What Are Tokenized Stocks and What Are Top 6 Tokenized Stock Platforms?

Tokenized stocks are a blockchain-based variant of stocks. These tokens represent company stocks traded on the NASDAQ, NYSE or other stock exchanges. To peg the price to the stock’s price, smart contracts are developed and sometimes stock reserves are held. 

With the developments in Web 3.0, stock trading has gained a new dimension and has been included in the crypto trading ecosystem. The ability to tokenize any asset through oracles has been made possible by distributed ledger technology. Blockchains, which have become the technology disrupting traditional industries, have eliminated the need for intermediaries when investing in stocks. There is no need to rely on any bank or broker when purchasing tokenized stock.

Normally, brokerage houses serving stock exchanges and investors receive commissions with certain percentages in stock trading. Investors start their investments by making a direct loss due to these intermediaries. In decentralized finance (DeFi), on the other hand, transaction fees are minimal and are only paid to keep the blockchain running uninterrupted.

Which platforms were first to offer tokenized stocks?

Contrary to popular belief, Bittrex or FTX were not the first to offer tokenized stock. In early 2019, the Estonian-based DX exchange started listing many tokenized stocks on the exchange. DX, the first exchange to provide this service, had a great impact and became the focus of investor attention.

Binance was also one of the exchanges offering tokenized stock for a brief period of time. Binance ultimately had to terminate the service after facing a number of legal challenges.

The advantages of tokenized stocks

Tokens can be easily purchased 24/7. Cryptocurrency exchanges operate around the clock, while traditional exchanges work during certain working hours on business days. Users can trade tokenized stock at any time.

When buying stocks in traditional ways, we need to interact with intermediaries such as brokers or fund managers. Incorporating a broker into a trade means that additional costs and commissions will be added to that trade. Cryptocurrency exchanges usually have transaction fees as low as 0.1%.

Tokenized stocks can be bought in parts. Those who want to invest in stocks can buy 1, 2, 5, 10, or as many shares as they want. Those who buy tokenized stocks can buy as many parts of the token as they want, in fractions such as 0.01 or 5.25. This allows you to invest exactly the amount you want.

Non-US residents or non-US citizens cannot directly invest in stocks traded on US stock exchanges. Tokenized stocks help prevent these people from paying high commissions to brokerages.

The disadvantages of tokenized stocks

Tokenized stocks, like all assets in the crypto market, carry a number of risks. When you buy tokenized stock, you usually don’t get a share of the company’s dividends. Token holders do not have voting rights as part of the company’s decision-making process.

Tokenized stocks can lose their price peg to real stocks. Tokenized stock, which is traded at a different price than the real stock, has become deficient in its function. After the collapse of the Terra ecosystem in 2022, the prices of tokenized stocks in Mirror Finance, which is a part of the ecosystem, experienced a great decrease. Afterward, the platform had to stop its services.

How tokenized stocks work?

Basically, there is a simple working principle for tokenized stocks. There is a real stock reserve for each tokenized stock offered on FTX, Bittrex, and Bitpanda. Every token you buy is backed by real stock. Some DeFi dApps set their token prices with oracles that collect data from the exchange, while others set the token price based on supply and demand. Below we will enumerate tokenized stock providers and listed stocks.

Top 6 tokenized stock trading platforms

With a brief history and description of tokenized stock mechanics behind us, let’s take a look at trading platforms that have recently emerged as the top destination for investors looking to trade tokenized stocks.

Bittrex Global

Bittrex is a US-based cryptocurrency exchange. Tokenized stocks developed in cooperation with DigitalAssetsAG are available to users on Bittrex. All of the listed tokenized stocks are backed by the actual stock reserve purchased by DigitalAssetsAG. Purchased stocks are stored by a licensed bank.

Tokenized stocks offered on Bittrex Global:

• Tesla
• Alibaba
• Pfizer
• Apple
• BioNTech
• Facebook
• Google
• Netflix
• Billibilli
• Beyond Meat Inc
• Amazon
• SPDR S&P 500 ETF

FTX

FTX purchases the tokenized stocks it offers through CM Equity. Tokens purchased and tokenized through CM Equity are available to users of FTX who have completed their KYC and AML requirements. FTX also provides dividend support to users holding tokenized stock. Trading of tokenized stocks on FTX can be done 24/7 nonstop. 

Tokenized stocks listed on FTX:

• Apple
• MicroStrategy
• Coinbase
• PayPal
• Billibilli
• Tesla
• Alibaba
• Grayscale Bitcoin Trust
• NVIDIA
• Facebook
• Nio
• Twitter
• Google
• Amazon
• Netflix
• Moderna
• Pfizer
• Taiwan Semiconductor Mfg
• AMC Entertainment Holdings
• Airbnb
• Beyond Meat
• Square
• BioNTech
• Uber
• Advanced Micro Devices
• GameStop
• BlackBerry
• ARK Innovation ETF
• SPDR S&P 500 ETF

DeFiChain

DeFiChain is a platform built on the Bitcoin blockchain with a mission to bring DeFi to the Bitcoin network. Aiming to use Bitcoin’s decentralization and security for DeFi transactions, DeFiChain has a native coin named DFI, a stablecoin named DUSD, wrapped cryptos such as Ethereum and Dogecoin, and many tokenized stocks on its platform.

DeFiChain uses Nasdaq, Tiingo, and Finnhub feeds for prices of tokenized stocks. The good thing about this platform is that tokenized stocks can be put into liquidity pools along with other tokens like DFI or DUSD. Users who provide liquidity to pools are rewarded with DFI.

When we examine the price performance of stablecoin DUSD and tokenized stocks on DeFiChain, we cannot say that the platform is very successful. Both stablecoins and tokenized stocks are experiencing large deviations from the prices they should be. Although aiming to overcome these problems with the new hard fork, we cannot count DeFiChain among the most reliable platforms, especially until the fork takes place. 

List of tokenized stocks offered on DeFiChain:

• Vanguard Real Estate
• Invesco QQQ Trust
• Apple
• Amazon
• Microsoft
• Palantir
• iShares Silver Trust
• Netflix
• SPDR Gold Shares
• Tesla
• GameStop
• Alibaba
• PDBC
• Nvidia
• Coinbase
• Google
• Facebook
• ARK Innovation ETF
• SPDR S&P 500 ETF
• iShares MSCI World ETF
• Vanguard S&P 500 ETF
• iShares MSCI Emerging Markets ETF
• iShares 20+ Year Treasury Bond ETF

Zipmex

Zipmex is a Thailand-based cryptocurrency platform. Like many platforms that thought the crypto winter was coming with the collapse of 2022 and were experiencing financial problems, Zipmex also had problems. The main reason Zipmex is having problems is the loss of $5 million in crypto assets due to Celsius Network and $48 million due to Babel Finance.

List of tokenized stocks listed on the Zipmex platform:

• Google
• Paypal
• Alibaba
• Airbnb
• Twitter
• Netflix
• Amazon
• Facebook

Bitpanda

Bitpanda has partnered with its subsidiary Bitpanda Financial Services and CM Equity to create tokenized stock and hold stock in its reserves. Bitpanda, like FTX, distributes dividends declared on stocks to token holders. Bitpanda offers its users the tokenized version of hundreds of stocks on many exchanges. You can visit https://www.bitpanda.com/en/prices/stocks to see the current list of all tokenized stocks.

Currency.com

Currency.com is one of the regulated cryptocurrency platforms. On the platform that supports a limited number of cryptocurrencies, users can buy and sell indices, financial assets, commodities, and tokenized stocks with these cryptocurrencies. Currency.com, the world’s first regulated tokenized securities trading platform, has created thousands of tokens pegged at the market prices of various asset classes.

Company stocks, indices such as USDX, SP35, FR40, NL25, commodities such as gold, Brent crude oil, silver, palladium and natural gas, government bonds and many more financial asset classes are listed on the platform. The prices of the tokens are provided by blockchain-based technologies and oracles of Capital.com.

Conclusion

The cryptocurrency world is a large ecosystem that allows users to trade tokenized stocks that mimic the price movements of various traditional assets. Many trading platforms offer tokenized versions of almost any stock or index you are looking for. Eliminating the tedious entry barriers for investing in stocks, these platforms allow users to trade in the market of their choice and control their funds 24/7. However, we recommend that you do not invest without doing some research on the reliability of each platform.

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