This standard provides a registry contract method for authorizing token transfers. By nature, this covers both initially issuing tokens to users (ie: transfer from contract to owner), transferring tokens between users, and token spends.
The tokenization of assets has wide application, not least of which is financial instruments such as securities and security tokens. Most jurisdictions have placed legal constraints on what may be traded, and who can hold such tokens which are regarded as securities. Broadly this includes KYC and AML validation, but may also include time-based spend limits, total volume of transactions, and so on.
Regulators and sanctioned third-party compliance agencies need some way to link off-chain compliance information such as identity and residency to an on-chain service. The application of this design is broader than legal regulation, encompassing all manner of business logic permissions for the creation, management, and trading of tokens.
Rather than each token maintaining its own whitelist (or other mechanism), it is preferable to share on-chain resources, rules, lists, and so on. There is also a desire to aggregate data and rules spread across multiple validators, or to apply complex behaviours (ex. switching logic, gates, state machines) to apply distributed data to an application.
This proposal includes a financial permissions system on top of any financial token. This design is not a general roles/permission system. In any system, the more you know about the context where a function will be called, the more powerful your function can be. By restricting ourselves to token transfers (ex. ERC20 or EIP-777), we can make assumptions about the use cases our validators will need to handle, and can make the API both small, useful, and extensible.
The events are fired by the calling token. Since `Validator`s may aggregate or delegate to other `Validator`s, it would generate a lot of useless events were it the
`Validator`'s responsibility. This is also the reason why we include the `token` in the `call/4` arguments: a `Validator` cannot rely on `msg.sender` to determine the token that the call is concerning.
We have also seen a similar design from [R-Token](https://github.com/harborhq/r-token) that uses an additional field: `spender`. While there are potential use cases for this, it's not widely used enough to justify passing a dummy value along with every call. Instead, such a call would look more like this:
A second `check/2` function is also required, that is more general-purpose, and does not specify a transfer amount or recipient. This is intended for general checks, such as checking roles (admin, owner, &c), or if a user is on a simple whitelist.
We have left the decision to make associated `Validator` addresses public, private, or hardcoded up to the implementer. The proposed design does not include a centralized registry. It also does not include an interface for a `Validated` contract. A token may require one or many `Validator`s for different purposes, requiring different validations for different, or just a single `Validator`. The potential use cases are too varied to provide a single unified set of methods. We have provided a set of example contracts [here](https://github.com/Finhaven/ValidatedToken/) that may be inherited from for common use cases.
By only defining the validation check, this standard is widely compatible with ERC-20, EIP-721, EIP-777, future token standards, centralized and decentralized exchanges, and so on.
