Author: Aiying Research
The tokenization of real-world assets (RWA) is no longer a futuristic narrative in the blockchain circle, but a financial reality that is happening. In particular, with the entry of financial technology giants such as Kraken and Robinhood, the structural change driven by blockchain technology has already begun. For the first time, global investors have the opportunity to trade "digital stocks" of companies such as Apple and Tesla 24 hours a day in a nearly frictionless way. However, under the hustle and bustle of the market, deeper questions need to be answered. Continuing from the previous "From Retail Paradise to Financial Disruptor: In-depth Disassembly of Robinhood's Business Map and Future Chess Game" Aiying Aiying's report aims to penetrate the surface of market hotspots and deeply analyze the internal logic of current mainstream stock tokenization products. We will no longer stay at the level of "what is", but focus on "how to achieve" and "what are the risks", providing our customers, investors, developers and regulators with a reference map with both depth and practical value.
Aiying will conduct an in-depth comparative analysis of two typical cases: xStocks (issued by Backed Finance and traded on exchanges such as Kraken) representing the "open DeFi" path and Robinhood representing the "compliant walled garden" path, and will also use the practices of key industry players such as Hashnote and Securitize to jointly explore a core question:
How do these platforms strike a balance between stringent financial regulation, complex technology implementation, and huge market opportunities? What paths have they chosen, and what are the fundamental differences in their underlying logic and compliance design? This is exactly what this report will reveal.
I. Core Analysis (I): The "tightening spell" and "talisman" of compliance - the underlying logic of the two mainstream models
The primary challenge of stock tokenization is not technology, but compliance. Any attempt to "move" traditional securities onto the blockchain must face the complex global financial regulations. In the long-term game with regulation, the market has quietly differentiated into two completely different compliance paths: 1:1 asset-backed security tokens and derivative contract tokens. The underlying legal structure and operating logic of these two models are very different, which determines their product form, user rights and risk characteristics. Let's break them down one by one.
Model 1: xStocks — Embracing the open road of DeFi
Core definition: The tokens held by users (for example, TSLAX representing Tesla stock) legally directly or indirectly represent the ownership or interest in real stocks (TSLA). This is an on-chain mapping of "real" stocks, pursuing the authenticity and transparency of assets.
Legal framework and market performance
Aiying believes that xStocks’ compliance design is ingenious. Its core lies in embracing the openness of blockchain while minimizing legal risks through multi-layered legal entities and a clear regulatory framework.
Currently, xStocks supports 61 stocks and ETFs, 10 of which have been traded on the chain, showing initial market vitality. After being supported by Bybit and Kraken, its trading volume has experienced explosive growth. As of July 1, its daily trading volume has reached 6.641 million US dollars, with more than 6,500 trading users and more than 17,800 transactions.
Issuing entity and regulatory framework:
xStocks is issued by Swiss company Backed Finance and operates in compliance with the Swiss DLT (Distributed Ledger Technology) Act. Switzerland was chosen as the legal base because the country provides a relatively clear and friendly regulatory environment for digital assets and blockchain innovation.
Special Purpose Vehicle (SPV):
This is the cornerstone of the entire architecture. Backed Finance has established a special purpose vehicle (SPV) in Liechtenstein, which has a stable legal and tax environment. This SPV is like an "asset safe" whose only function is to hold real stocks. This design achieves critical risk isolation: even if the platform where the user trades (such as Kraken or Bybit) or the issuer has operational problems, the underlying assets held in the SPV remain safe and independent.
Asset Backing and Liquidity Strategies
To ensure the value and credibility of on-chain tokens, xStocks has established a transparent asset support and dual-track liquidity system.
1:1 peg (1 coin = 1 share):
Each xStock token circulating on the chain strictly corresponds to a real share of stock stored in a third-party custodian. This 1:1 anchoring relationship is the core of its value proposition. Currently, the total number of stock tokens of NVIDIA, Circle and Tesla has exceeded 10,000.
Issuance process:
Professional qualified investors can apply for a Backed Account and purchase stocks through Backed. Backed plays the role of a primary investor and purchases stocks from a brokerage, which are then held in custody by a third-party institution. Finally, xStocks mints a corresponding number of tokens based on the number of stocks purchased and returns them to the primary investors. These primary investors can issue and redeem stock tokens at any time.
Proof of Reserve:
Transparency is the cornerstone of trust. xStocks is integrated with the industry-leading oracle network Chainlink PoR. This means that anyone can query and verify Backed Finance's reserves in real time and autonomously on-chain to ensure that the number of real stocks it holds is sufficient to support all issued tokens.
Dual-track liquidity strategy:
1. Centralized Exchange (CEX) Market Makers:
On mainstream exchanges such as Kraken and Bybit, professional market makers are responsible for providing liquidity, ensuring that users can buy and sell xStocks as easily as trading ordinary cryptocurrencies.
2. Decentralized Finance (DeFi) Protocol:
xStocks' tokens are open, and users can deposit them into DeFi protocols on the Solana chain (such as lending platforms, DEX liquidity pools), provide liquidity and earn income. Currently, xStocks has cooperated with DEX aggregator Jupiter and lending protocol Kamino to make full use of the composability of DeFi and create additional value for assets. For example, the SP500 (SPY) token with the highest trading volume has reached $1 million in USDC-based liquidity on the chain.
The xStocks ecosystem consists of the issuer Backed, trading platforms Bybit and Kraken, and the underlying blockchain Solana.
Model 2: Robinhood — a “walled garden” that prioritizes compliance
Core definition: Completely different from xStocks, the stock tokens purchased by users on the Robinhood platform are not legally stock ownership, but financial derivative contracts signed between users and Robinhood Europe to track the price of specific stocks. Its legal essence is an over-the-counter (OTC) derivative, and the tokens on the chain are merely digital certificates of this contractual right.
1. Legal framework and technical implementation
The Aiying team found that Robinhood’s model is a very pragmatic “regulatory arbitrage”, which cleverly packages the product into an existing financial instrument with a clear regulatory framework and deploys it quickly at a very low cost.
Issuing entity and regulatory framework:
The tokens were issued by Robinhood Europe UAB, an investment company registered in Lithuania and regulated by its central bank. Its products are regulated under the EU’s MiFID II (Markets in Financial Instruments Directive II) framework. Under MiFID II, the tokens are classified as derivatives, thus circumventing more complex securities issuance regulations.
Low-cost and fast deployment:
Robinhood deployed 213 stock tokens on the Arbitrum chain, with a total cost of only $5.35 (on-chain gas fee), showing the extremely high efficiency of using Layer 2 technology. Among them, 79 tokens have set metadata and are ready for subsequent transactions.
Pioneering attempts:
Robinhood has boldly tried to tokenize private company stocks for the first time, launching tokens for OpenAI and SpaceX, intending to seize the initiative in the high-value field of private equity. Currently, Robinhood has minted 2,309 OpenAI (o) tokens. (OpenAI tokens will provide investors with an opportunity to invest in OpenAI indirectly through Robinhood’s ownership in the SPV, and then link the price of OpenAI tokens to the value of OpenAI shares held by the SPV)
2. “Walled Garden” Technology and Compliance Design
Robinhood's technological implementation is closely linked to its compliance strategy, together building a closed but compliant ecosystem.
On-chain KYC and whitelisting:
Through reverse analysis of the Robinhood stock token smart contract, community developers discovered that its contract has strict permission controls embedded in it. Each token transfer operation triggers a check to verify whether the recipient's address is in the "approved wallet" registry maintained by Robinhood. This means that only EU users who have passed Robinhood KYC/AML can hold and trade these tokens, forming a "walled garden".
Limited DeFi composability:
The direct consequence of this “walled garden” model is that its stock tokens are almost unable to interact with the vast, permissionless DeFi protocols. The on-chain value of the assets is firmly locked inside the Robinhood ecosystem.
Future plans (Robinhood Chain):
In order to better serve its RWA strategy, Robinhood plans to develop its own Layer 2 network, Robinhood Chain, based on the Arbitrum technology stack, demonstrating its ambition to control the underlying technology.
Although Robinhood's model has found a compliance path under the EU framework, it has also caused considerable controversy and potential risks.
"Fake equity" controversy:
The most representative event was the launch of OpenAI and SpaceX tokens. Soon after, OpenAI officially made a public statement denying its cooperation with Robinhood and clearly pointed out that these tokens do not represent company equity. This incident exposed the huge risks of the derivatives model in information disclosure and user perception.
Centralization Risk:
The security of your assets and the execution of your trades are completely dependent on the operational status and credit of Robinhood Europe. If there is a problem with the platform, you will be exposed to counterparty risk.
3. Comparison and summary of the two models
Through the above analysis, we can clearly see the fundamental differences between the two models. The xStocks model is closer to the open spirit of Crypto Native and DeFi, while the Robinhood model is a "shortcut" found within the existing regulatory framework.
Key Takeaways
xStocks’ path is “asset on-chain”, which attempts to map the value of traditional assets to the blockchain world in a real and transparent way and embrace open finance. Robinhood’s path is “business on-chain”, which uses blockchain as a technical tool to package and deliver its traditional derivatives business. Aiying understands that this is essentially more like a blockchain upgrade of “CeFi” (centralized finance).
2. Core Analysis (II): The "Song of Ice and Fire" of Technical Architecture - Open DeFi and Walled Gardens
Under the compliance framework, the technical architecture is the skeleton for realizing the product vision. Aiying believes that the differences between xStocks and Robinhood in technology selection and component design also reflect their two different philosophies of "open" and "closed".
1. The choice of underlying public chain: a triangular game between performance, ecology and security
Choosing which public chain to use as the "soil" for asset issuance is a strategic decision that concerns performance, cost, security, and ecology.
xStocks chooses Solana:
Its core motivation is the pursuit of extreme performance. Solana is known for its high throughput (theoretical TPS is up to tens of thousands), low transaction costs (usually less than $0.01), and sub-second transaction confirmation speeds. This is critical for stock tokens that need to support high-frequency trading and interact with complex DeFi protocols in real time. However, several network outages in history have also exposed its challenges in stability, which is a risk that must be taken when choosing Solana.
Robinhood chooses Arbitrum:
Arbitrum is Ethereum's Layer 2 expansion solution, and the logic behind its choice is "standing on the shoulders of giants." By adopting Arbitrum, Robinhood not only achieved higher performance and lower fees than the Ethereum mainnet, but more importantly, inherited Ethereum's unparalleled security, huge developer community, and mature infrastructure. In addition, Robinhood also announced plans to migrate to its own Layer 2 network based on Arbitrum technology in the future, which is specially optimized for RWA, which shows its long-term ambition.
Comparative analysis: This is not a simple question of "who is better", but a reflection of the strategic path. Solana is a single chain that pursues "integrated high performance", while Arbitrum represents the path of "modularization" and inheriting Ethereum's security. The former is more radical, and the latter is more robust.
2. Analysis of core technology components
In addition to the underlying public chain, several key technical components together constitute the core functions of stock tokenization products.
Smart contract design:
- xStocks (SPL Token):
As the standard token (SPL) on Solana, its smart contract is designed to be freely transferable, similar to ERC-20 on Ethereum. This open design is the technical basis for its seamless integration with DeFi protocols (such as collateral on the Kamino lending platform).
- Robinhood (Permissioned Token):
As mentioned earlier, its contract has transfer restriction logic built in. Every transaction calls an internal whitelist registry for verification, which is the technical core of its "walled garden" model and the fundamental reason for its isolation from the open DeFi protocol.
The key role of Oracle (taking Chainlink as an example):
- Price information:
The value of stock tokens needs to keep pace with real-world stock prices. Oracles, such as Chainlink Price Feeds, act as a data bridge, feeding stock prices from multiple reliable data sources to smart contracts in a secure and decentralized manner. This is the lifeline for maintaining price anchors, executing trades, and performing liquidations.
- Proof of Reserves (PoR):
This is crucial for 1:1 anchored products such as xStocks. Through Chainlink PoR, smart contracts can automatically and regularly prove to the outside world the adequacy of their off-chain reserve assets, solving the trust problem at the code level, which is far more timely and persuasive than traditional audit reports.
Cross-chain interoperability (taking Chainlink CCIP as an example):
value:
As the multi-chain landscape takes shape, cross-chain capabilities of assets become critical. The Cross-Chain Interoperability Protocol (CCIP) allows assets such as xStocks to be securely transferred between different blockchains (such as from Solana to Ethereum). This can break the silos between chains, greatly expand the liquidity pool and application scenarios of assets, and is a key technology to realize the vision of "one token, universal for all chains". Backed Finance has mentioned the use of Chainlink CCIP in its products to achieve cross-chain bridging.
3. Detailed explanation of asset on-chain and SPV operation
For asset-backed tokens, SPV is the key hub connecting real-world assets and the blockchain world. Its rigorous and interlocking operating procedures ensure the security and compliance of assets.
1. Asset Isolation:
The issuer (such as Backed Finance) first purchases real stocks in a compliant financial market (such as the New York Stock Exchange). These stocks are not placed on the issuer's own balance sheet, but are deposited in an independent, regulated special purpose vehicle (SPV) and kept by a third-party licensed custodian (such as a bank).
2. Token Minting:
After the SPV and the custodian confirm that the real assets have been deposited, they will send a verified instruction to the smart contract on the chain, authorizing the minting of an equal amount of tokens on the target blockchain (such as Solana) (for example, if 100 shares of TSLA are deposited, 100 TSLAX tokens will be minted).
3. Token Distribution:
The minted tokens are sold through compliant exchanges (such as Kraken) or directly to qualified investors who have passed KYC/AML audits.
4. Lifecycle Management:
During the life of the token, the issuer needs to process corporate actions through smart contracts and oracles. For example, when Tesla distributes dividends, the SPV receives the dividends and triggers the smart contract to distribute the equivalent stablecoins or tokens to the on-chain holders. If it is a stock split, the smart contract will automatically adjust the number of tokens for all holders.
5. Redemption & Burning:
When qualified investors wish to redeem, they send the on-chain tokens to the designated destruction address. After verification by the smart contract, the SPV is notified. The SPV then sells the corresponding number of real shares in the traditional market and returns the cash obtained to the investors. At the same time, the on-chain tokens are permanently destroyed to ensure that the on-chain circulation and off-chain reserves always maintain a 1:1 balance.
3. Core Analysis (III): Business Model and Risk Assessment - The "Reefs" Behind Opportunities
Behind the complex compliance and technical architecture is a clear business logic. The stock tokenization platform not only creates unprecedented value for users, but also opens up new profit channels for itself. However, opportunities and risks always go hand in hand.
1. Business model and profit source
Although all platforms offer stock token trading, their profit models differ in focus.
Robinhood’s revenue sources:
Specify income:
According to its official description, Robinhood charges a 0.1% foreign exchange (FX) conversion fee on transactions mainly for non-Eurozone users. This fee is incurred when users use euros to buy dollar-denominated tokens.
Potential Income:
Although it currently focuses on "zero commission" to attract users, its business model is scalable. In the future, it may introduce profit methods similar to its traditional US stock business, such as payment for order flow (PFOF, although it is strictly restricted in the EU), member value-added services for high-frequency traders, or earning income from the underlying assets held.
Exploring the private equity market:
By issuing tokens of non-listed companies such as OpenAI and SpaceX, Robinhood has expanded the high-value asset category. This is not only a powerful user acquisition strategy, but it may also make profits in the future by charging for related value-added services (such as information and transaction matching).
xStocks (Kraken & Backed Finance) income sources:
Transaction Fees:
As one of the core trading platforms, Kraken will charge a certain percentage of transaction fees to buyers and sellers of xStocks, which is the most traditional profit model of the exchange.
Minting/Redemption Fees:
As an issuer, Backed Finance mainly serves institutional clients. It may charge a certain service fee for large-scale minting and redemption operations performed by institutional users to cover the cost of purchasing, custody and managing the underlying assets.
B2B Services:
Backed Finance’s core business model is to provide a one-stop asset tokenization (Tokenization-as-a-Service) solution for other financial institutions. xStocks is both its product and a demonstration of its technical strength.
2. Comprehensive risk assessment matrix
While investors enjoy the convenience brought by stock tokenization, they must be aware of the various risks hidden behind it.
3. Market structure and future prospects: Who will dominate the next generation of financial markets?
The major platforms in the asset tokenization track are competing for the market with different strategic positioning. Understanding their differences will help us gain insight into the future direction of the industry.
1. Comparison of major players matrix
There are many players in the RWA tokenization track, and they have formed a unique competitive landscape based on different strategic considerations. We divide the main players into three camps for in-depth comparison.
2. Market trends and evolution paths
Looking ahead, stock tokenization and even the entire RWA track are showing several clear trends:
- From Isolation to Integration:
Early tokenization projects were mostly isolated attempts within a single platform. Today, the trend is shifting towards deep integration with mainstream financial institutions (such as BlackRock, Franklin Templeton) and the vast DeFi ecosystem. Tokenized assets are becoming a bridge between TradFi and DeFi.
- Regulation drives innovation:
Regulatory clarification is the strongest catalyst for market development. The EU's MiCA Act, Switzerland's DLT Act, and the Monetary Authority of Singapore's "Guardian Plan" are all providing the market with clearer rules, which in turn encourages more compliance innovation. Compliance capabilities are becoming the core competitiveness of the platform.
- Institutional entry and product diversification:
As BlackRock brings the trillion-dollar money market to the blockchain through its BUIDL fund, the participation of institutions will inject unprecedented liquidity and trust into the market. Product types will also expand from single stocks and bonds to more complex structured products, private equity and alternative assets.
- Private equity tokenization becomes a new blue ocean:
Platforms such as Robinhood have begun to explore the tokenization of non-listed company stocks, which has opened a window to the private equity market that is usually limited to institutions and high-net-worth individuals. Although it faces huge challenges in valuation, information disclosure and law, it is undoubtedly a new direction with great potential.
Future Outlook and Thoughts
The trend of stock tokenization is unstoppable, but the road ahead is not smooth. Several core issues will determine its final form:
Open vs. Closed Debate:
Will the future market be dominated by an open, composable model like xStocks, or will it be won by a compliant but closed "walled garden" model like Robinhood? More likely, the two will coexist for a long time, serving user groups with different risk preferences and needs. Crypto Native users will embrace the open world of DeFi, while traditional investors may prefer to try it in a familiar, regulated "garden".
The race between technology and law:
Cross-chain technologies (such as CCIP), Layer 2 solutions, and privacy computing (such as ZK-proofs) will continue to evolve to address current technical bottlenecks in scalability, interoperability, and privacy protection. At the same time, whether the global legal framework can keep up with the pace of technological innovation and provide certainty for these innovations will determine the development speed and ceiling of the entire industry.
Stock tokenization is far more than simply putting financial assets on the blockchain. It is fundamentally reshaping the issuance, trading, settlement and ownership paradigm of assets. It promises a more efficient, transparent and inclusive global financial market. Although this road is full of technological, market and regulatory "reefs", the future direction it points to is undoubtedly irreversible. For all market participants, whether investors, builders or regulators, the top priority is to actively and prudently embrace this coming financial revolution based on a deep understanding of its underlying logic and potential risks.
