Written by: Wu Says Blockchain
This article is for information sharing only and does not constitute any investment advice. Readers are advised to strictly comply with the laws and regulations of their location and not to participate in illegal financial activities.
Recently, the topic of stock tokenization has been hotly debated in the community, with Backed-supported xStocks and Robinhood's model being representative examples. In comparison, the stock tokenization model supported by xStocks exhibits more significant openness and composability, allowing ordinary users to trade freely on-chain; whereas Robinhood, while complying with regulations, only opens its platform to users of EU exchanges with clear regulatory frameworks and does not allow transfers to non-compliant addresses. The following sections will explore these two models through multiple sets of data.
Backed and xStocks
(1) xStocks supports 61 stocks, of which 10 have generated trading volume on-chain
Despite being launched only a few days ago, as of July 2, SPY, TSLA, CRCL, MSTR, and NVDA have accumulated over $1 million in trading volume. Additionally, AAPL, GOOGL, QQQ, META, and AMZN have also seen user trading activity. Some meme trading platforms, such as GMGN, have also launched xStocks trading sections.
(2) After being supported by Bybit and Kraken, xStocks' stock token trading volume has surged
Following the announcement of support from Bybit and Kraken, xStocks' trading volume increased significantly for two consecutive days, reaching $6.641 million on July 1, with over 6.5k trading users and more than 17.8k transactions. On that day, the trading volume for TSLA, SPY, and CRCL each exceeded $1 million.
(3) 1 token is pegged to 1 share
xStocks follows the logic of 1 token equaling 1 share of stock. Professional or compliant investors can apply for a Backed Account to purchase stocks through Backed, which assists these primary investors in buying stocks through brokers. The purchased stocks are held by a third-party institution, and the corresponding number of tokens is minted and returned to the primary investors through xStocks. Primary investors with a Backed Account can issue and redeem stock tokens at any time. Currently, among the 10 xStocks stock tokens that have been traded, NVIDIA, Circle, and Tesla stock tokens have the highest total quantity, each exceeding 10,000 tokens.
(4) Liquidity relies on exchange market makers
The issuance rights of stock tokens are concentrated in the hands of primary professional investors, but since they are issuing stock tokens, the question arises: who will provide liquidity? The significance of xStocks collaborating with exchanges lies not only in providing distribution channels for stock tokens but also in making exchanges a part of the primary issuance process, utilizing the market maker resources of exchanges to provide better liquidity. The activity of trading complements the depth of liquidity pools; the more active the trading, the more liquidity providers there are, especially for the SP500 (SPY), which has achieved $1 million in USDC-based liquidity on-chain, surpassing the market value of the already issued stock tokens. However, stock tokens with lower trading volumes face the awkward situation of having no liquidity providers.
(5) Using third-party DeFi protocol tokens to guide and incentivize retail investors to provide liquidity for stock tokens
The xStocks stock tokens issued on Solana are expected to reference bStocks, which is also supported by Backed and issued on the EVM network, to establish certain collaborations with public chains and mainstream DEXs, using these third-party protocol tokens to incentivize and guide liquidity for stock tokens. Currently, xStocks is actively collaborating with DeFi protocols on Solana, including known entities like the DEX aggregator Jupiter and the lending protocol Kamino.
Robinhood Stock Tokenization
(1) Robinhood: Deployer has deployed 213 tokens or is testing stock tokens
Robinhood has chosen Arbitrum to issue its stock tokens, deploying 213 stock tokens at a cost of only $5.35, averaging just $0.03 per token. The low transaction fees are one of the important factors for Robinhood's choice of Arbitrum. Next, Robinhood plans to develop its proprietary chain, Robinhood Chain, based on Arbitrum.
(Image source: @tomwanhh)
(2) Robinhood has minted 2,309 OpenAI (o) tokens
Robinhood announced that Robinhood EU will launch the world's first non-listed company stock tokens, including OpenAI and SpaceX tokens. Allowing crypto to become a pre-market for high-value potential non-listed company stocks is undoubtedly the most exciting aspect of Robinhood's stock tokenization. In the future, crypto users may have earlier access to and the ability to purchase stocks that are about to go public compared to traditional stock market investors. Currently, Robinhood has minted 2,309 OpenAI (o) tokens.
(3) Robinhood's stock token contracts embed compliance requirements
Electric Capital researcher ren discovered after decompiling Robinhood's stock token contracts that it is a closed system, requiring checks against an approved wallet registry (KYC/AML) for each transfer. These tokens may not be able to interact with DeFi, but CeFi with distribution capabilities may benefit. Even EU users purchasing stocks on-chain cannot transfer stock tokens to other non-registered addresses, as such transfers will be blocked.
(Image source: @0xrencf)_
(4) 79 stock tokens have set metadata and are about to go live
In addition to OpenAI, Robinhood-related addresses have set metadata for 79 deployed stock tokens, including stocks like Robinhood Markets, Trump Media & Technology Group, GameStop, as well as ETFs like Schwab US Dividend Equity ETF and Yieldmax MSTR Option Income Strategy. Some stock tokens with set metadata have already undergone a small amount of minting.
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