Two Paradigms of Stock Tokenization: Open and Closed Games

Stock tokenization has become a financial reality in the blockchain space. With fintech companies like Kraken and Robinhood entering the scene, this blockchain technology-driven structural transformation has officially begun. For the first time, global investors have the opportunity to trade "digital stocks" of companies like Apple and Tesla in a nearly frictionless manner, 24/7.

This report will focus on two typical cases - xStocks, representing the "Open DeFi" path, and Robinhood, representing the "Compliance Walled Garden" path. It will deeply analyze the intrinsic logic of current mainstream stock tokenization products and explore how these platforms achieve a balance between stringent financial regulations, complex technical implementations, and significant market opportunities.

1. The Underlying Logic of Two Mainstream Models

The primary challenge of tokenization of stocks is compliance rather than technology. The market has formed two distinctly different compliance paths: 1:1 asset-backed security tokens and derivative contract tokens.

Model 1: xStocks - Embracing the Open Road of DeFi

Core Definition: The tokens held by users legally represent direct or indirect ownership or interests in real stocks. This is a mapping of "real" stocks on the blockchain, pursuing the authenticity and transparency of assets.

Legal Framework:

• Issued by the Swiss company Backed Finance, in accordance with the Swiss DLT Act.
• Establish a special purpose vehicle (SPV) in Liechtenstein to hold real stocks and achieve risk isolation.

Asset-backed and liquidity strategies:

• 1:1 pegged, each Token corresponds to a share of real stock
• Reserve proof achieved on-chain verification through Chainlink PoR
• Dual-track liquidity: centralized exchange market makers + DeFi protocols

Model 2: Robinhood - Compliance-First "Walled Garden"

Core Definition: The stock tokens purchased by users are essentially a financial derivative contract that tracks the price of specific stocks, rather than ownership of the stocks.

Legal Framework:

• Issued by Robinhood Europe UAB, regulated by the Bank of Lithuania
• The product is classified as a derivative and follows the EU MiFID II framework.

Technology and Compliance Design:

• Smart contracts are embedded with strict access control, forming a "walled garden".
• Limited DeFi composability
• Plan to develop a dedicated Layer 2 network Robinhood Chain

2. Technical Architecture Comparison

Layer 1 blockchain selection

xStocks chooses Solana:

• Pursue extreme performance: high throughput, low fees, sub-second confirmation
• Challenge: There is uncertainty in network stability.

Robinhood chooses Arbitrum:

• Inherits the security and mature ecosystem of Ethereum
• Future plans to migrate to a self-built Layer 2 network

core technology components

Smart Contract Design:

• xStocks: Open SPL Token, freely transferable
• Robinhood: Permissioned Token with embedded transfer restriction logic

Oracle ( Function:

• Price information synchronization
• Proof of Reserves ) PoR (

Cross-chain interoperability:

• Chainlink CCIP enables cross-chain asset transfer

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) Asset On-Chain and SPV Operation

1. Asset isolation: Real stocks deposited into an independent SPV
2. Minting Token: SPV authorized on-chain smart contract minting
3. Token distribution: through compliant exchanges or direct sales to qualified investors
4. Lifecycle Management: Handling corporate actions such as dividends, stock splits, etc.
5. Redemption and Destruction: Ensure a 1:1 balance between on-chain circulation and off-chain reserves.

![Two Paradigms of Stock Tokenization: xStocks Moves Towards Openness, Robinhood Enters the Walled Garden]###https://img-cdn.gateio.im/webp-social/moments-c0b28a9f81da85cb978f9143d8dbbdac.webp(

3. Business Model and Risk Assessment

) Business Models and Revenue Sources

Robinhood:

• Clear income: A 0.1% foreign exchange conversion fee will be charged to non-Eurozone users.
• Potential income: may introduce order flow payments, membership services, etc.
• Expand the private equity market

xStocks ###Kraken & Backed Finance(:

• Transaction Fee
• Minting/Redeeming Fee
• B2B Asset Tokenization Services

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) Risk Assessment Matrix

• Regulatory risks: cross-border regulatory arbitrage, compliance challenges
• Technical risks: vulnerabilities in smart contracts, oracle failures
• Market Risk: Insufficient liquidity, price volatility
• Operational Risk: Custody Security, KYC/AML
• Legal risks: cross-border disputes, ownership disputes
• Credit risk: The issuer or custodian defaults

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4. Market Landscape and Future Outlook

) Main Player Matrix Comparison

Three major camps:

1. Open DeFi roadmap: xStocks, Hashnote, etc.
2. Compliance perimeter route: Robinhood, Swissborg, etc.
3. Infrastructure providers: Securitize, Polymath, etc.

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) Market Trends and Evolution Paths

• From Isolation to Integration: Deep Integration with Mainstream Financial Institutions and the DeFi Ecosystem
• Regulation-driven innovation: The EU MiCA and Switzerland's DLT Act provide clear rules.
• Institutional entry and product diversification: expansion into structured products, private equity, etc.
• Private equity tokenization has become a new blue ocean.

![Two paradigms of stock tokenization: xStocks moving towards openness, Robinhood entering walls]###https://img-cdn.gateio.im/webp-social/moments-6788731b29e485ddfe712b4656fb49cd.webp(

) Future Outlook and Thoughts

• The conflict between openness and closure: two models may coexist for a long time.
• The race between technology and law: Continuous evolution of technologies such as cross-chain, Layer 2, and privacy computing.

Stock tokenization is fundamentally reshaping the paradigms of asset issuance, trading, clearing, and ownership. Despite facing numerous challenges, the future direction it points towards is irreversible. Market participants need to actively and prudently embrace this financial revolution based on a profound understanding of its underlying logic and potential risks.

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