Controversy over "Criminal Record" of US Stock Tokenization Platform: Founder's Background Raises Concerns, Operational Model Contains Potential Risks

Recently, the concept of tokenization of US stocks has sparked heated discussions within the cryptocurrency circle. Several well-known trading platforms and blockchain projects have announced their support for the tokenized stock trading of companies like Apple, Tesla, and Nvidia. Among them, some exchanges have chosen to adopt the Solana-based xStocks platform as the underlying architecture, while others have opted to issue tokens on other public chains.

However, just as the market's popularity continues to rise, a piece of news has sparked concern and worry within the industry. According to public information, the three co-founders of the xStocks platform's backing Israeli company, Backed Finance, all previously worked at a now-bankrupt blockchain project, DAOstack. This discovery inevitably raises questions about the credibility of xStocks.

DAOstack raised approximately $30 million through multiple rounds of financing from the fourth quarter of 2017 to May 2018, but closed at the end of 2022 due to depleted funds. More concerning is that the DAOstack team has been accused of a "soft exit," meaning that after issuing the Token, they allowed its value to drop to zero without fulfilling their responsibilities.

Nevertheless, xStocks currently offers an operable tokenization mechanism for US stocks. The platform purchases actual stocks in the US stock market and stores them in designated custodian accounts. Subsequently, the corresponding number of tokens are minted on the Solana chain, corresponding to the actual stocks at a 1:1 ratio. Investors can trade these tokens on major trading platforms or apply to exchange the tokens for actual stocks.

However, there are still some potential issues with the operation model of xStocks. First, the platform's liquidity is relatively insufficient, with each stock only providing a limited number of Tokens, which may lead to significant price fluctuations. Second, the trading and management fees are relatively high, which may increase the costs for investors. In addition, since the pledged stocks are held by off-chain institutions and lack public audits, there are certain risks involved. Meanwhile, the on-chain stock Tokens do not have shareholder voting rights, and in fact, resemble an unsecured note.

Finally, some users have reported that the buying and redemption process of xStocks is relatively slow, which affects the overall user experience. These issues need to be taken seriously and improved by the platform in future development.

Overall, although the concept of tokenization of U.S. stocks has sparked enthusiastic discussions in the market, investors still need to carefully assess the risks and rewards involved. Factors such as the historical performance of the team behind the platform, the sustainability of the operational model, and regulatory compliance are all worth close attention. In this emerging field, innovation coexists with risk, and investors should remain rational, conduct thorough research, and manage risks effectively.