Two Paradigms of Stock Tokenization: Open Ecosystem and Walled Garden

Tokenization of real-world assets (RWA) has become an important trend in the financial sector. Particularly, stock tokenization is unfolding with the involvement of fintech companies like Kraken and Robinhood, driven by blockchain technology. Global investors can now trade "digital stocks" of companies like Apple and Tesla more conveniently 24/7.

This report will delve into two mainstream stock tokenization models: xStocks representing the "Open DeFi" path and Robinhood representing the "compliance-walled garden" path. We will explore how these platforms seek balance between regulation, technology, and market opportunities, as well as the fundamental differences in the paths they each choose.

1. The Underlying Logic of Two Major Mainstream Models

The primary challenge of stock tokenization is compliance. Currently, the market has formed two different compliance paths: 1:1 asset-backed security tokens and derivative contract tokens. These two models have significant differences in legal structure and operational logic.

Mode 1: xStocks - Embracing the Open Road of DeFi

Core Definition: The tokens held by users legally represent ownership or interest in real stocks, either directly or indirectly. This is a "true" stock mapping on the chain, pursuing the authenticity and transparency of assets.

The compliance design of xStocks maximizes the avoidance of legal risks through multiple layers of legal entities and a clear regulatory framework, while embracing the openness of blockchain.

Currently, xStocks supports 61 types of stocks and ETFs, 10 of which have generated on-chain transactions. After being supported by Bybit and Kraken, its trading volume has experienced explosive growth, reaching a single-day trading volume of $6.641 million as of July 1, with over 6,500 trading users and more than 17,800 transactions.

Issuing entities and regulatory framework: xStocks is issued by the Swiss company Backed Finance, and its operations adhere to the Swiss DLT law. Switzerland was chosen as the legal base because the country offers a relatively clear and friendly regulatory environment for digital assets and blockchain innovation.

Special Purpose Vehicle ( SPV ): Backed Finance has established a special purpose vehicle (SPV) in Liechtenstein. This SPV acts like an "asset vault," whose sole function is to hold real stocks. This design achieves critical risk isolation: even if the trading platform or issuer encounters operational issues, the underlying assets held in the SPV remain safe and independent.

Asset-backed and liquidity strategies: xStocks has established a transparent asset-backed and dual-track liquidity system.

1:1 pegged ( coin = 1 share of ): Each xStock Token that circulates on the chain corresponds strictly to a share of real stock held in a third-party custody institution. Currently, the total amount of stock tokens for NVIDIA, Circle, and Tesla has exceeded 10,000.

Issuance process: Qualified professional investors can apply for a Backed Account to purchase stocks through Backed. Backed acts as a primary investor, purchasing stocks at a brokerage, which are then custodied by a third-party institution. Finally, xStocks mints the corresponding number of tokens based on the quantity of stocks purchased and returns them to the primary investors. These primary investors can issue and redeem stock tokens at any time.

Proof of Reserve (: xStocks integrates with Chainlink PoR. This means that anyone can query and verify the reserves of Backed Finance on-chain in real-time and autonomously, ensuring that the actual number of shares held is sufficient to support all issued Tokens.

Dual-track liquidity strategy:

1. Centralized Exchange ) CEX ( Market Makers: At mainstream exchanges like Kraken and Bybit, professional market makers are responsible for providing liquidity, ensuring that users can buy and sell xStocks as conveniently as trading ordinary cryptocurrencies.

2. Decentralized Finance ) DeFi ( Protocol: The token of xStocks is open, and users can deposit it into DeFi protocols on the Solana chain ) such as lending platforms, DEX liquidity pools (, providing liquidity by themselves and earning returns. Currently, xStocks has partnered with the DEX aggregator Jupiter and the lending protocol Kamino to fully leverage the composability of DeFi, creating additional value for assets. For example, the token SP500 ) SPY ( with the highest trading volume has reached a liquidity of 1 million USDC on-chain.

) Model 2: Robinhood - Compliance-first "walled garden"

Core Definition: The stock tokens purchased by users on the Robinhood platform do not legally represent ownership of the stocks, but rather are financial derivative contracts tracking the price of specific stocks, signed between the user and Robinhood Europe. Their legal nature is over-the-counter ### OTC ( derivatives, and the tokens on the blockchain are merely digital representations of the rights under this contract.

Robinhood's model is a pragmatic "regulatory arbitrage" that packages products as an existing financial instrument with a clear regulatory framework, deploying them rapidly at a very low cost.

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Issuing entities and regulatory framework: These tokens are issued by Robinhood Europe UAB, an investment company registered in Lithuania and regulated by its central bank. Its products are regulated under the EU's MiFID II) Markets in Financial Instruments Directive II( framework. According to MiFID II, these tokens are classified as derivatives, thereby circumventing more complex securities issuance regulations.

Low-cost rapid deployment: Robinhood has deployed 213 stock Tokens on the Arbitrum chain, with a total cost of only $5.35 ) on-chain gas fees (, demonstrating the extremely high efficiency of utilizing Layer 2 technology. Among them, 79 Tokens have metadata set up, preparing for subsequent transactions.

Pioneering attempt: Robinhood has made its first attempt at the tokenization of non-public company stocks by launching tokens for OpenAI and SpaceX, intending to seize opportunities in the high-value field of private equity. Currently, Robinhood has minted 2,309 OpenAI)o( tokens.

"Walled Garden" type technology and compliance design: Robinhood's technical implementation is closely linked to its compliance strategy, together constructing a closed but compliant ecosystem.

On-chain KYC and whitelist: Every token transfer ) transfer ( operation will trigger a check to verify whether the recipient's address is registered in the "approved wallet" registry maintained by Robinhood. This means that only EU users who have passed Robinhood's KYC/AML can hold and trade these tokens, thus forming a "Walled Garden" ).

Limited DeFi composability: The direct consequence of this "walled garden" model is that its stock tokens are almost unable to interact with the broad, permissionless DeFi protocols. The on-chain value of the assets is firmly locked within the Robinhood ecosystem.

Future Planning ( Robinhood Chain ): To better serve its RWA strategy, Robinhood plans to develop its own Layer 2 network - Robinhood Chain, based on the Arbitrum technology stack, demonstrating its ambition for control over the underlying technology.

( Comparison Summary of Two Major Models

The xStocks model is more in line with the open spirit of Crypto Native and DeFi, while the Robinhood model is a "shortcut" found within the existing regulatory framework.

Key Points: The path of xStocks is "Asset Tokenization," which attempts to map the value of traditional assets onto the blockchain world in a real and transparent manner, embracing open finance. In contrast, Robinhood's path is "Business Tokenization," using blockchain as a technological tool to package and deliver its traditional derivatives business, essentially resembling a blockchain upgrade of "CeFi") centralized finance###.

2. The "Game of Ice and Fire" in Technical Architecture - Open DeFi and Walled Gardens

( 1. Choosing a Layer 1 Blockchain: The Triangular Game of Performance, Ecosystem, and Security

xStocks selects Solana: Its core motivation is to pursue extreme performance. Solana is known for its high throughput with theoretical TPS reaching tens of thousands, low transaction costs usually below $0.01, and sub-second transaction confirmation speeds. This is crucial for stock Tokens that require support for high-frequency trading and real-time interaction with complex DeFi protocols. However, several historical network outage incidents have also exposed its challenges in terms of stability.

Robinhood chooses Arbitrum: Arbitrum is a Layer 2 scaling solution for Ethereum, and the logic behind its choice is "standing on the shoulders of giants." By adopting Arbitrum, Robinhood not only gains higher performance and lower fees than the Ethereum mainnet, but more importantly, inherits Ethereum's unparalleled security and vast developer community, along with a mature infrastructure.

Comparative analysis: This is not simply a matter of "who is better", but a reflection of strategic paths. Solana is a monolithic chain pursuing "integrated high performance", while Arbitrum represents a path of "modularity" and inheriting Ethereum's security. The former is more aggressive, while the latter is more robust.

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( 2. Analysis of Core Technology Components

Smart Contract Design:

xStocks)SPL Token(: As a standard Token on Solana )SPL(, its smart contract is designed for free transferability, similar to ERC-20 on Ethereum. This open design is the technical basis for its seamless integration with DeFi protocols.

Robinhood)Permissioned Token###: Its contracts embed transfer restriction logic. Every transaction will call an internal whitelist registry for validation, which is the technical core of its "walled garden" model and the fundamental reason for its isolation from open DeFi protocols.

The key role of the Oracle ( ) is exemplified by Chainlink (:

Price Information: The value of stock tokens needs to be in sync with the real-world stock prices. Oracles ) like Chainlink Price Feeds ( play the role of data bridges, securely and decentralized feeding stock prices from multiple reliable data sources to smart contracts. This is the lifeline for maintaining price anchoring, executing trades, and performing clearing functions.

Proof of Reserves ) PoR (: It is crucial for products like xStocks that are 1:1 pegged. Through Chainlink PoR, smart contracts can automatically and regularly prove the adequacy of their off-chain reserve assets to the outside world, addressing the trust issue from the code level, which is far more timely and persuasive than traditional audit reports.

Cross-chain interoperability ) taking Chainlink CCIP as an example (: With the formation of a multi-chain landscape, the cross-chain capability of assets has become crucial. The cross-chain interoperability protocol )CCIP( allows assets like xStocks to be securely transferred between different blockchains ), such as from Solana to Ethereum (. This can break the silos between chains, greatly expanding the liquidity pools and application scenarios of assets, and is a key technology to realize the vision of "one Token, universal across ten thousand chains." Backed Finance has mentioned using Chainlink CCIP in its products for cross-chain bridging.

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) 3. Detailed Explanation of Asset On-chain and SPV Operation

For asset-backed tokens, SPV is a key hub connecting real-world assets and the blockchain world. Its operational process is rigorous and interconnected, ensuring the security and compliance of the assets.

1. 资产隔离(Asset Isolation): The issuer (, such as Backed Finance ), first purchases real stocks on compliant financial markets (, such as the New York Stock Exchange ). These stocks will not be placed on the issuer's own balance sheet, but will be stored in