SPL tokens and accounts

Wonder

1. Why does holding a token require creating, and funding, a separate account?
2. How can two wallets hold the same mint without their balances interfering with each other’s state updates?
3. What happens to the supply if the ‘mint authority’ key is lost versus if it is compromised?

Explore

1. On Solana, every object in the system is an account. An account holds a balance of lamports (the native SOL currency), arbitrary data, and an owner program that dictates how its data can be modified. One SOL equals one billion lamports. Unlike Ethereum, where a contract keeps its own storage, a Solana program keeps no state: it acts on accounts passed to it.
2. This separation enables extreme parallelism. If ten thousand users transfer tokens simultaneously, they interact with distinct memory addresses—specifically, their individual token accounts. Because these accounts do not share mutable state, the network can process them concurrently without conflict. Activity concentrated on one shared account, such as a popular trading pool, still has to queue for it; that is why Solana prices congestion per account (a later lesson).
3. Tokens are managed by the SPL Token program. A ‘Mint’ account defines a token’s identity: its total supply, decimal precision, and two critical authorities. The ‘mint authority’ can create new tokens, increasing supply. The ‘freeze authority’ can lock specific user accounts, preventing them from sending or receiving. These powers are optional; many projects revoke both: revoking the mint authority fixes the supply, and revoking the freeze authority means no one can freeze holders.
4. Each wallet holds each token in a separate ‘Token Account.’ For most users, this is the Associated Token Account (ATA), derived deterministically from their public key and the mint’s address. This derivation means the ATA address is predictable: if you know who owns what, you can calculate where it lives without querying the chain. The account must hold enough lamports to be ‘rent-exempt,’ a one-time deposit that is refunded if the account is closed.
5. Token-2022 extends this model with optional features that standard SPL tokens lack. It supports transfer fees, which hold back a percentage of each transfer in the recipient’s token account, up to a set maximum, for a designated authority to collect. It also enables ‘transfer hooks,’ where custom logic executes during a swap or send. These extensions add complexity but provide mechanisms for royalties and compliance checks that were previously impossible on-chain without external middleware.
6. To inspect a token’s properties, open a Solana explorer such as Solscan or Solana Explorer. Search for any mint address. The interface displays the total supply, decimals, and whether the mint authority is still active (meaning new tokens can be created) or revoked. If the freeze authority is active, its holder can freeze any wallet’s token account. Reading these fields reveals the centralization risk embedded in the token’s design before a single unit moves.

Key facts

Exercise nine, six, three, one

Fact check

Dates, figures and claims checked against the published sources listed below.

• Solana Documentation: Accounts and Token Program
• SPL Token and Token-2022 Technical Specifications