ERC-3643 and ERC-1400 are two token standards for security tokens on the Ethereum blockchain. Security tokens are digital representations of real-world assets, such as stocks, bonds, real estate, or art, that are subject to compliance and regulation. Both standards aim to provide a common framework for issuing, transferring, and managing security tokens, but they have some differences in their design and implementation.
ERC-3643 is a token standard that was developed by Tokeny, a platform for tokenizing financial assets. It is based on the ERC-20 standard, but it adds some features to ensure compliance and security. ERC-3643 tokens have a validator system that automatically checks the eligibility of the sender and the receiver before every transfer, based on the rules defined by the issuer or its agent. The issuer or its agent can also control (burn or forcibly transfer) the tokens and the transfers, even if the investors have self-custody of their tokens. ERC-3643 tokens are compatible with any ERC-20 wallet or exchange, and they can reduce gas costs and increase efficiency by using batch transfers and off-chain signatures. ERC-3643 is the first permissioned token standard that is officially accepted and merged into Ethereum master GitHub.[1]
ERC-1400 is a token standard that was proposed by a group of developers and companies, including Polymath, Harbor, and Securitize. It is also based on the ERC-20 standard, but it introduces some extensions and variations to support security tokens. ERC-1400 tokens have a document management system that links the tokens to relevant legal documents and information. They also have a partition system that allows the tokens to be split into different subsets, each with its own rules and restrictions. ERC-1400 tokens use a specific key, generated off-chain, to validate each transfer, based on the compliance requirements of the issuer and the jurisdiction. ERC-1400 tokens are not fully compatible with ERC-20 wallets or exchanges, due to their additional features and complexity and they may incur higher gas costs and lower efficiency due to the complexity of the standard.
| Feature | ERC-3643 | ERC-1400 |
| Compliance | ↑ Uses a validator system to enforce compliance rules based on on-chain identities and attestations | ↑ Uses an off-chain key to enforce compliance rules based on token parameters and jurisdictions |
| Complexity | → Based on the ERC-20 standard but adds some features to ensure security and control | ↑ Introduces some extensions and variations to the ERC-20 standard to support security tokens |
| Scalability | ↑ Can handle multiple rules and jurisdictions without creating partitions or sub-tokens | ↓ Creates partitions or sub-tokens for different rules and jurisdictions and could increase the complexity and confusion |
| User-friendliness | ↑ Compatible with any ERC-20 wallet or exchange and can reduce the transaction fees and the processing time | ↓ Not fully compatible with ERC-20 wallets or exchanges and could incur higher transaction fees and lower efficiency |
| Recognition | ↑ The only permissioned token standard that has been officially approved and merged into the Ethereum master GitHub | ↓ Still a draft proposal and has not been officially accepted or merged into the Ethereum master GitHub |
| Use cases | ↑ Suitable for tokenizing financial assets, such as stocks, bonds, funds, or derivatives, that require strict compliance and security | ↑ Suitable for tokenizing any kind of real-world asset, such as real estate, art, or collectibles, that require governance and document management |
Ultimately, we believe that ERC-3643 is a better token standard than ERC-1400 for several reasons:
Recognizing the importance of interoperability in fostering network effects, as more tokens of compatible standards can be exchanged on various platforms, this increases the value of the ecosystem. As the landscape of tokenized assets continues to evolve, the robustness and acceptance of ERC-3643 position it as a reliable and future-proof solution for tokenizing financial assets requiring stringent compliance. In choosing ERC-3643, stakeholders not only embrace a token standard that aligns with their current needs but also invest in a solution that aligns with the broader trajectory of the Ethereum community. ERC-3643 stands out as a possible solution – paving the way for a more streamlined and efficient tokenized future.
[1] ERC-3643 vs ERC-1400 – Tokeny
