Tokenized Stocks

Tokenized Stocks are the digital assets that are traded on exchanges using blockchain technology.

What Are Tokenized Stocks?

Tokenized stocks are typically created on top of the blockchain platforms. They offer a convenient way to represent assets.

Tokens give you the ability to trade stocks without having to worry about high brokerage fees, long settlement times, or any of the other gremlins that can plague your stock trading experience. These tokens are backed by  real stocks and there are many companies out there that will actually pay you dividends in Ether, Bitcoin, or other cryptos for holding such tokens.

Here’s how it works: A company issues “tokens” on a blockchain and people buy them up. These tokens are backed by real stocks. For example, imagine if you owned Apple stock and were able to tokenize those shares so that you could sell them on an exchange. You would simply generate a token (which would represent one share of Apple), and then you would sell that token on an exchange (or a secondary market).

When you invest in the stock market, you’re essentially buying shares of a company. But if you’re not up for the task of buying and selling stock, there’s an alternative — stocks that have been tokenized on blockchains.            

Tokenized stocks are essentially stocks in your pocket. You can hold them in a cryptocurrency wallet, sell them in an instant, and buy them with ease. No more waiting on long settlement delays or worrying about how long it’ll take to get your money back if you want to sell early.

You can also trade them peer-to-peer, which means there’s no exchange between you and the person who buys them from you — just like Bitcoin.

These tokenized stocks of several public companies are available via FTX. But if this trend catches on, we will see tokens for every public company out there — and that could change how we invest forever.

There are several potential benefits to tokenized stocks, including: 

  • Tokenized assets are easily accessible, meaning they can improve the liquidity of particular stocks facing low liquidity problems.
  • Equity shares take longer to transfer compared to tokens. In fact, the transfer of tokenized stocks occurs almost instantly. 

  • There’s no need to deal with brokers or fund managers when using tokenized stocks, which means you don’t have to worry about hidden fees or commissions. Some cryptocurrency exchanges don’t charge any trading fees either. 

  • One of the main benefits of tokenized stocks is that they could make it easier for small investors to invest. It makes fractional ownership possible which means that you can purchase a fraction of the equity share in the form of a token.

  • Crypto exchanges operate 24/7, meaning you can trade tokenized stocks whenever you want. Traditional stock exchanges operate within a specified time only.

Along with benefits, there are some limitations of tokenized stocks as well. Token holders don’t have any voting rights, so they can’t become a part of the company’s decision-making process. 

It’s important to always check with the rules of the company if you plan to invest in tokenized stocks.