Two Models of On-Chain Stock Trading: Open Ecosystem and Compliance Closed Loop

Recently, stock on-chain has become a hot topic of discussion in the blockchain community. Among them, the xStocks supported by Backed and the model of a certain trading platform are the most eye-catching. These two models each have their own characteristics: the xStocks model emphasizes openness and composability, allowing ordinary users to trade freely on-chain; while the certain trading platform is only open to users in the EU region with clear regulations under Compliance, and restricts transfers to non-compliant addresses. Below, we will analyze the characteristics of these two models in depth through data.

xStocks Model Analysis

transaction status

xStocks currently supports 61 stocks, of which 10 have generated transactions on-chain. As of July 2, the cumulative trading volume of SPY, TSLA, CRCL, MSTR, and NVDA has exceeded $1 million. In addition, users have also traded AAPL, GOOGL, QQQ, META, and AMZN.

After receiving support from certain trading platforms, xStocks' trading volume has significantly increased. On July 1st, the daily trading volume reached 6.641 million USD, with over 6,500 trading users and more than 17,800 transactions. On that day, the daily trading volume of TSLA, SPY, and CRCL all exceeded 1 million USD.

Issuance Mechanism

xStocks adopts a model where 1 token corresponds to 1 share of stock. Professional investors or compliance investors can apply to become primary investors, purchasing stocks through Backed and receiving a corresponding number of tokens. These primary investors can issue and redeem stock tokens at any time. Currently, among the 10 xStocks stock tokens with the largest trading volume, NVDIA, Circle, and Tesla have the highest issuance, each exceeding 10,000 tokens.

Liquidity Source

The liquidity of xStocks mainly relies on the market makers of the exchange. The exchange not only provides distribution channels but also becomes a primary issuance link, using market maker resources to provide liquidity. Trading activity and liquidity depth complement each other. Currently, the highest trading volume SP500(SPY) has reached a liquidity of 1 million USD in on-chain USDC, exceeding the market value of issued stock tokens. However, stock tokens with lower trading volumes still face liquidity insufficiency issues.

Liquidity Incentives

xStocks is actively collaborating with DeFi protocols to incentivize retail investors to provide liquidity for stock tokens using third-party protocol tokens. Known partners include the DEX aggregator Jupiter and the lending protocol Kamino. In the future, it may refer to the bStocks model issued by Backed on the EVM network, collaborating with public chains and mainstream DEXs to utilize protocol tokens to guide the liquidity of stock tokens.

Analysis of Stock On-Chain Model of a Certain Trading Platform

deployment status

The platform has chosen to issue stock tokens on a certain L2 network, having deployed 213 types of tokens at a total cost of only $5.35, with an average deployment cost of just $0.03 per token. The low transaction fees are one of the important factors for choosing this network. The platform plans to develop its own proprietary chain based on this L2 network.

unlisted company stocks

The platform announced the launch of the world's first tokenized stocks of private companies, including OpenAI and SpaceX. This turns cryptocurrency into a pre-IPO trading market for high-potential private company stocks, potentially allowing crypto users to access upcoming IPOs earlier than traditional stock investors. Currently, the platform has minted 2,309 OpenAI tokens.

Compliance requirements

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

upcoming token

In addition to OpenAI, the platform has set metadata for 79 stock tokens, including the platform itself, Trump Media & Technology Group, GameStop, and ETFs such as Schwab US Dividend Equity ETF and Yieldmax MSTR Option Income Strategy. Some stock tokens with set metadata have undergone a small amount of minting.

These two on-chain stock models have their own advantages and disadvantages. xStocks focuses more on openness and composability, while a certain trading platform strictly adheres to compliance requirements. In the future, how these two models will develop is worth our continued attention.