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Closed-Loop Token

Closed-Loop Token allows its creator to limit applications where the token is used, set up custom policies for transfers, spending and conversions. It is defined in the sui::token module and is a part of the Sui Framework.

Background & Use Cases​

The standard Coin implementation on Sui is an example of an open-loop system - Coins are free-flowing, wrappable, freely transferable and can be stored in any application. The best real world analogy would be "cash" - hardly regulated and can be freely used and passed.

However, some applications require constraining the scope of the token to a specific purpose. For example, a token that can only be used for a specific service, or that can be used only by an authorized account, or one whose accounts can be blocked. A real-world analogy would be a "bank account" - regulated, controlled by the bank and compliant with certain rules and policies.

Specific domains that can benefit from a closed-loop token include:

  • Loyalty Points - A token that can only be used for a specific service, e.g. for an airline - granted to frequent flyers and used to purchase tickets or upgrades.
  • Regulatory-Compliant Tokens - some jurisdictions require certain checks or restrictions on tokens. For example, a token that can only be used by a verified user, or a single operation with a token can have a limit.
  • In-Game Currency - similar to "gems" and "diamonds" in mobile games: a token that can only be used in a game and granted to players for their actions or purchased. Tokens of this kind are often not transferrable and minted in predefined amounts to maintain scarcity and game balance.

Difference with Coin​

Unlike Coin, which has key + store abilities and thus supports wrapping and public transfers, Token has only the key ability and cannot be wrapped, stored as a dynamic field, or freely transferred (unless there's a custom policy for that). Due to this restriction, Token can only be owned by an account and can't be stored in an application (however, it can be "spent" - see Spending section section).

// defined in `sui::coin`
struct Coin<phantom T> has key, store { id: UID, balance: Balance<T> }

// defined in `sui::token`
struct Token<phantom T> has key { id: UID, balance: Balance<T> }

Compliance and Rules​

Closed-Loop Token allows its creator to set up any rules for transfers, spending and conversions. These rules are specified per action in the TokenPolicy. Rules are custom programmable restrictions which can be used to implement any request authorization / validation logic.

For example, a policy can set a limit on a transfer - X tokens per operation; or require a user to be verified before spending tokens; or allow spending tokens only on a specific service.

Rules can be reused across different policies and applications; and can be freely combined to create complex policies.