Believe it or not, stocks have been around for centuries, with the Dutch East India company being the first to be publicly listed on an official stock exchange. It happened in the early 17th century when the race to explore the trade wealth required a massive amount of funding.
Now in the 21st century, the stock market industry has evolved together with the ever-changing technology. The way of stock trading has changed in a lot of ways. For example, improvement in the buy-sell process, real-time stock performance, day trading, and more.
The tokenization era
In 2009, Bitcoin was introduced together with blockchain technology. Since then, the exponential growth of blockchain innovation has brought a different type of products and services. Not only into the financial industries but to others as well.
In October 2020, FTX, a cryptocurrency derivatives exchange, successfully introduce tokenized stocks. Then, followed by Bittrex Global in December 2020. Stock like Amazon, Apple, Google, and Tesla are some examples.
How is it possible?
The stock and cryptocurrency markets are regulated to ensure all stakeholders can engage in safe and secure business conduct. The process can be quite a handful but let us help you to understand better.
In the case of Bittrex Global, the exchange partners up with DigitalAssetsAG, a financial technology company. The process should be something like this;
- DigitalAssetsAG will buy shares of the agreed companies to tokenized,
- The purchased shares will be under the custody of a licensed bank acting as a custodian,
- Bittrex Global will generate the 1:1 stock-pegged token and available for users to acquire.
The main important question left is, what are the advantages? How is tokenized stock any different from the regular one?
Before we go into that, in this case, based on the U.S. regulation, the tokenized stocks are not considered securities. The token is a representation of the derivative contract. In simpler words, users able to buy stocks with extra yet, convenient steps. Why? Here is why;
- Global exposure to stocks and users,
- Trade outside of the traditional market operation,
- Legal means to diversify investment outside the local market.
It is exciting to experience the rapid growth and impact of blockchain technology around us. We believe that there is more room for improvement and changes to explore.