Stock Tokens: What They Are & How They Work

Investing has been around for centuries, but the way we invest has changed drastically since the early days of the stock market. Investors today have a variety of opportunities to choose from. And this may seem overwhelming at times, but if you know what you’re doing, it can be very exciting.

Not too long ago, cryptocurrency was the newest fad, but that has recently changed since tokenized stocks were introduced. This is still a relatively new concept not many people are familiar with. If you’re asking yourself what are stock tokens and how they work, you’ve come to the right place.

Sock tokens—what are they?

Anyone who has ever heard of investing has heard about stock and has probably heard about digital tokens, but we’re here to talk about something completely new. Instead of talking about how the stock market works or how to buy Bitcoin cash, we’re looking at something that is in between.

Stock tokens are something like the middle ground between stock and cryptocurrency. They are a form of digital token that represents a share of equity in a publicly-traded company. The shares of these tokens are issued on a blockchain and their price is based on the value of the company’s share.

They can be traded and bought on a regular cryptocurrency exchange just like any other digital currency such as Bitcoin or Ethereum. When you buy this stock, you don’t own regular stock but a derivative.

However, this derivative is still backed by real shares and gives you the same exposure to the underlying stock as if you outright own it.

A lot of well-known and successful companies currently offer stock tokens including Apple, Tesla, Google, and Netflix, just to name a few. If you want to know what other companies offer them, you can check out a list of tokenized stock.

Why are stock tokens special?

Stock market numbers
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Unlike regular stock, stock tokens have the following properties:

  • They’re accessible to everyone. If someone wanted to buy stock from a US company such as Apple or Tesla, they would have to do it from the US stock market. But this isn’t an issue traders encounter with stock tokens because you can legally access them from anywhere in the world.
  • You can buy fractions of a stock. Tokenized stock from big companies can cost thousands of dollars. But if you don’t want to spend that much, you can simply buy a fractionalized portion of one stock.
  • The trade is always on. Unlike the US stock market which only accepts trades between 9:30 am and 4:00 pm, you can trade your tokenized assets 24/7.
  • The transactions are fast. Compared to traditional stock exchanges that may take multiple business days, the stock token exchange is lightning fast. The speed depends on the exchange you use, but most transactions that deal with tokenized stock are processed in just a couple of minutes.

There are still more options that are yet to be released. But as you can see, tokenized stocks offer multiple benefits the regular stock market doesn’t, especially to foreign investors.

How does trading stock tokens work?

Don’t let the name fool you because trading stock tokens is not the same as trading regular stocks. As we already explained, these tokens are cryptocurrencies, so you should trade them the same way you would trade a digital coin.

If you’ve traded cryptocurrencies before, you will pick up on tokenized stock trading easily. Here are the steps you should follow:

  • Choose an exchange. Go to the cryptocurrency exchange of your choice to check if they’re trading the stock you’re interested in. It can either be a centralized or decentralized exchange.
  • Create your account. If you don’t have one already, you will need to create an account on the exchange. This requires you to submit some of your personal information and verify your identity.
  • Put funds into your account. You can put almost any cryptocurrency or fiat currency into this account. However, the safest choices for deposits are usually Bitcoin or USD if you want to go with a fiat currency. Make sure to choose a currency that is paired with your desired token.
  • Buy your stock tokens. Finally, you can follow the steps on the exchange you’ve chosen and in just a few clicks, you’ll be the owner of your stock token of choice.

Final thoughts

Stock tokenization is still fairly new in the world of cryptocurrency but the support it’s gotten from investors is incredible.

If you want to benefit from the newest trend in the world of investment, get into stock tokens before they become as popular as Bitcoin. In a few years, you’ll be happy you got in on the ground floor.

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