Two Practice Models of Stock On-Chain: Open Ecology vs Closed Loop Compliance

Recently, stock on-chain has become a hot topic in the blockchain community, primarily represented by the Backed-supported xStocks and the Robinhood model. The xStocks model has a higher degree of openness and composability, allowing ordinary users to trade freely on-chain. In contrast, the Robinhood model is only open to users of EU exchanges under the premise of Compliance and does not allow transfers to non-compliant addresses. The following will analyze and compare these two models through multiple sets of data.

xStocks Mode

Transaction Status

xStocks currently supports 61 stocks, of which 10 have generated trading volume on-chain. As of July 2, SPY, TSLA, CRCL, MSTR, and NVDA have accumulated over $1 million in trading volume. AAPL, GOOGL, QQQ, META, and AMZN have also seen user trades. Some trading platforms have also launched xStocks trading sections.

After receiving support from certain trading platforms, xStocks' trading volume has increased significantly. On July 1st, it reached $6.641 million, with over 6.5k trading users and more than 17.8k transactions. On that day, the daily trading volume of TSLA, SPY, and CRCL all exceeded $1 million.

Operating Mechanism

xStocks adopts a model where 1 token equals 1 share of stock. Professional investors can apply for an account to purchase stocks through Backed, which assists in buying and custodial services at a brokerage, and then mints the corresponding number of tokens to return to the investors. These primary investors can issue and redeem stock tokens at any time.

Source of Liquidity

The issuance rights of stock tokens are concentrated in the hands of primary professional investors, while liquidity mainly relies on exchange market makers. xStocks collaborates with exchanges not only to provide distribution channels but also to make exchanges part of the primary issuance process, leveraging market maker resources to provide liquidity.

To guide retail investors in providing liquidity, xStocks may refer to the bStocks model and collaborate with public chains and DEXs, using third-party protocol tokens for incentives. Currently, partnerships have been established with a DEX aggregator and a lending protocol on Solana.

Robinhood Model

Deployment Status

Robinhood has chosen to issue stock tokens on a certain L2 network, having deployed 213 types of tokens at a total cost of just $5.35. In the future, a proprietary chain will be developed based on this network.

non-listed company stock

Robinhood plans to launch the world's first tokenized stocks of private companies, such as OpenAI and SpaceX. This could allow crypto users to access upcoming IPOs sooner than traditional stock investors. Currently, 2,309 OpenAI tokens have been minted.

Compliance design

Robinhood's stock token contracts embed compliance requirements. Each transfer must check the approved wallet registry (KYC/AML), and these tokens may not interact with DeFi, but centralized exchanges with distribution capabilities may benefit. Even if EU users purchase on-chain, they cannot transfer tokens to non-registered addresses.

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Aside from OpenAI, Robinhood-related addresses have set metadata for 79 stock tokens, including stocks like Robinhood Markets, Trump Media & Technology Group, GameStop, and several ETFs. A small amount of some tokens has been minted.