Technology has never failed to amaze us. It is because of its innovation and new ways to conduct a business in a reliable and efficient way. You would be thinking that investing in a US based stock would be never possible unless you are in the New york stock exchange. But now, forget it. Yes, investing had become more easier with the securities token. Tesla, the electric car maker had endorsed their stock converted into a crypto token that can be traded like a token in the crypto exchange. That is great news. You know what, it is initiated by one of the well-known crypto exchange platforms - Binance.
Now, in this blog, let us know about the stock token, their significance, how they work so that it would help you to understand the stock token more elaborately.
Stock tokens are those crypto tokens that closely track the performance of a particular stock and manage their financial securities. It mostly belongs to publicly traded companies with huge amounts of stocks.
In a layman’s language, a stock token is a kind of crypto token in which a particular stock of a company may be converted into a crypto token and can be traded in a crypto exchange. This is not something illegal. It is similar to the asset tokenization where a specific physical asset would be converted into a token and traded in an exchange platform.
That means, the stock price may also be a determining factor in the price of the token.
There are a lot of financial and time-related benefits in trading stock tokens compared to traditional shares. Coming to that point, you can have certain benefits in trading stock tokens.
Firstly, the time and transaction cost - You may not conduct your stock trade within minutes and your transaction is so secured in a blockchain based ledger unless you are dealing in a cryptocurrency exchange platform. Yes, This is a gift to both the stock traders and the crypto traders in a single mix. Also, the crypto exchanges charge low transaction fees and trading fees compared to the traditional stock companies.
Another significant benefit is the buying of shares. For instance, if you want to buy a Tesla share, say it may be around 500$, you have to buy one whole share of 500$ in a traditional stock exchange. But if it is stock tokenized, then you see, you can buy a part of it, say 0.1% of the token that would cost you less than 60$. This is one of the specialities of the crypto tokens as stock tokens.
Token holders will also get some benefits and dividends according to the tokens they hold. If you are about to trade in a stock token or to start a stock token exchange, then you should know about how the stock token works.
They are denominations that are settled and collateralized as crypto tokens that can be traded in BUSD or Binance cash. That way, stock tokens can be traded and exchanged well in fiat and managed accordingly by the traders in the crypto exchange platform. They are completely cash- settled and digital tokens which means there is no means of physical holding of such tokens. Each token represents the share in a public listed company. In that way, they are pegged at the price based on the variations of the share price along with the trading price in the crypto exchange platform.
In order to prevent confusions, the operations are managed accordingly to get a clear view about the stock tokens. Saying about the ownership, the token holder will enjoy the shareholder benefits and the stock tokens are completely backed on the underlying economics.
That means, the stock tokens cannot operate on its own and it needs the endorsement of the stock market and the company. So, it is time for the stock companies to get relief about the misconception that the stock tokens are going to take over the stock market all-together.
Holders are entitled to dividends. Stock splits are also possible as the entire stock may not be traded by one particular trader. It would be notified to the particular company that they facilitate the stock splits competitively and encourage the stock tokenization.
All corporate actions regarding the stock would be notified by the shareholders by email in advance. This helps the traders to make firm decisions on holding or selling the token as per the circumstance.
However, you should know that the stock tokens do not impose any kind of legal rights to you or your user. That means, you will not have any voting rights on decisions based on that particular stock.
It is not like ICO that whoever can trade on stock tokens. Being a high priority crypto token, the Binance, who initiated the stock token principle have come up with some criteria to trade in stock token.
1. You need to have completed your Level 2 KYC verification to trade in stock token.
2. The tokens are regulated and fully backed by shares held by CM Equity AG. So, there will be no kind of illegal transaction or mismanagement.
3. Users who find it difficult to acquire a stockbrokers’ account can trade in the stock token and gain exposure in the traditional equity markets.
4. As they provide flexibility and market access, there is a chance that the market may grow wide and far by the traders.
Trading stock tokens in Binance is very easy. If you satisfy the points discussed above, then you are eligible. Then,
1. Go to the stock tokens page.
2. Pick the token you wish to trade on and click trade
3. Deposit BUSD in order to trade.
If you want to get more extensive profits, it is more wise to start your stock token category in your cryptocurrency exchange platform.
If you are an entrepreneur who is about to create a cryptocurrency exchange platform, then it is more needed to add the feature of stock token trading in your platform to become more competitive than your competitors.
1. Users will have access to the price chart, an order based entry panel, and a transaction history panel on the dashboard trading interface.
2. RFQ prices are subjective and not guaranteed.
3. There is no presence of volume data or order book widgets in a stock token exchange.
4. On the order entry panel, enter the order’s quantity and then you can click Buy or Sell.
5. Once the order is completed, the transaction might deduce BUSD from your spot crypto wallet.
6. There will be no presence of the stock token wallet, and the BUSD balance displayed on the UI will reflect the user’s spot BUSD balance.
7. Stock tokens will be withdrawn only in cash which means the user can sell back their tokens to the market on Binance thereby receiving equivalently in BUSD.
8. Stock tokens are non-fungible.
Being the new feature, it is only a reputed crypto exchange development company who can offer you the stock token creation and integration services to your platform.
In that sense, AlwinTechnologies have a wide expertise in providing outstanding crypto exchange services to the clients and well aware of this new token creation process - Stock token.
With an excellent track record in the crypto field, this is the best choice you will get to start your stock token business with Alwin Technologies.