Following the recent listing of Coinbase on the Nasdaq stock exchange, it appears as more and more bridges are being built between stocks and cryptocurrencies.
Thanks to projects like Horizon Protocol or Mirror Protocol, cryptocurrency investors on Binance Smart Chain can now not only have some market exposure to stocks, but even earn yields on their investments.
These projects enable investors to hold a 1:1 version of the original stock, this time in #BEP20, a tokenized equity which resides on the blockchain. There are actually many benefits of holding a synthetic version of an asset instead of the real one, and here are just a few.
- These assets can be traded anytime, unlike the stock market, enabling a true 24/7 experience just like the crypto market itself.
- They can be purchased globally. Due to the decentralized nature of cryptocurrencies, anyone in the world can now have that market exposure, even if they live in parts of the world where access to foreign equities or US stocks might be limited, for example.
- Users can buy and sell fractions of the tokens if desired. Buying fractional stocks in traditional finance is somewhat of a convoluted process, as opposed to the tokenized versions, where a small portion can be easily purchased like any other cryptocurrency.
- The orders are processed in a matter of seconds unlike again the stock market, where the process depends on the time of the day and the volume of transactions.
- The asset is on chain and not staying idle on the stock market.
Now being liquid, these tokenized versions can be used in several ways, and provide much more than just pure investment material. They can now be easily swapped, paired for liquidity, or even used as collateral in Defi applications, earning yields or be borrowed against. Indeed, yield farming with Tesla tokenized stocks is already a reality on #BSC.
- Different types of assets and commodities can be tokenized or swapped in a similar manner, all in the same familiar space. These Protocols work in a similar fashion, as they offer tokenized versions of for example Amazon, or Netflix stocks when a certain amount of their Stablecoin is minted by the smart contract of their respective apps, thus creating the tradable tokenized version. Moreover, in order to display a correct price on chain, these fungible assets do track the prices of the real world assets by using an oracle which reads the price off chain at specific times, maintaining an ideal 1 : 1 ratio.
As of now, most of these “assets” are already available in various liquidity pairs replicating the price, volatility, and risk/reward of the original stocks, and it’s likely that even more projects will appear in the next few months offering even more options and stocks to invest in the Binance Smart Chain ecosystem.