What is Shares (Tokenised Shares)

Tokenised shares (also called tokenised stocks or stock tokens) are blockchain-based digital tokens that represent ownership claims in traditional company equity essentially fractionalisable, blockchain-native representations of publicly traded stocks or private company shares. They aim to bring the efficiency, accessibility, and composability of blockchain to traditional equity markets.

THE CONCEPT AND APPEAL

Traditional stock ownership requires brokers, clearinghouses (DTCC in the US), depositories, and days for settlement. Tokenised shares theoretically enable instant global settlement (T+0 versus the traditional T+2), fractional ownership of high-priced stocks (buy 0.001 shares of Berkshire Hathaway), 24/7 trading without market hours restrictions, programmable shareholder rights (automatic dividend distribution via smart contracts), and global accessibility to markets that are geographically restricted.

HOW TOKENISED STOCKS WORK

Full backing model: A regulated entity holds the actual shares in custody and issues an equivalent number of tokens on a blockchain. Each token is redeemable 1:1 for the underlying share.
Mirror protocol: Synthetic tokens tracking stock prices through algorithmic mechanisms without holding actual shares, higher risk, regulatory uncertainty.
CFD-style tokens: Tokens representing the economic exposure to a stock without legal ownership common in early implementations.

THE FTX STOCK TOKENS FAILURE

FTX offered tokenised stocks for US-listed companies in 2021. When FTX collapsed in November 2022, holders of these stock tokens faced significant difficulties despite the tokens theoretically being backed by real shares held through a German broker. The collapse demonstrated the critical dependence on the issuer's financial health even in supposedly fully-backed models.

REGULATORY LANDSCAPE

The legal status of tokenised shares varies significantly by jurisdiction. In most countries they are regulated securities, requiring proper licensing and investor verification. Singapore's MAS, Switzerland's FINMA, and Germany's BaFin have provided clearer frameworks. SEC oversight applies in the US. India's SEBI has not yet established comprehensive tokenised securities regulations.

Terms in addition to the Shares (Tokenised Shares)

Blockchain

A blockchain is a subset of a distributed database. The Bitcoin inventors originally prototyped the system in 2008. This modern database is made up of separate blocks that are connected together in a chronological chain. Blockchains may be used to store a wide range of data types. It has mostly been utilized as a public ledger for bitcoin transactions to date. A peer-to-peer network comprised of independent nodes uses a consensus process to ensure the blockchain's security and legitimacy. Each node in the network keeps a public and immutable copy of the data.

2 Factor Authentication (2FA)

2 Factor Authentication is a security measure with two layers. It is used by the majority of cryptocurrency exchanges. To log in, you must provide not only a password, but also a code obtained, for example, from the Google authenticator.

Airdrop

An airdrop is a method of distributing coins. End users can typically obtain coins for free or in exchange for doing a small task, such as subscribing to a newsletter, sending a tweet, or inviting others via a personal affiliate link. Cryptocurrency airdrops — the act of depositing cryptocurrency into public crypto wallets — are utilized as a marketing, liquidity creation, and network bootstrapping technique for many different types of blockchain initiatives.

Altcoin

Altcoin - "alternative coin" - is any kind of digital currency other than Bitcoin. Since the launch of Bitcoin, the world's first digital currency, many altcoins (as well as supporting blockchains) have been created. Altcoin digital currencies share many similarities to Bitcoin, but consistently and have significant differences. There are about 20,000 altcoins, and this number is expected to grow significantly in the coming years. Altcoins often develop Bitcoin features. Ethereum, currently the most widely used blockchain, supports digital contracts and separate applications where Bitcoin does not. Altcoins are also often created to cater to the needs of different users. The Litecoin blockchain, for example, can process payments quarterly for the duration of Bitcoin.

Cold Storage

Cold storage is the way to store cryptocurrency offline. The word refers to the use of offline wallets that are not connected to the internet. Cold storage is the most secure way to keep cryptocurrencies since an offline currency becomes less likely to be hacked and stolen. Paper wallets, printed renditions of private keys, and offline hardware and software wallets are all examples of cold storage.