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ETH On Ethereum, a token is a smart contract
Every rule it executes consists of code written, audited and deployed by someone. Hedera takes a fundamentally different approach.
Tokens as native ledger entries
On most blockchains, tokens rely on smart contracts, which brings higher fees, slower speeds and additional complexity. Hedera is built differently: Tokens are native and have dedicated APIs that support fast, low-cost transfers and instant finality.
Issuers do not need to deploy contracts to encode token behavior, but instead configure a set of encryption keys when creating tokens. These keys determine what a token can and cannot do.
Administrator Key
Administrator Key can perform token updates and deletions and has the right to change supply keys, freeze keys, suspend keys, erase keys, and KYC keys. It can also update the treasury account of the token.
Functions of each sub-key
Supply the total supply of key management tokens, which can be used to mince new tokens or destroy existing tokens.
The freeze key is used to freeze or unfreeze a token account, and no transactions can be carried out after the account is frozen.
The suspension key has the right to suspend or restore the token. After the suspension, the token will not be able to participate in any transaction.
Erasure keys and immutability
The erase key is used to clear the balance of a token account and is especially useful if the account owner loses access or the account is compromised. Hedera's document also describes it as a tool to refund or correct allocations, allowing regulated issuers to recover misallocated tokens without redeploying any contract logic.
A key design constraint runs through the entire system: every key is optional, and any key omitted when created cannot be added later. If a token does not have a pause key, it cannot be suspended; if the key is not set when created, it cannot be added later through token updates. If the administrator key is left blank, the token can be considered immutable, that is, it cannot be updated or deleted. A token without a key at all is completely immutable from day one, and no administrator can change its behavior after the fact.
Impact of the key model on transparency
Many NFT projects require their tokens to remain immutable, but some project owners inadvertently create tokens with administrator, erase, freeze, and suspend keys, which violates the immutable assumption. Most collectors may also not understand what these key settings mean for the tokens they purchase. Therefore, knowing what keys are present on a token is crucial to assessing its credibility.
