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What is tokenized equity? How tokenized stock works and examples

Published

3 months ago

29 April, 2024

TokenTalk Staff

What is tokenized equity?

Tokenized equity is a digital token or “money” that represents the shares of a company or organization.

With the growing adoption of blockchain, businesses are finding it convenient to use digitized crypto versions of capital. Tokenized shares are emerging as a means of raising capital where a company issues shares in the form of digital assets such as cryptocurrencies or tokens.

Key points

Tokenized capital is the creation of units of equity ownership represented by digital tokens or “coins.”
Equity tokenization became popular with the advent of decentralized blockchain systems, which allowed for the simple and convenient creation, issuance, and transfer of digital tokens.
Tokenized capital has been used in the form of initial coin offerings (ICOs) for blockchain-based projects, although its legal and regulatory status as a traded security remains uncertain.

Understanding tokenized equity

Tokenized equity is like any standard stock purchased in a listed company, except that such shares are cryptographic tokens.

To draw a parallel with stock ownership, let’s say you purchased shares of a listed company during its initial public offering on the stock exchange. These actions would then be credited to yours Demat account: an electronic account that holds financial securities, such as stocks and bonds, in digital format for online trading and investing. Tokenized stocks work the same way, except those stocks are in digital crypto coins or tokens. Instead of logging into your Demat account, you will be credited to your blockchain-hosted account.

Traditional methods of raising capital present some operational obstacles. They include rules on regular accounting and bookkeeping, compliance with strict stock exchange rules, the reluctance of banks and other financial institutions to extend credit, and entrepreneurs’ challenges in convincing private investors to buy parts of a company.

In contrast, tokenizing corporate ownership of stock on a blockchain offers flexibility in fundraising. The low-cost method allows an accessible way of valuing the company based on the direct participation of interested investors. The valuation depends primarily on market forces rather than on a group of sponsors or angel investors.

Despite their potential, the viability of tokenized shares remains uncertain. Regulatory hurdles, digital asset thefts, hacking attempts, and the anonymity of cryptocurrency transactions raise investor protection concerns.

Tokenized equity in practice

Many new startups and businesses raise funds through ICOs that award token shares to investors. For example, US-based biotechnology company Quadrant Biosciences Inc. tokenized all of its capital as Quadrant Token and offered 17% of its diluted capital via a token sale. It successfully raised over $13 million at $1.25 per share. The Quadrant token, which resides on its native blockchain, represents traditional equity.

The underlying blockchain infrastructure also supports all necessary activities applicable to tokenized shares. For example, the blockchain system handles popular corporate actions such as dividends, mergers, acquisitions, shareholder voting, and subsequent stock offers.

tZERO, Polymath, Securitize Markets and Templum are blockchain-based platforms offering regulatory-compliant tokenized asset offerings and their secondary trading.

New Directions in Tokenization: BlackRock’s USD Digital Institutional Liquidity Fund

In 2024, BlackRock, the world’s largest asset manager, launched its first tokenized investment fund called BlackRock USD Institutional Digital Liquidity Fund (BUIDL) on the market Ethereum blockchain. While the capital is not tokenized as such, BUIDL seeks to maintain a stable value of $1 USD per token and will pay out daily accrued dividends as new tokens every month. The fund itself invests in cash, U.S. Treasury bills, and repurchase agreements.

The fund trades on the blockchain, offering benefits such as expanded access to investors, instant settlement, and seamless transfers between platforms. Securitize acts as a transfer agent and tokenization platform.

How does tokenized capital differ from traditional equity ownership?

While tokenized equity represents ownership rights like traditional stocks, there are some key differences. Tokenized shares are issued, bought and sold on blockchain platforms, while traditional shares are traded on centralized platforms stock exchanges. This means that tokenized capital is held in digital wallets, while traditional stocks are usually held in brokerage accounts. The regulatory landscape for tokenized stocks is still evolving, while traditional stocks are subject to established securities regulations.

Can anyone create a stock token?

In theory, anyone can create an equity token, but there are laws and regulations that must be followed. Those issuing equity tokens must follow applicable securities regulations, such as registration requirements and disclosure obligations. The company or asset to be tokenized must also have a legal structure that allows this tokenization, like a company. Creating and issuing equity tokens requires specialized technical knowledge and resources, including blockchain development and smart contract programming.

What are the risks of holding tokenized stocks?

Like any investment, tokenized capital carries some risks, including a decline in the value of the company’s equity. The value of tokenized capital may be subject to significant price fluctuations, particularly in the early stages of adoption. More specifically regarding tokenization, laws and regulations are still evolving, which creates uncertainty and potential compliance risks. As a digital asset, tokenized capital may be vulnerable to hacking, theft, or other security breaches. If you lose yours private keys to access your digital wallet, you will also lose your stock tokens forever.

How are dividends and voting rights managed with tokenized capital?

The specific terms and conditions of dividends and voting rights for tokenized shares depend on the issuer but will be executed according to smart contracts. These are blockchain-based scripts that automatically execute pre-set terms between counterparties. Dividend payments can be scheduled into a smart contract, allowing automatic distribution to token holders based on their ownership percentage. Voting rights can also be incorporated, allowing token holders to participate in governance decisions through blockchain-based voting mechanisms.

The bottom line

Tokenized equity represents ownership rights in a company or business that uses digital tokens on a blockchain network. In other words, it converts traditional capital, such as shares of a company, into cryptocurrencies that can be bought, sold and traded on a blockchain platform. This allows for decentralized, peer-to-peer trading rather than relying on centralized exchanges or private placement markets. Tokenization also divides capital into smaller, more affordable units, allowing for fractional ownership and potentially increasing liquidity. Capital terms and conditions, such as voting rights and dividend distributions, can be programmed into smart contracts, automating the enforcement of these rules.

However, laws and regulations for tokenized capital are still evolving, and challenges related to compliance, security and investor protection have yet to be fully addressed.

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News

Meme Tokens Surpass Bitcoin in Turkish Trading Activity This Year

Published

3 hours ago

27 July, 2024

TokenTalk Staff

Meme Tokens Surpass Bitcoin in Turkish Trading Activity This Year

The Turkish cryptocurrency market has seen significant growth in recent years. Currently, more than half of the population invests in cryptocurrencies, according to surveys and polls.

This is evident from the fact that the Turkish Lira (TRY) is the fourth most used fiat currency in cryptocurrencies. Several macroeconomic factors are fueling this crypto adoption in the country. Therefore, stablecoins and meme coins have emerged as the favorites of Turkish investors, even surpassing Bitcoin.

Stablecoins and meme coins dominate Turkish trade

According to the latest relationship According to Kaiko, Turkey’s inflationary conditions have significantly increased stablecoin usage in recent years. In 2024, the research firm found that USDT-TRY dominates as the largest trading pair by volume on Binance, reaching over $22 billion, more than five times larger than the next largest pair, PEPE-USDT, which has $4 billion.

Notably, meme tokens have surpassed Bitcoin in terms of trading volume this year, indicating that Turkish traders are also turning to more speculative cryptocurrencies to hedge against currency fluctuations and make profits.

The increased usage of stablecoins is further reflected in the main Bitcoin trading pairs on BTCTurk, which are BTC-USDT and BTC-TRY.

One of the main reasons driving the adoption of cryptocurrencies is Turkey’s fight against double-digit inflation and the currency devaluation for years, with an average inflation rate above 40% over the past five years. In response, the central bank adopted an unorthodox monetary policy, cutting rates until June 2023. However, this worsened the devaluation of the Turkish lira, which lost more than 300% of its value from the end of 2020 to the end of 2023.

Turkey’s decision to normalize its monetary policy after the 2023 elections failed to restore confidence in the TRY, whose value continued to decline in 2024, albeit less rapidly.

Binance Sees Strong Expansion in Türkiye

Amid economic challenges, Binance has strengthened its position as one of the two largest trading platforms for Turkish traders, thanks to deep liquidity and low fees. As part of a large-scale zero-fee campaign, it offered zero fees for BTC-TRY trading between July 2022 and March 2023.

Offering a wide range of TRY-denominated trading pairs and aggressively adding new pairs in recent years have helped Binance maintain its leadership in the country despite the 2022 cryptocurrency bear market. Binance introduced 61 new TRY trading pairs in 2024 alone, bringing the total number to over 200.

Other exchanges, such as Gate.io, KuCoin, and OKX, have jumped into the Turkish crypto ecosystem, but their overall market share remains less than 1%.

Fuente

News

Top 5 PolitiFi Tokens to Buy Now for MAX Profits

Published

4 hours ago

27 July, 2024

TokenTalk Staff

Coinpedia - Fintech & Cryptocurreny News Media

With the US presidential election fast approaching, the cryptocurrency world is buzzing with new trends. In addition to the well-known cartoon-themed meme coins, a new category is making waves: PolitiFi tokens. Did you see that coming?

These politically themed crypto tokens are gaining attention, especially those centered around former President Donald Trump. Today, we explore the 5 trending Trump-themed PolitiFi tokens.

Stock up to benefit later!

1. Trump (Magazine)

Launched about a year ago, the Trump-themed MAGA token has caused quite a stir in the cryptocurrency ecosystem. Inspired by Donald Trump’s slogan “Make America Great Again,” the MAGA token has produced an astonishing 35 million percent return since its inception. Currently trading at $5.65, it has fallen 8.80 percent in the past 24 hours.

Despite this, the token’s trading volume increased by 23.23%, bringing its market cap to $248 million and securing the 220th spot on CoinMarketCap.

Source: Dexscreener

2. MAGA (MAGA)

Another token with the same ticker, MAGA, is also trending in the PolitiFi category. With 390 billion tokens in circulation, this MAGA token has seen a 11.08% price drop over the past 24 hours, but an 81.39% increase in trading volume. Currently trading at $0.0001337, it is ranked 21st on Dexscreener’s trending list and 522nd on CoinMarketCap. Despite being only two months old, it has provided early adopters with a remarkable profit of 313,373.62% at its all-time high of $0.0007354.

Source: Dexscreener

3. Super Trump Coin (STRUMP)

Super Trump Coin, a meme token depicting Donald Trump as Superman, has a circulating supply of 1.8 billion tokens. Over the past 24 hours, its trading volume has increased by 39.88%. Currently trading at $0.01112, it has dropped by 6.07% over the past 24 hours, but holds a CoinMarketCap rating of 776. From its all-time high of $0.03085, it has dropped by 64.06%. Despite this, its impressive short-term returns have made it a favorite among Trump crypto enthusiasts.

Source: Dexscreener

4. MAGA Vice President (MVP)

Launched just four months ago, MAGA VP has yet to break into the top 1000 cryptocurrencies on CoinMarketCap, currently ranked 1231st. With a value of $0.128, its trading volume has increased by 21.79% over the past 24 hours, with a market cap of $5.3 million. While it is up 110% at its current price, it is down 83.24% from its all-time high of $0.7706.

Source: Dexscreener

5. Little Trump

One of the most unique Trump-themed tokens is Baby Trump, which depicts Donald Trump as a baby president. With a circulating supply of 406 million tokens, it has a market cap of $3.5 million at a trading price of $0.008616. Although its price has dropped 9.45% in the last 24 hours, its trading volume has increased by 4.29%. At its peak, Baby Trump’s market cap was $11 million.

Notably, Baby Trump is the only token among the five analyzed to be based on the BNB Smart Chain, while the others are based on the Ethereum network.

Source: Dexscreener

It’s an exciting time for cryptocurrencies

The current political climate in the United States is spawning a new wave of meme tokens themed around various political figures. Among them, Trump-themed PolitiFi tokens are experiencing the most significant surge in popularity. Support for Donald Trump in the crypto community seems to be a driving force behind the success of these tokens.

Do you think Trump-themed PolitiFi tokens are here to stay or just a passing trend? Share your thoughts.

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News

Brett Token Price Soars 12%; Analyst Expects Further 30% Upside

Published

5 hours ago

27 July, 2024

TokenTalk Staff

Eight altcoins rally 10+% as volatility swings market

Brett, the largest meme coin in Blockchain Base, rose more than 12% on Friday, as sentiment in the cryptocurrency and stock sectors improved.

Brett (BRETT) the token rose to $0.133, up 31% from its low this month. Some traders believe the meme coin has more upside potential in the future.

Analyst is bullish on Brett

In an X-post, Michael van de Poppe, a trader with over 721,000 followers, said he is optimistic that the token will rise to $0.1712, up 30% from Friday’s trading level.

I’ve been a day trader for a long time and memes are a great way to gain that perspective.

Lots of volume.
And there’s a lot of volatility.

When it comes to $BRETTI would look for long positions in this area between $0.125-0.1325 and $0.170 as a clear identification of a potential bull run. photo.twitter.com/hWmSjCZGJa

— Michaël van de Poppe (@CryptoMichNL) July 26, 2024

If he is right, Brett’s market cap will surpass Floki’s (FLOKI), which has a market capitalization of $1.7 billion.

Brett’s bounce came at the start of the Bitcoin 2024 conference today. In a statement at the event, Robert Kennedy, an independent presidential candidate, noted that he is a big supporter of Bitcoin (BTC).

The main protagonist of the event will be Donald Trump, leading in most polls, included in Polymarket. Trump is expected to reiterate his support for cryptocurrencies. Analysts are divided on whether he will announce a Bitcoin reserve at this event.

Blockchain Base is doing well

Brett token also recovered as Base blockchain ecosystems continued to perform well. Launched in 2023 by Coinbase, Base has accumulated over $1.6 billion in DeFi assets, making it the sixth largest chain in the industry. It has surpassed popular networks like Cardano (ADA), Avalanche (AVAILABLE) and Polygon (MATIC).

At the same time, Brett and other altcoins jumped as the U.S. stock market rebounded, signaling that investors have embraced risk-on sentiment. The Dow Jones Industrial Average rose more than 600 points, while the S&P 500 and Nasdaq 100 jumped more than 80 basis points.

Brett Price

Brett Price Chart | Source: Trading View

Technically, Brett formed a morning star pattern, which is a popular reversal sign. In the past, the coin has risen by double digits when it has formed this pattern. For example, it formed on July 12 and then rose by 40%.

On the other hand, this bounce could be a dead cat bounce, where an asset briefly rises and then resumes its downtrend.

Fuente

News

Top 5 PolitiFi Tokens to Buy Now for MAX Profits

Published

6 hours ago

27 July, 2024

TokenTalk Staff

These politically themed crypto tokens are gaining attention, especially those centered around former President Donald Trump. Today, we explore the 5 trending Trump-themed PolitiFi tokens.

Stock up to benefit later!