Tokenization of Stocks: A New Revolution in Financial Markets

In the era where cryptocurrency intersects with artificial intelligence, a quiet financial revolution is taking place. Tokenized stocks, as an innovative financial product, are attracting widespread attention in the market. This article will delve into this emerging trend and analyze its potential impact on global capital flows, trading efficiency, and market volatility.

Strategic Layout of Market Leaders

The ambition of a certain trading platform

A well-known trading platform recently announced an ambitious plan: by the end of 2023, to support the tokenization of over 1000 types of American stocks. The key advantages of this initiative include:

1. 24/7 Trading: Break the traditional market time limits and achieve continuous trading without interruption.
2. Lower investment thresholds: By using fractional ownership models, more ordinary investors can participate in the stock market.
3. Global Accessibility: Providing international investors with a more convenient channel for investing in US stocks.

It is worth noting that the platform plans to launch a Layer 2 blockchain based on Arbitrum, which not only expands the Ethereum ecosystem but also marks a further alignment of traditional financial institutions with blockchain technology.

However, this innovation has also sparked some controversy. For example, some companies point out that these tokenized stocks are not equivalent to real stocks, especially for non-publicly traded stocks. Therefore, clear communication with users is crucial when promoting tokenized financial products to avoid potential misunderstandings.

The differentiation strategy of another giant

Meanwhile, another well-known trading platform has adopted a different strategy. It has partnered with Backed to launch xStocks on the Solana blockchain, offering over 60 tokenized US stocks and ETFs, and is open to non-US users.

The features of this product include:

1. Based on the Solana blockchain: allows users to withdraw tokens to self-custody wallets and is compatible with DeFi protocols.
2. Extremely low investment threshold: You can participate in the investment with just 1 dollar.
3. Asset Flexibility: Can be used in DeFi protocols to earn yields or as collateral.

Interestingly, although the platform has its own Layer 2 network, it has chosen the Solana ecosystem to develop its tokenization of stock business. The long-term effects of this strategic choice are worth paying attention to.

the movements of other participants

In addition to the two major giants mentioned above, other companies are also actively laying out the tokenization stock market:

• A trading platform has partnered with Backed to launch xStocks tokenized US stocks and ETF products on its spot platform, supporting Ethereum and Solana networks, with the possibility of on-chain dividend distribution in the future.

• Another well-known exchange has launched the first tokenized stock - MicroStrategy, collaborating with Dinari to open it to EU users, allowing for 24/5 trading and full on-chain integration.

Market Landscape and Historical References

The layout of potential giants

As a leading company in the cryptocurrency sector, a certain large exchange has not yet officially entered the tokenized stock market, but its movements are worth paying attention to. It is reported that the company is communicating with regulators regarding the compliance of tokenized stocks.

The company's advantages include:

1. Strong investment portfolio: Its venture capital department has invested in multiple top DeFi protocols.
2. Advanced technological infrastructure: its Layer 2 solutions are progressing towards the million TPS target.

Although the company is not usually a market pioneer, its cautious strategy often allows it to launch the most refined products after thorough testing.

The importance of compliance

The current tokenization stock model is fundamentally different from the Mirror Protocol that was once popular in 2020. Both the trading platform mentioned earlier and other participants have adopted a more compliant and regulated approach, effectively mitigating regulatory risks. With the involvement of traditional financial institutions and giants in the cryptocurrency industry, the market size for tokenized stocks is expected to far exceed previous levels.

The Transformation of On-Chain Capital

Industry experts predict that by the end of 2025, the market value of tokenized stocks on-chain may exceed $20 billion, with a conservative estimate reaching $50 billion. If certain platforms fully launch their Layer 2 solutions and put all stock assets on-chain, the total user and managed funds could surpass $100 billion.

The financial infrastructure of this "super tokenized stock" will open a new stage of deep integration between traditional finance and blockchain. The future financial system will feature efficiency, transparency, and global accessibility. The US market is at the forefront of this trend, and tokenized stocks will become an important component of the global capital market.

Compared to traditional methods, on-chain stocks offer 24/7 trading capabilities, lower transaction costs, and do not rely on intermediary channels. Especially in overseas markets, obtaining U.S. stocks typically requires paying a high premium, while on-chain assets can provide exposure to U.S. stocks with almost "zero threshold," creating a broad and inclusive capital channel.

In the short term, on-chain stocks are still difficult to completely replace traditional stock markets, existing more as a complementary mechanism. In terms of market volatility, on-chain markets may be more stable due to deeper liquidity, but they may also experience severe fluctuations during emergencies due to the lack of traditional circuit breaker mechanisms.

In traditional stock markets, weekends and circuit breakers provide a buffer for market sentiment. In contrast, the "24/7 open" structure of the crypto market may trigger emotional sell-offs in certain situations. However, this also attracts users who are dissatisfied with the delayed mechanisms of traditional markets. The real-time and uninterrupted trading in on-chain markets is gradually becoming its main appeal.

Although the current proportion of tokenized stocks in the entire financial market is still negligible, with the deepening of layouts by major platforms, its proportion may significantly increase in the next two to three years. It is even possible that traditional securities exchanges will build their own on-chain platforms to offer product forms that better comply with regulatory requirements.

All of this not only brings new investment opportunities but also comes with higher risks. The financial market is entering a multi-layered integration phase between on-chain and traditional mechanisms. Tokenized stocks are no longer a conceptual product, but an indispensable part of the real financial system.

Currently, there are projects launched, such as Coinx on a certain platform, with a market value reaching 2 million USD. Although there are only 103 on-chain holders and the trading volume is about 3600 USD, it is still in the early stages. However, it is worth noting that due to the traditional market not yet opening, the on-chain trading price of Coinx is higher than its real stock price, which may suggest that the on-chain market has the potential for "advance pricing."

The mechanism of "on-chain price discovery first" may become an important way for the future cooperation between traditional and on-chain markets. With the continuous growth of tokenized stocks, the transformation of on-chain capital markets has just begun.