Compilation: Vernacular Blockchain

In the late 1980s, Nathan Most( worked on a securities trading platform in the United States. He was neither a banker nor a trader, but a physicist who had worked in the logistics industry transporting metals and commodities. His starting point was not financial instruments, but practical system design.

At that time, mutual funds were a popular way to gain broad market exposure. They offered investors opportunities for diversified investments, but there were delays. You could not buy and sell in real-time during trading days; you could only place an order and wait until the market closed to know the transaction price ). By the way, mutual funds are still like this today (. This experience seems outdated, especially for investors who are used to trading individual stocks in real-time.

Nasen proposed a solution: create a product that tracks the S&P 500 index but trades like a single stock. Package the entire index into a new form and list it on trading platforms. This proposal faced skepticism. The original intention of mutual funds was not to trade like stocks, there is no legal framework for it, and the market does not seem to have this demand.

Nevertheless, he still insisted on pushing it forward.

In 1993, the S&P Depositary Receipts ) SPDR ( made its debut under the code SPY. This was essentially the first exchange-traded fund ) ETF (. A tool representing hundreds of stocks. Initially regarded as a niche product, it gradually became one of the most traded securities in the world. On many trading days, the trading volume of SPY even surpassed that of the stocks it tracks. A synthetic financial instrument surprisingly has higher liquidity than its underlying assets.

Today, this story seems all the more significant. Not because of the launch of another fund, but because of what is happening on the Blockchain.

Investment platforms such as Robinhood, Backed Finance, Dinari, and Republic have started offering tokenized stocks - blockchain-based assets designed to reflect the prices of private companies like Tesla, Nvidia, and even OpenAI.

These tokens are promoted as a way to get price exposure rather than ownership. You do not have shareholder status, nor do you have voting rights. What you are purchasing is not equity in the traditional sense, but a token linked to it.

This distinction is important because it has already sparked some controversy.

OpenAI and even Elon Musk have expressed concerns about the tokenized stocks offered by Robinhood.

![])https://img-cdn.gateio.im/webp-social/moments-aebba0c224d8bd6d8d35f9296f3304f9.webp(

@OpenAINewsroom

Robinhood CEO Tenev ) Tenev ( later clarified that these tokens actually provide retail investors with access to these private assets.

Unlike traditional stocks issued by the company itself, these Tokens are created by third parties. Some claim to hold real stocks as a 1:1 backing, while others are completely synthetic. The experience is quite familiar: price movements resemble stocks, and the interface is similar to brokerage applications, but the underlying legal and financial substance is often relatively weak.

Nevertheless, they remain attractive to certain investors, especially those outside the United States who cannot easily access the US stock market. If you live in Lagos, Manila, or Mumbai and want to invest in NVIDIA, you typically need an overseas brokerage account, a high minimum balance, and a long settlement period. Tokenized stocks eliminate these frictions by allowing on-chain trading that tracks the performance of the underlying stocks on the trading platform. No wire transfers, no forms, no gatekeepers, just a wallet and a market.

This convenience seems novel, but its mechanism evokes earlier things.

But there is a practical problem here. Many platforms—such as Robinhood, Kraken, and Dinari—are not widely operating in emerging economies outside of the United States. For example, it is still unclear whether an Indian user can legally or practically purchase tokenized stocks through these means.

If tokenized stocks really want to expand access to the global market, friction comes not only from technology but also involves regulation, geography, and infrastructure.

How Derivatives Work

Futures contracts have long provided a way to trade based on expectations without having to touch the underlying asset. Options allow investors to express views on volatility, timing, or direction, often without having to purchase the stock itself. These products have become alternative means of accessing the underlying assets.

The emergence of tokenized stocks also has a similar intention. They do not claim to be better than the stock market; they simply provide another way for those who have long been excluded from public investment to enter.

New derivatives typically follow a recognizable trajectory.

Initially, the market was filled with confusion. Investors did not know how to price, traders hesitated about risks, and regulators remained watchful. Then, speculators entered. They tested the boundaries, expanded products, and arbitraged inefficiencies. Over time, if a product proved useful, mainstream participants would gradually accept it. Eventually, it became infrastructure.

Index futures, ETFs, and even Bitcoin derivatives on CME and Binance are no exception. They were not initially tools for the masses, but rather a playground for speculators: faster, riskier, but more flexible.

Tokenized stocks may follow the same path. Initially used by retail traders to chase exposure to hard-to-reach assets like OpenAI or pre-IPO companies. Then exploited by arbitrageurs to take advantage of the price difference between the token and the underlying stock. If trading volume continues and infrastructure matures, institutional trading desks may also start to use them, especially in regions where a compliance framework emerges.

Early activities can appear noisy: low liquidity, high spreads, and price fluctuations on weekends. But this is often how derivative markets start. They are not perfect replicas, but rather stress tests. They are a way for the market to discover demand before the asset itself adjusts.

This structure has an interesting characteristic, or perhaps a flaw, depending on your perspective.

Time difference.

Traditional stock markets have opening and closing times. Even derivatives based on stocks mostly trade during market hours. However, tokenized stocks do not necessarily follow these rhythms. If a U.S. stock closes at $130 on Friday, and a significant event occurs on Saturday—such as a financial report leak or a geopolitical event—the token might react immediately to the news, even though the underlying stock itself is stationary.

This allows investors and traders to digest the impact of news flow when the stock market is closed.

Time delay only becomes an issue when the trading volume of tokenized stocks significantly exceeds that of the stocks themselves.

The futures market responds to such challenges through funding rates and margin adjustments. ETFs rely on authorized participants and arbitrage mechanisms to maintain price consistency. However, tokenized stocks have not yet established these mechanisms, at least for now. Prices may deviate, liquidity may be insufficient, and the connection between tokens and their reference assets depends on trust in the issuer.

However, the level of trust varies. When Robinhood launched tokenized stocks of OpenAI and SpaceX in the EU, both companies denied any involvement, with no coordination or formal relationship.

This is not to say that tokenized stocks themselves have a problem. But it is worth asking, what are you buying? Is it price exposure, or synthetic derivatives with unclear rights and recourse?

![])https://img-cdn.gateio.im/webp-social/moments-79c84e9492284e60c9d3df31fffdc9b1.webp(

@amitisinvesting

The underlying infrastructure of these products varies greatly. Some are issued under a European framework, while others rely on smart contracts and offshore custodians. Platforms like Dinari are trying to pursue a more compliant path. Most are still testing the boundaries of legal possibilities.

In the United States, the securities regulatory agency has not made a clear statement. The SEC has a clear stance on Token sales and digital assets, but tokenizing traditional stocks remains a gray area. Platforms are exercising caution. For example, Robinhood chose to launch its products in the EU rather than in the U.S. market.

Even so, the demand is evident.

Republic has provided synthetic exposure for private companies like SpaceX. Backed Finance will issue publicly packaged stocks on Solana. These efforts are still in their early stages, but they persist, driven by a model that seeks to resolve friction rather than finance. Tokenized stocks may not improve the economics of ownership, as that is not their goal. They are merely simplifying the participation experience. Perhaps.

For retail investors, participation is often the most important.

Tokenized stocks do not compete with stocks; they compete with the effort to acquire stocks. If investors can gain directional exposure to Nvidia with just a few clicks in an application that simultaneously holds stablecoins, they may not care whether the product is synthetic.

This preference is not new. SPY proves that packaging can become a major market. Derivatives such as contracts for difference, futures, options, etc., were initially tools for traders and eventually served a broader audience.

These derivatives sometimes even lead the underlying assets, absorbing market sentiment and reflecting fear or greed faster than the underlying market.

Tokenized stocks may follow a similar path.

The infrastructure is still immature, liquidity is uneven, and regulation is not clear. But its underlying impulse is identifiable: to build a tool that reflects assets, is easily accessible, and is sufficient to engage people. If this representation can remain stable, more trading volume will flow to it. Ultimately, it is no longer a shadow but a signal.

Nathan Most is not trying to reshape the stock market. He sees inefficiencies and is looking for smoother interfaces. Today's token issuers are doing the same thing. Only this time, the packaging is smart contracts instead of fund structures.

Interestingly, whether these new packages can stand firm in turbulent market conditions.

They are not stocks, nor are they regulated products. They are tools of accessibility. For many users, especially those far from traditional finance or in remote areas, this accessibility might be sufficient.

This article link:

Source: