Perpetuals are OK for trading, but not good for holding as a long-term investments - usually you need to pay interest on any open position.

I guess the appeal of tokenized stock is to do things regulators don't want you to do (e.g. evade capital controls). Otherwise one can just access market directly through a broker.

Sure but wasn't the whole pitch of tokenization, RWA, all of this cycle's narrative, that crypto could function as an investment vehicle for the normie retirement account holder, that it wasn't just derivatives and speculating on short-term price movement?

In the U.S. things like this (eg Contract for Differences) are illegal, and the SEC regulates these sort of things.

Cyberpank is having a really nice and modern mobile app for your bank but all the interface doesn't give you any hint that transfering money out of the country is even possible.

Perps aren't the same and they carry liquidation risks.

[delayed]

Company A will accept funds to buy some stock like MSFT, then they will mint a token i.e. xMSFT that you'll own in a blockchain ledger. You can trade this for whatever you want but the company promises to buy any token xMSFT at MSFT price whenever you want[1]. So the tokenized asset remains pegged as long as there's trust in the institution.

Also, the company will grow a balance sheet out of the funds created by the owners of the tokens and they frequently will give you some sort of yield on your position.

[1] Open Market hours and usually accompanied by a fee.

Value comes from the underlying. Of course you are carrying some intermediary risk but that's also inherent with stock brokers as well. Similar to a stablecoin backed by treasuries. Voting isn't the only value of holding stock, although some platforms have proposed passing through to token holders voting and dividend distributions as well.

One of the primary benefits for traders is 24/7 liquidity and the ability to plug the token into other products onchain, like lending markets.

> The value is only from what other people are willing to pay for it?

Somehow every time I try to make this argument about stock buybacks, some people vigorously defend them as not just somehow a glorified Ponzi scheme.

So that people with off the books defi assets can diversify their holdings as if they bought into the non-defi world, without any of those pesky taxes or KYC requirements.

24/7 liquidity and near instant settlement, easier access for international investors, and ability to plug token into other apps and products onchain like Aave lending, providing liquidity, etc.

My understanding is that it's possible there will be / is a country that you don't have low cost or easy access to US stocks, but can have access to tokenized stocks. If Coinbase and others are smart, they'll collect the KYC info the US requires, regardless of where the person is in the world. In fact, that seems like the other part of this line in the article: "provided the tokens carry the same rights and privileges as the underlying shares, including dividends and voting rights."

It sounds enough like real investing that it might make some more people put real money into crypto, while still being unregulated and vague enough that you can outright steal the money or take risks a regulated market wouldn't allow

Or you meant an argument for the person putting their money into it? No idea.

Like all cryptocurrency, it's optimised for evading laws and law enforcement. Fraud, evading sanctions, doing things with fake stock that would be prosecuted by financial watchdogs if it were real stock, grifting people into thinking they're buying real stocks, the list goes on.

I suppose it also allows for trading stock without paying brokerage fees (though you need to pay the network in other ways) and it permits trading for people who cannot get access to dollars or the market of origin because of local laws and/or corruption.

Honestly, it's kind of genius. All of the tools that caused the Great Depression combined with cryptocurrency grifting. Someone will make a lot of money off this.

I guess the target audience are countries where capital gains on stocks are high-to-ridiculous but simultaneously capital gains on crypto are low for whatever reason or the tax free amount on crypto gains is relatively high. Germany comes to my mind as an example.

Stocks are already tokens. "Tokenizing" stocks makes no sense, if one assumes quite reasonably that "tokenization" involves giving token-ness to something that was not already a token. What it is is wrapping what is already a token in another token, mostly so the second token can get around the limitations of the first. But some of those limitations are incidental and can be eliminated at any time by the underlying token provider, mostly because nothing stops a conventional stock market from being tradeable 24/7. They already are if you're in the club anyhow, per all the "aftermarket" and "pre-market" trading you hear about around quarterly release times.

The rest of the limitations are regulatory, and if the wrapping token can get access to regulatory approval to do their thing, so can the stocks.

The whole thing feels skeevy as all get out to me. It feels like someone telling me that they'll be happy to hold my mortgage between me and the current holder. There is no good reason for that. Frankly there is already a disturbing amount of indirection in the way you don't actually own the stocks you think you do, but they're held on behalf of you on behalf of your broker at the Depository Trust & Clearing Corporation. Adding another layer of indirection makes me worry about the motives of the people who are very excited about being that layer.

- 24 x 7 trading is open to retail (no more waking up finding out the market moved out of hours and your stop loss didn't execute because the price moved 'though' it)

- Fractionalization (you can buy $12 worth of NVDA easily)

- Fundraising (you can raise public money without needing the large caps of traditional public markets)

- Distribution - smart people that know math publish a whitepaper and get investors into their strategy immediately rather than waiting for a hedge fund or bank to get them to market.

- Composability - eg, I invested in an app that let's people use the HNWI 'buy/borrow/die' technique as a wealth building strategy - talk into any shop, buy somethng, pay using as small loan taken out of your share holdings.

It's a growth play for financial services to find trading volume they otherwise cannot create. Young retail has no cashflow to speak of, so Coinbase and Robinhood target them for the house rake of trading meme stocks and crypto. The rest is institutional, broker dealer, traditional retail brokerages, etc but there's only so much revenue to be had moving existing securities around amongst those who can obtain exposure to them, managing pensions and 401ks, etc. ~93% of equities are held by the top ~10% of US households, for example.

Lots of cost inefficiency to squeeze out, but everyone is incentivized to not cannibalize other participants or their own business. "Its a big club and you're not in it" and "If you're playing a poker game and you look around the table and and can't tell who the sucker is, it's you."

If I recall, the most optimal equities market operating model is a short auction window at the open and the close to process order books, but again, no appetite for efficiency over revenue, I'll have to find the paper.

(thoughts and opinions always my own)

it's for people who live in countries with capital controls and don't have access to normal securities accounts

Blockchain makes a ton of sense as a replacement for the NSCC which is the entity that actually keeps track of the ledger for ownership. But again whenever I say things like that the people that come out of the woodwork are crypto bros vs skeptics which this isn't about the cyberpunk antigovernment anonymous future but just a better cryptographically proven multiparty database.

I would probably make trade settlement faster and lower overhead costs.

Clearing equities trades with a blockchain between brokers would be beneficial in plenty of ways that are really only all that interesting to very large banks and broker services companies. (like Citadel for example)

https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_...

They already found it with money laundering, but boosters just don't want to admit it and keep saying there will eventually be something better to be found.

Stablecoins have PMF.

yes I know people definitely get around this with hyper but I'd be scared in case they ever tried to kyc or something.

As much teeth as they want to have. If you're having to center your business model around using a VPN to avoid regulation, you're opening the door to a great white shark.

Look at swap contracts. They are pretty standard financial agreements that are just otc agreements between 2 parties and they are frequently pegged to an exchange traded price with none of the underlying contract obligations.

Tokenization is and of the tech isn’t sketchy at all. That it’s mostly used to get around the regulations something like swap contracts are for is.

That’s only true of street side shares. And unlike cede shares vs direct registrations you can’t treat tokens as fungible with direct ownership.

Correct.

Postgres I assume.

Robinhood chain, which is an Ethereum L2 built with the Arbitrum stack.

The article is about the SEC framework giving them the right

Yes.

Did you read the article?

"Goldman Sachs doesn't know what they are talking about" in reference to a stock maneuver is pretty unlikely to be true.

Even beyond GS, some of these companies are among the most sophisticated financial institutions on the planet.

The article says 22 companies have commented, but more have commented since it was written, or maybe the original article missed a few. Those companies include the list below.

Alphabet

AppLovin

Applied Digital

Applied Optoelectronics

Arm Holdings

Caterpillar

Cerebras

Cisco Systems

CoreWeave

Goldman Sachs

Intuit

Marvell Technology

McDonald's

Microsoft

Moderna

Qualcomm

Rocket Lab

UnitedHealth Group

Verizon

Wells Fargo