Two Modes of Stock On-Chain: Open Ecosystem and Closed Loop Compliance

Recently, the topic of stock on-chain has become a hot issue, among which the model of xStocks and a certain trading platform is the most notable. The stock on-chain method adopted by xStocks is more open and composable, allowing ordinary users to trade freely on the chain. In contrast, a certain trading platform only opens to users in the EU zone where regulations are clear, while ensuring Compliance, and does not allow transfers to non-compliant addresses. Below, we will explore these two models through multiple sets of data.

xStocks Model

Trading Status

As of July 2, xStocks supports 61 stocks, of which 10 have generated transactions on-chain. The cumulative trading volume for SPY, TSLA, CRCL, MSTR, and NVDA has exceeded $1 million. AAPL, GOOGL, QQQ, META, and AMZN also have users trading. Some trading platforms have also launched xStocks trading zones.

After receiving support from certain trading platforms, the trading volume of xStocks surged significantly. It peaked at $6.641 million on July 1, with over 6,500 trading users and more than 17,800 transactions on that day. The daily trading volume of TSLA, SPY, and CRCL all exceeded $1 million.

Operating Mechanism

xStocks adopts a model where 1 token equals 1 share of stock. Professional investors or compliance investors can apply for an account to purchase stocks through relevant institutions, and then mint the corresponding number of tokens based on the number of stocks purchased. These investors can issue and redeem stock tokens at any time. Among the stock tokens with high trading volumes, NVDIA, Circle, and Tesla have the highest total, each exceeding 10,000 tokens.

Liquidity Source

The issuance rights of stock tokens are concentrated in the hands of professional investors, but liquidity mainly relies on exchange market makers. xStocks collaborates with exchanges not only to provide distribution channels but also to make exchanges one of the issuance links, utilizing market maker resources to provide liquidity. Trading activity and liquidity pool depth complement each other; for instance, the USDC-based liquidity on-chain for SP500 (SPY) has reached $1 million, surpassing the market value of the issued stock tokens.

Incentive Mechanism

xStocks may refer to the practices of other similar projects, collaborating with public chains and mainstream DEXs, using third-party DeFi protocol tokens to guide and incentivize retail investors to provide liquidity for stock tokens. Currently, xStocks is actively collaborating with several DeFi protocols, including DEX aggregators and lending protocols.

Certain Trading Platform Model

deployment status

The platform has chosen to issue stock tokens on a certain Layer 2 network, having deployed 213 types of tokens or currently undergoing testing. The deployment cost is extremely low, averaging only $0.03 per token. In the future, the platform plans to develop its own proprietary chain based on this network.

unlisted company stocks

The platform announced the launch of the world's first tokenized stocks of unlisted companies, including tokens from a certain AI company and a certain aerospace company. This allows cryptocurrency users to access stocks of companies going public earlier than traditional stock market investors. Currently, 2,309 tokens of the certain AI company have been minted.

Compliance Design

The platform's stock token contracts embed compliance requirements. Each transfer needs to check the approved wallet registry (KYC/AML), and these tokens may not interact with DeFi, but centralized exchanges with distribution functions may benefit. Even EU users purchasing stocks on-chain cannot transfer stock tokens to non-registered address lists.

is about to launch stocks

Except for a certain AI company, the relevant addresses of the platform have set metadata for 79 deployed stock tokens, including the platform itself, a certain media technology group, a certain game retailer, and some ETFs. Some stock tokens that have set metadata have undergone a small amount of minting.

These two stock on-chain models each have their characteristics, one pursuing openness and composability, while the other strictly adheres to Compliance requirements. In the future, how they will develop and influence each other is worth our ongoing attention.