Company A will accept funds to buy some stock like MSFT, then they will mint a token i.e. xMSFT that you'll own in a blockchain ledger. You can trade this for whatever you want but the company promises to buy any token xMSFT at MSFT price whenever you want[1]. So the tokenized asset remains pegged as long as there's trust in the institution.
Also, the company will grow a balance sheet out of the funds created by the owners of the tokens and they frequently will give you some sort of yield on your position.
[1] Open Market hours and usually accompanied by a fee.
I'm assuming that, like most crypto, the benefits are for the exchange. They don't have to purchase any Microsoft stock. They can just sell virtual stock, invest the crypto in whatever they want, and only have to pay back when people actually want to sell it. And like the fractional reserve system, they hope that only a small fraction want out at any given time.
Microsoft loses because all of that investment activity does nothing to help their valuation, but the middlemen in the crypto market take their share on each transaction.
Not a crypto person, but is it a situation where one may have crypto and wants to invest it without converting it to USD/CAD/JPY/etc.. and paying taxes on it?
Have you ever tried to actually buy and hold a stock yourself without a middlemen like a brokerage actually holding it for you? It's a very annoying and sometimes almost impossible process.
This is just a different kind of middlemen with different trade-offs.
To make a long story short, and because I'm not an expert: A similar thing kinda-sorta happens behind the scenes with retail investing anyway. When you buy and sell stocks online, often the real ownership of the stock, in the stock exchange, doesn't change hands. Instead, the stock is exchanged among customers of the same platform.
IE, if you buy and sell stocks on ETrade, most of the time the ownership with the dow doesn't change, instead the ownership within ETrade's database changes.
Shares should simply just be tokens. Why do we have that complex systems where shares can only be traded by regulated entities (brokers) and only be traded during certain times? If a share is a token, the holder of the token will be entitled to the same rights such as dividends collection and voting in the shareholder meeting. No need for brokerage accounts, I can trade my shares 24/7 and transfer it to whomever I want. Paying 2-5$ fees on trades seem backwards this day and age.
> Why do we have that complex systems where shares can only be traded by regulated entities (brokers)
Because it safeguards against fraud and tax evasion.
> Paying 2-5$ fees on trades seem backwards this day and age.
Many brokerages don’t charge for buying or selling stock. They make their money elsewhere, likely with contracts on calls/puts. But to your point, having to pay a variable rate fee for moving my Ethereum from one wallet I own to another wallet I own also seems silly. I’m certain though that in both cases the charges cover the maintenance costs to keep the platform going. Everything comes at a cost.
I didn't say anything about decentralized blockchain or anonymous tokens. We could have a kyc process and a single centralized blockchain run by the stock exchange, which only settles transactions to kyc customers - fraud prevention and tax evasion applies.
The real-time trading independent of brokerages, the free information flow of trading volume/direction etc. all benefits and a true, real free market. Right now we have mountain of unneeded intermediaries, that sit and cash in on the data and access.
Would you expect exchanges to permit everyone to trade directly? How would you police the consequences of, for example, no entry policing? How would you want to police requirements if everyone is on the exchange or some venue (e.g., around algorithms)?
But complexities of any new system aside, what is an example of a cashing in of an unneeded example in terms of an activity?
You public key is registered with a kyc progress. Transactions (transfer of shares) is only settled when all parties have a kyc-verified key. Again, centralized chain (proof of authority). Any and all transactions can be reversed and changed by the regulator if needed. The main difference over today is, you have a open, access-to-all (after kyc) and no intermediaries.
Examples for cashing in: payment for order flow (was recently banned in the EU). They litterally sold their trading data of retail clients for money.
Not sure how you think brokers make money, but they get kickbacks from market makers and fund providers, or simply higher spreads. No one works for free.
I have some fairly good understanding actually, hence my point about just data vs orders. Not sure what you want me to take from your link specifically?
Minor benefits around clearing and settlement, but these allow for 24/7 even if the clearing house is not so. On the other hand, I don’t see how they should be able to block it. It is a derivative product, can MSFT block e.g. puts on its stock? Stock ownership gives rights, not obligations.
The other thing would be using it in any other automated whatever that accepts tokens with the same interface. Loans, escrow, trades, whatever it is that someone has built.
There's a lot of technical and other issues with blockchains, but framed as "a single shared database that allows stored procedures and shared data types, with no central owner" I'd hope devs here could see something interesting to mess about with there. If it wasn't for the fact that "a currency" is absurdly easy to make and then there was a lot of quick money to be made or lost, I think it'd be liked more as an odd shared network.
If nothing else, there's some interesting programming challenges involved given the compute limits.
There’s many countries around the globe where buying US shares is either impossible or prohibitively expensive. Also composability in DeFi protocols.
For the issuer, same playbook on how stables issuers print money - you get cash that you can put into treasuries to earn “free” yield on. Works as long as rates aren’t zero.
I guess because it's easier to trade USDT for stock tokens in an Ethereum contract. Same reason USDT is on the blockchain and not just a database run by its owners, who are already centralized of course.
There are also a lot of examples of contracts with some centralization that would appear to remove the entire point of using a blockchain, but they're simple enough that the blockchain is actually easier than hosting their own API, dealing with auth, keeping ddos and hackers out, etc.
Database by itself is easy, but the rest of a public-facing exchange would be a lot of security to get right. I've seen contracts for blockchain exchanges, they're not that complicated, and the footguns have been figured out already. Once they set that up, they don't have to host anything publicly, or very little. The orders are typically matched off-chain, but their backend just talks to the chain, not end users.
OpenAI to this day is not aware if they solved or not Navier Stokes.
Mathematicians are not gate keepers but I understand the frustration. If someone claims they spent 30 million dollars to solve one of the most difficult problems yet there’s no new knowledge, understanding, nor certainty. Then what’s the point besides marketing?
Not OP, but it's ironic how Musk/Tesla fans tell us we shouldn't make political decisions when buying products, but they only seem to be angry when someone boycotts their political heroes.
So which is it? Should buying decisions be political or not?
I personally wouldn't buy a Tesla for many individual reasons (terrible quality, not valuing safety, racist work environments, Musk's behavior), but just the terrible quality would be enough for me. I don't want a car that's in the shop all the time.
Tesla fans think Teslas are the best cars in the world, and they can't conceive you not buying a Tesla for reasons that are not political.
It's idiotic, but it is consistent.
Personal reasons I won't get a Tesla is just that they are too expensive. Tesla fans will tell me I am wrong of course. They will tell me that you can't get anything better at this price, which may be true if your needs matches what Tesla offers. But I don't want "at this price", and my needs are of a much cheaper car.
I know it’s satire but your comment made me think about the engineers working at Flock I’d bet most of them feel ashamed of it even in front of acquaintances.
Well, most of us are no longer able to work without AI.
Not because we can't do the job without AI, rather because there are evaluation requirements for using AI on the job no matter what, and those that can't "upskill" themselves are invited to search something else.
Also, the company will grow a balance sheet out of the funds created by the owners of the tokens and they frequently will give you some sort of yield on your position.
[1] Open Market hours and usually accompanied by a fee.
reply