What Are Tokenized Stocks?
Tokenized stocks are typically created on top of blockchain platforms, offering a convenient way to represent traditional stocks digitally.
Democratizing Stock Trading
Tokens allow trading stocks without the high brokerage fees and long settlement times typically associated with traditional stock trading.
Real stocks back these tokens, and some companies even offer dividends in cryptocurrencies like Ether or Bitcoin to holders.
Revolutionizing Stock Trading
Here’s how it works:
A company issues tokens on a blockchain, representing shares of their stocks.
These tokens can be bought and sold on exchanges or secondary markets
Tokenized stocks offer several advantages.
They allow you to hold stocks in a cryptocurrency wallet, trade them instantly, and enjoy greater liquidity. There’s no need to wait for settlement delays or worry about the time it takes to sell your stocks.
Tokenized stocks can also be traded peer-to-peer, similar to Bitcoin, eliminating the need for intermediaries.
FTX is one platform where tokenized stocks of several public companies are available.
If this trend continues, we may see tokens representing every public company’s stocks, potentially transforming how we invest.
Some potential benefits of tokenized stocks include:
- Improved accessibility and liquidity for stocks with low liquidity
- Near-instant transfer compared to traditional stock transfers
- No involvement of brokers or fund managers, reducing fees and commissions
- Possibility for fractional ownership, making it easier for small investors to participate
- Availability for trading 24/7 on cryptocurrency exchanges
However, tokenized stocks also have limitations.
Token holders typically don’t have voting rights in the company and cannot participate in the decision-making process.