trusted Issuers Registry and the Trusted Topics Registry to check requests and determine eligibility. The Identity Registry Storage is where user information and associations such as wallet addresses and on-chainIDs are stored.
Compliance
Compliance is a toolkit used to establish the rules of compliant Token Issuance . These rules, once established, will be strictly followed throughout the entire life cycle of the Token.
For example, a compliance contract might define the number of investors by country, the maximum number of Token each investor can own, and the countries in which the Token can circulate.
Compliance is designed in a modular form with each condition being a module, allowing issuers to flexibly adjust compliance items based on specific requirements.
Security Token
Security Token are essentially ERC-20 Token but the transfer-related functions (transfer and transferFrom) are designed to be conditional. Transactions are only executed with the approval of the Eligibility Verification System (EVS).
This ensures that compliant Token can only be transferred to qualified parties. Additionally, ERC-3643 also has robust mechanisms for restoring and revoking Token if necessary.
In addition, the ERC-3643 standard also supports many other mechanisms to meet strict regulatory requirements such as upgrading contract terms and assigning Vai to participants.
In short, the ERC-3643 standard allows issuers to create and manage a list of mandatory standards for each Token and requires traders to meet them if they want to participate. At the same time, it also allows issuers to control Token in circulation.
Potential of the ERC-3643 standard
The advent of the ERC-3643 compliant Token Standard creates a layer of real user, real asset identity on the anonymous blockchain space. Not only does it provide accurate information and significantly reduce the number of shady transactions, it also affects the confidence of investors who prefer security, because they know that the assets they are trading are protected by regulatory agencies.
ERC-3643 is a promising standard for Token real-world assets . As mentioned in the beginning of the article, a major gap in real-world assets when put on-chain is the status of the assets and legality. Until now, on-chain investors have had little choice but to put their trust in the issuers.
A compliant Token Standard would be a valuable upgrade for this category. ERC-4643 opens up use cases for Token securities, real estate, luxury goods, equities, intellectual property, and more. Already, over $28 billion in assets have been Token using this standard.
Some prominent projects in applying this standard are: Tokeny, TokenFi, Bitbond, Defactor, Plume .
The sacrifice of permissionlessness also creates limitations for the standard. Power is vested in issuers and regulators, who need to operate fairly and efficiently for the standard to work to its full potential. Additionally, the requirement for users to disclose their identities to use it is also a barrier in the anonymity-obsessed blockchain world.
- Read more: Is privacy a normal thing?
Conclusion
The ERC-4643 standard is a necessity for the evolution of the blockchain market in the context of TradFi and DeFi intersection, especially in the face of the rise of the Real World Asset industry group.
Above is information about ERC-4643 - the compliant Token Standard , hope the article helps you in the research process.
