Having been immersed in the Crypto industry for a long time, we often fall into a 'Crypto-centric' way of thinking: Whatever topic we discuss, our first reaction is always what benefits it brings to Crypto? Does it create speculation opportunities? For instance, the concept of stock tokenization seems somewhat useless from a Crypto-centric perspective—stock tokens with daily volatility of only 1-3% are clearly less attractive compared to Meme coins that can fluctuate several times. Moreover, stocks can also be traded in traditional markets, so why bother with the crypto space? Under this mindset, stock tokenization appears to be a futile attempt to fight for liquidity.
I. Reverse Thinking: Perhaps it is not Crypto that needs stocks, but rather stocks that need Crypto?
However, if we step out of the Crypto-centric view and examine this issue from another perspective, we might discover new opportunities. Imagine if you were the CEO of a company about to IPO, facing a choice between two markets:
Traditional market: Trading for 7-8 hours daily, closed on weekends and holidays, strict regional restrictions, only open to European and American investors.
On-chain market: Continuous trading 24/7, any globally connected user can participate.
Which market would you choose to go public? The answer is obvious. The all-weather, global nature of the on-chain market is undoubtedly very attractive to listed company owners who are well-versed in trading. Moreover, once stocks are tokenized, they can not only be used for trading but also be collateralized to borrow stablecoins like USDT in lending protocols, or even be packaged into various yield products, further enhancing liquidity and speculation potential.
Therefore, the Crypto market may not urgently need stocks, but the stock market desperately needs the empowerment of Crypto. Especially in the stock market after 2025, if it does not embrace 24/7, borderless on-chain trading, it will face the risk of losing significant trading time, users, and composability, ultimately leading to a loss of liquidity and pricing power.
II. The History and Current Status of Stock Tokenization: From STOs to the Entry of Giants
Stock tokenization is not a new concept. Since 2017, many exploratory projects have emerged, such as the STO issuance platform Polymath and the stock token trading platform tZERO. However, most of these projects have failed due to compliance policy restrictions and immature timing for promotion. At that time, the Crypto market was still dominated by retail investors, traditional institutions had not yet entered on a large scale, and the policy environment was also unfriendly.
However, since 2024, the situation has changed significantly. The Crypto market is gradually being led by the government, with policies paving the way and institutions taking the lead. The approval of ETFs, the entry of traditional giants like BlackRock, and the introduction of crypto-friendly policies in the U.S. have created favorable conditions for stock tokenization. Now, the forces driving stock tokenization are completely different:
Group one: Exchanges like Robinhood, Coinbase, and Kraken aim to encroach on the traditional stock trading market through stock tokenization.
Group two: Asset management giants and investment banks such as BlackRock, Goldman Sachs, and JP Morgan, holding significant funds and a wealth of pre-IPO company resources, eager to achieve a leapfrog in the on-chain market.
The entry of these giants has not only brought significant liquidity but also pushed for the improvement of the stock tokenization infrastructure. They may build dedicated blockchains, launch on-chain financial products based on stocks, or even create their own stock token exchanges. Once this trend takes shape, it will pose a gradual threat to the traditional stock market.
III. Advantages of On-chain Finance: Cost Reduction, Efficiency Increase, and Maximization of Capital Efficiency
Compared to traditional finance, on-chain finance has significant advantages. In addition to a 24/7, borderless trading environment, on-chain finance can greatly reduce accounting and settlement costs. Statistics show that the accounting costs for Nasdaq and NYSE account for about 15%-20% of their operating costs each year, while settlement costs can be as high as 20%-45%. Once stocks are tokenized, all ledgers are publicly and reliably recorded on-chain, bringing accounting costs close to zero, and settlements can occur in real-time with only Gas fees to be paid.
Moreover, on-chain finance has broken the constraints of traditional financial markets regarding trading times, regional access, and settlement efficiency, thereby releasing capital energy in terms of time, space, and speed. Rough estimates suggest that the capital efficiency of on-chain finance could be 27 times that of traditional finance. Additionally, with the composability of on-chain finance, various interlocking on-chain financial protocols can further unleash capital efficiency.
IV. Robinhood's Tokenization of Stocks: A Blockchain Name, but Marketing in Reality?
Despite the broad prospects for stock tokenization, the recent launch of Robinhood's stock tokenization products has sparked considerable controversy. From a technical perspective, the product resembles a carefully planned marketing campaign rather than genuine technological innovation. Robinhood uses a 'synthetic wrapper' model, where the tokens purchased by users actually represent a contract signed with Robinhood, rather than true ownership of the underlying assets. Although this model provides EU customers with exposure to U.S. stocks, traditional financial instruments can achieve this goal without relying on blockchain technology.
In addition, Robinhood's stock tokens also have many limitations. For example, tokens cannot be withdrawn to personal wallets, cannot be traded on DEX, or used for collateralized lending, lacking true composability. This indicates that Robinhood's stock tokens are more like a Web2.5 product disguised as Web3, a grand 'Blockchain SHOW'.
V. The Rise and Concerns of Tokenized Stocks: Can Smart Contracts Replace Funds?
Although Robinhood's stock tokenization products have many shortcomings, the concept of tokenized stocks itself still holds great potential. Tokenized stocks provide retail investors with a means to gain exposure without ownership, which is particularly attractive for emerging market investors who cannot directly invest in U.S. stocks.
However, tokenized stocks also face many challenges. For example, current stock tokens are more like on-chain stock derivatives, lacking rights such as voting rights and dividend rights; liquidity is relatively low; and legal regulations are still not perfect. In addition, the time lag issue of tokenized stocks cannot be ignored. The traditional stock market has opening and closing times, while tokenized stocks can be traded at any time, leading to price fluctuations that are disconnected from the underlying assets.
Nevertheless, tokenized stocks may still become an important part of the future financial market. With the improvement of infrastructure and the clarification of regulatory policies, tokenized stocks are expected to attract more institutional investors, thereby enhancing liquidity and market efficiency.
VI. The Movement of Transcendent Assets: Future Prospects for On-chain Finance
Stock tokenization is just one part of the movement of transcendent assets. This movement also includes fiat stablecoins, bond tokenization, and a variety of alternative assets such as people's attention (Meme and Meme-like assets). On-chain finance is building a parallel financial universe for global users that operates continuously, transcending time and space.
In this movement, mainstream public chains such as Ethereum and Solana that support smart contract functionality will play a key role. These public chains have comprehensive on-chain financial infrastructure and substantial asset accumulation, which can provide substantial support for the movement of transcendent assets. Additionally, existing leading on-chain financial protocols such as AAVE, Pendle, Hyperliquid, etc., will also embrace new development opportunities.
VII. Conclusion: Opportunities for Bitcoin and Crypto Practitioners
In this movement of transcendent assets, Bitcoin, as the anchor of value in the on-chain financial world and digital gold, will solidify its position even further. The continuous issuance of fiat currencies and the expanding M2 scale in countries around the world will become the greatest driving force for Bitcoin’s rise.
For Crypto practitioners, this movement offers numerous opportunities. Focusing on mainstream public chains that support smart contract functionality, leading on-chain financial protocols, and specialized infrastructures for stock tokenization may reveal new investment opportunities. At the same time, one should be wary of 'Blockchain SHOW' projects that lack real innovation and rely solely on marketing hype.
In summary, stock tokenization and the movement of transcendent assets are profoundly changing the landscape of financial markets. In this transformation, maintaining a clear mind, understanding the nuances, and seizing opportunities will be the important tasks for every Crypto practitioner.
