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Tokenized assets are a relatively new concept, however, that hasn’t stopped major companies from using them as an alternative to traditional shares. As the adoption of cryptocurrencies is growing globally, so is the reliance on Blockchain technology to manage assets.
What are Tokenized Stocks?
Tokenized stocks or shares are a way to hold assets in a token form or digitally. This is not only cheaper to issue than the traditional method but also easy to transfer. This reduces the barrier to entry for many who fail to comply with regulations and rules of the stock exchange. It is already possible to trade crypto-assets at record speeds from Crypto Exchanges, which have made it convenient for many who are looking for a safer and accessible method of payment.
The blockchain also offers a healthy amount of transparency that holds everyone accountable. In addition to an unbiased voting system that considers everyone’s opinion. It also maintains a degree of anonymity by not stealing trading data from unsuspecting individuals, which is prevalent in stock trading apps.
Although, this comes with its own set of risks that should be considered. This will also help promote ICOs(initial coin offerings), which have a bad track record of scamming people. ICOs are not inherently bad it just so happens to be the tool used by most scammers. There are also security concerns regarding the privacy of the blockchain and how vulnerable it is to getting hacked.
Major Companies gravitating towards tokenized stocks!
Digital Assets AG, a financial firm based in Switzerland, is making digital tokenized assets available on the Solana blockchain(Solana is a blockchain network that relies on the “Proof of History” protocol to help build scalable and secure Apps) while only permitting users of the FTX Crypto Exchange to buy these assets. Stocks of major companies like Facebook, Apple, Google, Netflix, Nvidia, PayPal, Square, and Tesla are going to be listed on the Exchange. This is still in its infancy as it is limited to users who live in certain areas and complete the required KYC processes. It seems like the major companies have acknowledged the rise and potential of cryptocurrency usage in the future, which will definitely attract other behemoths like Walmart and Amazon to follow suit.
However, this is not the first time an Exchange has listed stocks as tokenized shares. Binance did a similar thing in April where it listed Microsoft, Coinbase, Apple, Tesla, and MicroStrategy, this, too, is only limited to people who pass the KYC process.
This step is great for companies and people alike who are looking to have a portfolio that is based on cryptocurrencies rather than fiat-based currencies. Although the process will still remain more or less the same it still adds an element of decentralization that is always great to see.
DWAYNE D’CUNHA, WRITER ON MEDIUM.
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Why are Major Companies Shifting towards Tokenized Stocks? was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.