On-chain stock investment new era: How does Gate xStocks stand out?

The Basic Principles and Market Overview of Tokenized Stocks

Tokenized stocks refer to the mapping of traditional publicly traded company stock rights into digital tokens through blockchain technology, with each token representing a portion of ownership in the underlying stock. These tokens support 24/7 trading and instant settlement, breaking the trading hours and geographical barriers of traditional stock markets, and typically support more flexible fractional share trading. The issuer will purchase and custody the corresponding stocks at a 1:1 ratio, ensuring that the tokens are tied to the value of the underlying stocks, and token holders can redeem equivalent cash when necessary. In recent years, with the rising concept of blockchain securitization (on-chain stock trading), mainstream exchanges have been competing to lay out tokenized U.S. stocks. For example, Kraken launched xStocks based on the Solana chain, covering over 50 U.S. stocks including Apple and Tesla, with Backed Finance responsible for acquiring and custodying the underlying stocks and minting tokens at a 1:1 ratio; Bybit has also announced support for USDT trading of 78 high-quality global stocks. Industry insiders expect that as DeFi infrastructure improves and regulations clarify, tokenized stocks may grow rapidly, with some institutions projecting that future market capitalization could reach several trillion dollars.

Advantages and Limitations of the Backed Model

The tokenized stock model of Backed Finance emphasizes compliance and trust. Its issued ERC20 tokens are fully backed by physical stocks at a 1:1 ratio and operate under the regulatory framework of DLT in Switzerland, having obtained a Swiss securities custody license. Backed tokens can be freely used in mainstream DeFi protocols, featuring high composability and transparency. The advantages of this model are:

• Compliance Qualification: Backed utilizes regulated SPVs in places like Luxembourg or Liechtenstein to achieve institutional-grade standards through rigorous investor information disclosure and witness auditing.
• High trust level: The token does not rely on platform credit, but is backed by real stocks, theoretically allowing each token to be exchanged for the corresponding asset.
• DeFi Scalability: Since the tokens are based on a universal standard, they can flow across multiple chains and various DeFi protocols (lending, market making, etc.).

However, this model also has its limitations: Backed itself bears compliance and custody risks, and any technical or operational issues could affect the value of the tokens. Another challenge is insufficient liquidity. Although tokenized stocks can trade 24/7, their price anchoring relies on the buy and sell arrangements of the stock market, which only trades on business days. This leads to price discrepancies that can easily occur in pre-market and after-hours trading, and market makers may also tighten their quotes during holidays or weekends. Currently, tokenized stocks in the market are still in the early stages, with low trading volumes, making large trades prone to high slippage. Moreover, the Backed model currently has strict restrictions for U.S. investors (not targeting the U.S. market), which limits some demand. Overall, the advantage of the Backed model lies in compliance and transparency, making it suitable for long-term development, but there is a need to further improve liquidity and expand the investor coverage.

The technology and regulatory strategies of platforms such as Kraken, Bybit, and Gemini.

Different trading platforms have adopted various strategies for tokenized stock products:

• Kraken xStocks: Kraken has partnered with Backed Finance to issue over 50 US stock and ETF tokens (such as AAPLx, TSLAx, etc.) on the Solana blockchain, aimed at non-US users. The tokens are fully backed by real stocks held in custody by a brokerage and are issued in accordance with the EU's MiFID II prospectus requirements, complying with the regulatory standards of Jersey, Switzerland, and the EU. Kraken's design emphasizes ensuring compliance through a regulated issuance structure, but it is also only open for minting and redemption to users who have undergone KYC.
• Bybit TradFi & xStocks: On one hand, Bybit has launched the Gold & FX traditional trading platform (MT5 interface), allowing users to trade contracts for difference (CFD) on 78 high-quality global stocks using USDT. This model does not require the actual purchase of stocks, making trading convenient and leveraging flexible, but investors do not have shareholder rights, and it is more akin to gambling in terms of regulation, only open to specific offshore markets. On the other hand, according to Backed news, Bybit has partnered with Backed to list tokenized stocks of xStocks directly on the spot market, enabling 24/7 trading. Users can buy and sell these tokenized stocks using USDT without the need for fiat currency or broker intervention. Bybit's dual-track strategy: CFD products cater to short-term speculative needs, while xStocks spot meets long-term investment needs, with both complementing each other.
• Gemini & Dinari: The cryptocurrency exchange Gemini has partnered with European securities broker Dinari to launch the first tokenized stock (MicroStrategy MSTR) for EU users. This product uses an on-demand tokenization model, where ownership aligns with the economic rights of normal stocks. Gemini emphasizes that tokenized stocks can address the limitations of traditional market hours, high fees, and geographical barriers, providing a "one-stop, seamless on-chain investment experience." Gemini operates within the EU, subject to EU and UK regulations, ensuring the legitimacy of its tokenized stock business. Overall, both Gemini and Kraken have adopted strategies that combine traditional financial licenses with blockchain technology to ensure services are regulated; Bybit, on the other hand, addresses different market demands through an innovative trading model (CFD + xStocks parallel).

These cases indicate that the tokenized stock market has a diverse technical path, including pure blockchain tokens (xStocks), CFD-based contract trading, and hybrid models (tokens + off-chain matching). In terms of regulatory strategies, some rely on off-chain licenses (Backed, Dinari), some seek to build their own licenses (Robinhood plans to build its own chain), while others circumvent direct shareholding through traditional derivatives. Overall, each platform is exploring the balance between compliance and innovation: strengthening on-chain compliance design is the trend.

Design Highlights of Gate xStocks

The xStocks stock zone launched by Gate has several innovative advantages in its product model:

• Fully collateralized assets, cross-chain compatibility: Gate promises that all xStocks tokens are fully backed by corresponding real US stocks. The tokens use standard blockchain formats, allowing for free transfer and use across multiple ecosystems, achieving true cross-chain universality.
• USDT settlement, no fiat currency intermediary: Users trading xStocks only need to hold USDT and other crypto assets, without the need to open traditional securities accounts or conduct fiat currency deposits and withdrawals. This model creates a"Borderless Investment Channel"This greatly lowers the entry barrier, and the platform does not require lengthy KYC processes, allowing users from around the world to participate (aiming to support over 190 countries/regions).
• 7×24 hours continuous trading with fractional shares and leverage support: Gate supports all-day trading of xStocks, completely breaking the time constraints of US stock trading days. In addition, the platform also pioneers the launch of a contract market for tokenized stocks, allowing users to go long or short on these tokenized stocks priced in USDT, utilizing leverage strategies to seize market fluctuations. This trading system that emphasizes both spot and contract trading is a first in similar products.
• DeFi Ecosystem Integration: Gate's xStocks token can be deeply integrated with DeFi protocols. According to official information, xStocks has connected with various application scenarios including large lending markets on Solana (Kamino), DEX aggregators (Jupiter), and more. Users can not only trade directly but also use the tokens as collateral for lending or other financial strategies, achieving composite returns from "on-chain stock trading."
• Optimized trading architecture: Gate has upgraded the matching engine, pricing model, and risk control system for xStocks, optimizing for stock liquidity and crypto trader behavior. According to reports, the new system is responsive, highly compatible, and capable of providing a smooth trading experience for both spot and futures markets, aiming to deliver robust performance akin to traditional exchanges.

The above highlights show that Gate xStocks has differentiated advantages in product integrity and technical performance: it adopts a pure on-chain model for compliant asset mapping, while also taking into account trading convenience and strategy richness, providing users with aSeamless experience of trading traditional stocks in a crypto way.

The advantages of Gate in user experience, asset security, and scalability.

User Experience

Gate has a registered user base of approximately 30 million, and the xStocks product is aimed directly at the existing user group, making the user migration path short. Compared to other platforms, Gate users only need to hold USDT to participate in stock investments, without the need to open a brokerage account or perform fiat deposits and withdrawals, effectively "bringing" stocks into the crypto ecosystem. Gate also offers both spot and contract trading to meet different strategic needs, and this one-stop trading experience enhances platform stickiness. In contrast, Kraken's xStocks is only open to non-U.S. users and requires completion through the Solana ecosystem, while Gemini's services are currently limited to EU clients; Bybit's traditional stock services are more reflected in CFD contracts for difference, lacking on-chain attributes.

Asset Security

Gate promises that its xStocks tokens are fully backed by 100% physical stocks. In terms of compliance, Gate issues tokens based on the "physical asset tokenization" mechanism, by custodying real stocks in jurisdictions recognized by regulatory authorities (the specific custodian has not been disclosed but is in line with industry practices). Similarly, Kraken/Backed and Gemini/Dinari also ensure token backing through compliant SPVs and custody structures. Since token holders have legal subscription rights to the stocks, their interests are somewhat protected. However, Gate also emphasizes in its promotion that investment can be made without KYC, which is different from many traditional channels (most other platforms still require identity verification).

scalability

Gate xStocks is technically prepared for multi-chain interoperability and DeFi integration. Its tokens can circulate across multiple blockchain ecosystems and can be extended cross-chain in the future (officially mentioned to support cross-chain and borderless transactions). In addition, Gate already has a mature order matching and risk management system to handle high concurrency trading demands. In contrast, some platforms' tokenized assets are currently limited to a specific public chain (for example, Kraken xStocks initially only on Solana, with plans to later integrate BNB Chain), while Gate positions itself for a multi-ecosystem from the start. In terms of user growth, Gate's large existing user base also lays the foundation for future scale expansion.

Overall, Gate xStocks has certain advantages in user convenience and platform scalability through product diversity (spot + futures), low market access thresholds, and technical optimization, while its asset security is comparable to mature models in the industry.

Investor recommendations and market outlook

Tokenized stocks, as a frontier area for the integration of crypto finance and traditional finance, have immense potential but also carry risks. Institutions are generally optimistic about their long-term prospects: for example, the founder of Backed predicts that the market size could reach approximately $2.5 trillion; the EU and emerging markets have begun to accelerate related layouts (reportedly, Dinari has obtained the first U.S. tokenized stock brokerage license, and Coinbase is seeking SEC approval). Investors can use tokenized stocks to participate in global capital markets, enjoying the benefits brought by high liquidity and flexibility, while also being able to connect stock assets to DeFi strategies (such as lending, market making, etc.) to obtain additional returns.

However, it is also recommended that investors pay attention to the following points:

• Choose a legitimate platform: Prioritize tokenized exchanges that have clear compliance pathways and custodial institutions to ensure asset security and a clear legal status.
• Focus on liquidity: Currently, the liquidity of tokenized stocks is still in the cultivation stage, and large transactions may experience significant slippage or price fluctuations. New users can start with small transactions or blue-chip assets, gradually increasing their positions after the market depth grows.
• Prudent risk management: Tokenized stocks offer investment innovation but are not without risks (such as changes in compliance policies and significant fluctuations in the underlying asset prices). It is advisable to diversify your portfolio, avoid blindly chasing highs, and understand your own risk tolerance.
• Utilizing DeFi Opportunities: Tokenized stocks can serve as new DeFi collateral or liquidity assets. Investors can focus on their application prospects in lending, staking, or indexed portfolios to achieve compound returns.

From a macro perspective, as more institutions and trading platforms join (Goldman Sachs, JPMorgan, etc. are also experimenting with asset tokenization schemes), and with the regulatory attitude towards digital assets shifting to openness, the market prospects for tokenized stocks are generally optimistic. Effectively leveraging on-chain advantages and innovating compliant designs will further propel tokenized stocks to become an important driving force for the next stage of the integration of blockchain and the securities market.