Author: Aiying Research
Real-World Assets (RWA) tokenization is no longer a futurist narrative enjoyed only in the blockchain community, but a financial reality that is happening. In particular, with the successive entry of fintech giants such as Kraken and Robinhood into stock tokenization, this structural change driven by blockchain technology has already begun. Global investors have the opportunity for the first time to trade "digital stocks" of companies such as Apple and Tesla 24/7 in an almost frictionless manner. However, beneath the market's clamor, deeper questions need to be answered urgently. Following the previous report (From Retail Paradise to Financial Game Changer: In-depth Analysis of Robinhood's Business Landscape and Future Strategy), this report by Aiying Research aims to penetrate the appearance of market hotspots and deeply analyze the intrinsic logic of current mainstream stock tokenization products. We will no longer stay at the level of "what it is", but focus on "how it is achieved" and "what are the risks", providing our clients, investors, developers, and regulators with a reference map that is both in-depth and practical.
Aiying will conduct an in-depth comparative analysis using two typical cases—xStocks (issued by Backed Finance and traded on exchanges such as Kraken), representing the "open DeFi" path, and Robinhood, representing the "compliant walled garden" path—and will supplement this with the practices of key industry players such as Hashnote and Securitize to jointly explore a core question:
How do these platforms balance strict financial regulations, complex technical implementations, and huge market opportunities? What paths have they each chosen, and what are the fundamental differences in their underlying logic and compliance designs? This is the core that this report will reveal.
1. Core Analysis (1): The "Tightening Curse" and "Amulet" of Compliance—The Underlying Logic of Two Mainstream Models
The primary challenge of stock tokenization is not technology, but compliance. Any attempt to "move" traditional securities to the blockchain must directly face the complex global financial regulations. In the long-term game with regulation, the market has quietly diverged into two distinct compliance paths: 1:1 asset-backed security tokens and derivative contract tokens. The underlying legal architecture and operational logic of these two models are very different, which determines their product form, user rights, and risk characteristics. We will disassemble them one by one below.
Model 1: xStocks—The Open Road to DeFi
Core definition: The tokens held by users (for example, TSLAX, which represents Tesla stock) legally represent, directly or indirectly, ownership or rights to the real stock (TSLA). This is an on-chain mapping of a "real" stock, pursuing the authenticity and transparency of the asset.
Legal Structure and Market Performance
Aiying believes that xStocks' compliance design is ingenious. Its core lies in embracing the openness of blockchain while minimizing legal risks through multi-layer legal entities and clear regulatory frameworks.
Currently, xStocks supports 61 stocks and ETFs, of which 10 have generated on-chain transactions, showing initial market vitality. After being supported by Bybit and Kraken, its trading volume has exploded. As of July 1, its single-day trading volume has reached US$6.641 million, with more than 6,500 trading users and more than 17,800 transactions.
Issuing Entity and Regulatory Framework:
xStocks is issued by Backed Finance, a Swiss company, and its operation follows the Swiss DLT (Distributed Ledger Technology) Act. Switzerland was chosen as the legal base because the country provides a relatively clear and friendly regulatory environment for digital assets and blockchain innovation.
Special Purpose Vehicle (SPV):
This is the cornerstone of the entire architecture. Backed Finance has established a special purpose vehicle (SPV) in Liechtenstein, a country with a stable legal and tax environment. This SPV is like an "asset safe", and its only function is to hold real stocks. This design achieves key risk isolation: even if the platform traded by users (such as Kraken or Bybit) or the issuer has operational problems, the underlying assets held in the SPV are still safe and independent.
Asset backing and liquidity strategy
To ensure the value and credibility of on-chain tokens, xStocks has established a transparent asset backing and dual-track liquidity system.
1:1 Peg (1 token = 1 share):
Each xStock token circulating on the chain strictly corresponds to one real stock stored in a third-party custodian institution. This 1:1 anchoring relationship is the core of its value proposition. Currently, the total number of NVIDIA, Circle, and Tesla stock tokens has exceeded 10,000.
Issuance process:
Professional qualified investors can apply for a Backed Account and purchase stocks through Backed. Backed acts as a primary investor, purchasing stocks at brokers. These stocks are then held in custody by a third-party institution. Finally, xStocks mints the corresponding number of tokens based on the number of stocks purchased and returns them to the primary investors. These primary investors can issue and redeem stock tokens at any time.
Proof of Reserve:
Transparency is the cornerstone of trust. xStocks integrates with the industry-leading oracle network Chainlink PoR. This means that anyone can query and verify Backed Finance's reserve vault on-chain in real time and autonomously, ensuring that the number of real stocks it holds is sufficient to support all issued tokens.
Dual-track liquidity strategy:
1. Centralized Exchange (CEX) Market Maker:
On mainstream exchanges such as Kraken and Bybit, professional market makers are responsible for providing liquidity, ensuring that users can buy and sell xStocks as conveniently as trading ordinary cryptocurrencies.
2. Decentralized Finance (DeFi) Protocol:
xStocks' tokens are open. Users can deposit them into DeFi protocols on the Solana chain (such as lending platforms and DEX liquidity pools), provide liquidity themselves, and earn income. Currently, xStocks has partnered with DEX aggregator Jupiter and lending protocol Kamino to fully utilize the composability of DeFi and create additional value for assets. For example, the SP500 (SPY) token with the highest trading volume has a USDC-denominated liquidity of US$1 million on the chain.
The xStocks ecosystem is jointly composed of the issuer Backed, trading platforms Bybit and Kraken, and the underlying blockchain Solana.
Model 2: Robinhood—A "Walled Garden" with Compliance First
Core definition: Completely different from xStocks, the stock tokens purchased by users on the Robinhood platform are not legally stock ownership, but a financial derivative contract signed between the user and Robinhood Europe that tracks the price of a specific stock. Its legal essence is an over-the-counter (OTC) derivative, and the tokens on the chain are only digital vouchers of this contractual right.
1. Legal Architecture and Technical Implementation
The Aiying team found that Robinhood's model is a very pragmatic "regulatory arbitrage". It cleverly packages the product into an existing financial tool with a clear regulatory framework and deploys it quickly at a very low cost.
Issuing Entity and Regulatory Framework:
These tokens are issued by Robinhood Europe UAB, an investment company registered in Lithuania and regulated by its central bank. Its products are regulated under the EU's MiFID II (Markets in Financial Instruments Directive II) framework. According to MiFID II, these tokens are classified as derivatives, thus bypassing more complex securities issuance regulations.
Low-cost rapid deployment:
Robinhood deployed 213 stock tokens on the Arbitrum chain at a total cost of only $5.35 (on-chain gas fees), showing the extremely high efficiency of using Layer 2 technology. Among them, 79 tokens have been set up with metadata, preparing for subsequent transactions.
Pioneering attempt:
Robinhood boldly made its first attempt to tokenize non-publicly traded companies' stocks, launching tokens for OpenAI and SpaceX, with the intention of seizing the first opportunity in the high-value field of private equity. Currently, Robinhood has minted 2,309 OpenAI (o) tokens. (OpenAI tokens will provide investors with the opportunity to indirectly invest in OpenAI through Robinhood's ownership in the SPV, and then link the price of the OpenAI tokens to the value of the OpenAI shares held by the SPV)
2. Technical and Compliance Design of the "Walled Garden" Style
Robinhood's technical implementation is closely linked to its compliance strategy, jointly building a closed but compliant ecosystem.
On-chain KYC and whitelist:
Through reverse analysis of Robinhood's stock token smart contracts, community developers discovered that its contracts embed strict permission controls. Every token transfer operation triggers a check to verify whether the recipient address is registered in the "approved wallet" registry maintained by Robinhood. This means that only EU users who have passed Robinhood KYC/AML can hold and trade these tokens, thus forming a "Walled Garden".
Limited DeFi composability:
The direct consequence of this "walled garden" model is that its stock tokens can hardly interact with the vast, permissionless DeFi protocols. The on-chain value of the assets is firmly locked within Robinhood's ecosystem.
Future planning (Robinhood Chain):
To better serve its RWA strategy, Robinhood plans to develop its own Layer 2 network—Robinhood Chain—based on the Arbitrum technology stack, showing its ambition to control the underlying technology.
Although Robinhood's model has found a compliant path under the EU framework, it has also triggered no small controversy and potential risks.
"Fake equity" storm:
The most representative event is the launch of OpenAI and SpaceX tokens. Shortly thereafter, OpenAI officially issued a public statement denying cooperation with Robinhood and clearly stating that these tokens do not represent company equity. This incident exposed the huge risks of the derivative model in information disclosure and user awareness.
Centralized risk:
The user's asset safety and transaction execution completely depend on the operating status and credit of Robinhood Europe. If the platform has problems, users will face counterparty risk.
3. Comparison and Summary of the Two Models
Through the above analysis, we can clearly see the fundamental differences between the two models. The xStocks model is closer to the open spirit of Crypto Native and DeFi, while the Robinhood model is a "shortcut" found within the existing regulatory framework.
Key points
xStocks' path is "asset on-chain", which attempts to map the value of traditional assets to the blockchain world in a real and transparent manner, embracing open finance. The path of Robinhood is "business on-chain", which uses blockchain as a technical tool to package and deliver its traditional derivative business. Aiying understands that this is essentially more like a blockchain upgrade of "CeFi" (Centralized Finance).
2. Core Analysis (2): The "Song of Ice and Fire" of Technical Architecture—Open DeFi and Walled Garden
Under the compliance framework, the technical architecture is the skeleton for realizing the product vision. Aiying believes that the differences in technical selection and component design between xStocks and Robinhood also reflect their two different philosophies of "openness" and "closure".
1. Choice of Underlying Public Chain: The Trilemma of Performance, Ecology, and Security
Choosing which public chain to use as the "soil" for asset issuance is a strategic decision related to performance, cost, security, and ecology.
xStocks Chooses Solana:
Its core motivation is to pursue ultimate performance. Solana is known for its high throughput (theoretical TPS of up to tens of thousands), low transaction costs (usually less than $0.01), and sub-second transaction confirmation speed. This is crucial for stock tokens that need to support high-frequency trading and real-time interaction with complex DeFi protocols. However, several historical network outages have also exposed its challenges in stability, which is a risk that must be taken when choosing Solana.
Robinhood Chooses Arbitrum:
Arbitrum is Ethereum's Layer 2 scaling solution, and the logic behind its choice is "standing on the shoulders of giants." By adopting Arbitrum, Robinhood not only obtains higher performance and lower fees than the Ethereum mainnet, but more importantly, it inherits Ethereum's unparalleled security and huge developer community and mature infrastructure. In addition, Robinhood also announced plans to migrate to a self-built Layer 2 network based on Arbitrum technology in the future, which will be specially optimized for RWA, showing its ambition for long-term layout.
Comparative analysis: This is not a simple question of "who is better", but a reflection of strategic paths. Solana is a monolithic chain that pursues "integrated high performance", while Arbitrum represents a path of "modularization" and inheriting Ethereum's security. The former is more aggressive, and the latter is more stable.
2. Analysis of Core Technical Components
In addition to the underlying public chain, several key technical components jointly constitute the core functions of stock tokenization products.
Smart contract design:
xStocks (SPL Token):
As a standard token (SPL) on Solana, its smart contract is designed to be freely transferable, similar to ERC-20 on Ethereum. This open design is the technical basis for its seamless integration with DeFi protocols (such as being used as collateral on the Kamino lending platform).
Robinhood (Permissioned Token):
As mentioned earlier, its contract embeds transfer restriction logic. Each transaction calls an internal whitelist registry for verification, which is the technical core of its "walled garden" model and the fundamental reason for its isolation from open DeFi protocols.
The Key Role of Oracles (e.g., Chainlink):
Price information:
The value of stock tokens needs to be synchronized with the stock price in the real world. Oracles (such as Chainlink Price Feeds) play the role of data bridges, securely and decentrally feeding stock prices from multiple reliable data sources to smart contracts. This is the lifeline for maintaining price anchoring, executing transactions, and performing clearing functions.
Proof of Reserve (PoR):
This is critical for 1:1 pegged products like xStocks. Through Chainlink PoR, smart contracts can automatically and regularly prove the adequacy of their off-chain reserve assets to the outside world, solving the trust problem from the code level, which is far more timely and convincing than traditional audit reports.
Cross-chain interoperability (e.g., Chainlink CCIP):
Value:
As the multi-chain landscape takes shape, the cross-chain capability of assets becomes crucial. Cross-Chain Interoperability Protocol (CCIP) allows assets such as xStocks to be securely transferred between different blockchains (such as from Solana to Ethereum). This can break down inter-chain islands, greatly expand the asset liquidity pool and application scenarios, and is a key technology to realize the vision of "one token, universal for all chains." Backed Finance has mentioned the use of Chainlink CCIP in its products to achieve cross-chain bridging.
3. Detailed Explanation of Asset On-chain and SPV Operation
For asset-backed tokens, the SPV is a key hub connecting real-world assets and the blockchain world. Its operation process is rigorous and interconnected, ensuring the safety and compliance of assets.
1. Asset Isolation:
The issuer (such as Backed Finance) first purchases real stocks in the compliant financial market (such as the New York Stock Exchange). These stocks are not placed on the issuer's own balance sheet, but are deposited in an independent, regulated special purpose vehicle (SPV) and kept by a third-party licensed custodian (such as a bank).
2. Token Minting:
After the SPV and the custodian confirm that the real assets are in the warehouse, they will send a verified instruction to the on-chain smart contract, authorizing the minting of an equivalent amount of tokens on the target blockchain (e.g., deposit 100 shares of TSLA and mint 100 TSLAX tokens).
3. Token Distribution:
The minted tokens are sold through compliant exchanges (such as Kraken) or directly to qualified investors who have passed KYC/AML audits.
4. Lifecycle Management:
During the term of the token, the issuer needs to handle corporate actions through smart contracts and oracles. For example, when Tesla Corporation pays dividends, after the SPV receives the dividends, it will trigger a smart contract to distribute the equivalent stable coins or tokens to the on-chain holders. In the case of a stock split, the smart contract will automatically adjust the number of tokens held by all holders.
5. Redemption & Burning:
When qualified investors want to redeem, they send the on-chain tokens to the designated burn address. After the smart contract verifies, it notifies the SPV. The SPV then sells the corresponding number of real stocks in the traditional market and returns the cash obtained to the investors. At the same time, the tokens on the chain are permanently destroyed, ensuring that the on-chain circulation is always in a 1:1 balance with the off-chain reserves.
3. Core Analysis (3): Business Model and Risk Assessment—"Reefs" Behind Opportunities
Behind the complex compliance and technical architecture lies a clear business logic. Stock tokenization platforms not only create unprecedented value for users, but also open up new profit channels for themselves. However, opportunities and risks always go hand in hand.
1. Business Model and Profit Sources
Although they all provide stock token trading, the profit models of different platforms have different focuses.
Robinhood's Revenue Sources:
Clear revenue:
According to its official description, Robinhood mainly charges a 0.1% foreign exchange (FX) conversion fee for transactions of non-Eurozone users. This fee is generated when users use Euros to purchase tokens denominated in US dollars.
Potential revenue:
Although it currently focuses on "zero commission" to attract users, its business model is scalable. In the future, it may introduce profit methods similar to its traditional US stock business, such as payment for order flow (PFOF, although strictly restricted in the EU), membership value-added services for high-frequency traders, or obtaining revenue from the underlying assets held, etc.
Pioneering the private equity market:
By issuing tokens for non-publicly traded companies such as OpenAI and SpaceX, Robinhood has expanded the category of high-value assets. This is not only a powerful user acquisition strategy, but it may also profit from related value-added services (such as information and transaction matching) in the future.
Revenue sources of xStocks (Kraken & Backed Finance):
Transaction fees:
Kraken, as one of the core trading platforms, charges a certain percentage of transaction fees to both buyers and sellers of xStocks, which is the most traditional profit model of exchanges.
Minting / Redemption Fee:
As the issuer, Backed Finance mainly serves institutional clients. It may charge institutional users a certain service fee for large minting and redemption operations to cover its costs of purchasing, custodying, and managing the underlying assets.
B2B service:
Backed Finance's core business model is to provide other financial institutions with a one-stop asset tokenization (Tokenization-as-a-Service) solution. xStocks is both its product and a demonstration of its technical strength.
2. Comprehensive Risk Assessment Matrix
While enjoying the convenience brought by stock tokenization, investors must be soberly aware of the various risks hidden behind it.
3. Market Landscape and Future Outlook: Who Will Dominate the Next Generation of Financial Markets?
Major platforms in the asset tokenization track are competing for the market with different strategic positioning. Understanding their differences helps us to gain insight into the future direction of the industry.
1. Comparison of Major Player Matrices
The RWA tokenization track is booming, and based on different strategic considerations, they have formed a competitive landscape with distinctive characteristics. We will conduct an in-depth comparative analysis by dividing the main players into three camps.
2. Market trends and evolution paths
Looking to the future, stock tokenization and even the entire RWA track are showing several clear trends:
From Isolation to Integration:
Early tokenization projects were mostly isolated attempts within a single platform. Today, the trend is turning towards deep integration with mainstream financial institutions (such as BlackRock and Franklin Templeton) and the vast DeFi ecosystem. Tokenized assets are becoming a bridge connecting TradFi and DeFi.
Regulation drives innovation:
Regulatory clarification is the strongest catalyst for market development. The EU's MiCA Act, Switzerland's DLT Act, and the Monetary Authority of Singapore's "Guardian Project" all provide clearer rules for the market, which in turn encourages more compliant innovation. Compliance capabilities are becoming the core competitiveness of platforms.
Institutional Entry and Product Diversification:
As BlackRock brings trillions of dollars of money market into the blockchain through its BUIDL fund, institutional participation will inject unprecedented liquidity and trust into the market. Product types will also expand from single stocks and bonds to more complex structured products, private equity, and alternative assets.
Private Equity Tokenization Becomes a New Blue Ocean:
Platforms represented by Robinhood have begun to explore the tokenization of non-publicly traded companies' stocks, which opens a window to the private equity market, which is usually limited to institutions and high-net-worth individuals. Although it faces huge challenges in valuation, information disclosure, and law, this is undoubtedly a new direction with great potential.
Future Outlook and Reflections
The wave of stock tokenization is unstoppable, but the road ahead is not smooth. Several core issues will determine its final form:
Open vs. Closed Dispute:
Will the future market be dominated by open, composable models like xStocks, or by compliant but closed "walled garden" models like Robinhood? More likely, the two will coexist for a long time, serving user groups with different risk preferences and needs. Crypto Native users will embrace the open DeFi world, while traditional investors may prefer to try in a familiar, regulated "garden".
The race between technology and law:
Cross-chain technology (such as CCIP), Layer 2 solutions, and privacy computing (such as ZK-proofs) will continue to evolve to solve current technical bottlenecks in scalability, interoperability, and privacy protection. At the same time, whether the global legal framework can keep up with the pace of technological innovation and provide certainty for these innovations will determine the development speed and ceiling of the entire industry.
Stock tokenization is far more than simply putting financial assets "on the chain"; it is fundamentally reshaping the paradigm of asset issuance, trading, clearing, and ownership. It promises a more efficient, transparent, and inclusive global financial market. Although this path is full of technical, market, and regulatory "reefs," the future direction it points to is undoubtedly irreversible. For all market participants, whether investors, builders, or regulators, the urgent task is to actively and prudently embrace this coming financial revolution based on a deep understanding of its underlying logic and potential risks.