Tokenized Stock?
Tokenized stocks: The possible future of stocks?
The first question is, why tokenize a real-world stock? Our world is full of assets: stocks, real estate, gold, carbon credits, oil, etc. Many of these assets are difficult to physically transfer or subdivide, so buyers and sellers instead trade paper that represents some or all of the asset. Paper and complex legal agreements are cumbersome, difficult to transfer, and can be hard to track. One solution would be to switch to a digital system along the lines of Bitcoin but linked to an asset. Stock exchanges have largely done away with physical paper by substituting electronic transactions and standardized agreements, but the overhead of these systems is enormous and they generally rely on trusted participants and exchange boards to regulate the smooth functioning of a trade. Just like you can buy a fraction of bitcoins, it is possible to buy a fraction of digital stocks even though real-world stocks are bought in whole numbers.
- An example of how digital stocks could solve traditional stocks problem When an investor wants to buy or sell a stock, he can do so through a stock exchange broker.The stock exchange broker works on a commission basis which is a percentage of assets involved in the trade, whether you are selling or buying the stocks. A central hub or database is maintained about the ownership of stocks and they are updated after the trade takes place according to a long protocol, which needs to be followed. This may take a few days to be completed. Imagine Bob sells a stock of tesla worth 1000. The broker then finds a buyer for the stock and informs him about the stock price and his charges as commission. The buyer agrees and pays 1000 as a commission to the broker. The stock exchange broker makes 60$ for just helping the buyer and seller perform a trade. There are some cases where millions of shares may be bought and sold and in such cases the brokers make thousands of dollars just as commission out of buyer and sellers net profit. This trade may also take a few days for the transfer of ownership of the stocks and e-certificate for the stock ownership. Imagine the traditional stock was replaced with digital stock. The buyer and seller can perform peer-to-peer transaction between themselves without the need of stock exchange broker or bank or any other financial institution acting as intermediary. The brokerage fee charged is saved by the buyer and seller. The digital stock can be easily transferred through the blockchain without much time needed. Since the blocks store accurate and immutable trail, you can keep track of the ownership of digital stock permanently. Bob could directly send the digital stock across the blockchain to Alice without paying any fee for trade.
- International Journal of Management (IJM)
Tokenized Stock?
Tokenized stocks: The possible future of stocks?
The first question is, why tokenize a real-world stock?
Our world is full of assets: stocks, real estate, gold, carbon credits, oil, etc. Many of these assets are difficult to physically transfer or subdivide, so buyers and sellers instead trade paper that represents some or all of the asset.
Paper and complex legal agreements are cumbersome, difficult to transfer, and can be hard to track. One solution would be to switch to a digital system along the lines of Bitcoin but linked to an asset. Stock exchanges have largely done away with physical paper by substituting electronic transactions and standardized agreements, but the overhead of these systems is enormous and they generally rely on trusted participants and exchange boards to regulate the smooth functioning of a trade. Just like you can buy a fraction of bitcoins, it is possible to buy a fraction of digital stocks even though real-world stocks are bought in whole numbers.
An example of how digital stocks could solve traditional stocks problem
When an investor wants to buy or sell a stock, he can do so through a stock exchange broker. The stock exchange broker works on a commission basis which is a percentage of assets involved in the trade, whether you are selling or buying the stocks.
A central hub or database is maintained about the ownership of stocks and they are updated after the trade takes place according to a long protocol, which needs to be followed. This may take a few days to be completed.
**Imagine Bob sells a stock of tesla worth 1000. The broker then finds a buyer for the stock and informs him about the stock price and his charges as commission. The buyer agrees and pays 1000 as a commission to the broker. The stock exchange broker makes 60$ for just helping the buyer and seller perform a trade. There are some cases where millions of shares may be bought and sold and in such cases the brokers make thousands of dollars just as commission out of buyer and sellers net profit.
This trade may also take a few days for the transfer of ownership of the stocks and e-certificate for the stock ownership. Imagine the traditional stock was replaced with digital stock. The buyer and seller can perform peer-to-peer transaction between themselves without the need of stock exchange broker or bank or any other financial institution acting as intermediary.
The brokerage fee charged is saved by the buyer and seller. The digital stock can be easily transferred through the blockchain without much time needed. Since the blocks store accurate and immutable trail, you can keep track of the ownership of digital stock permanently. Bob could directly send the digital stock across the blockchain to Alice without paying any fee for trade.
- International Journal of Management (IJM)
The tokenization of stocks is directly related to the perfect divisibility of assets and is a key use case for smart financial contracts and Automated Market Makers.