Crypto-fied Google, Facebook, Tesla and Netflix shares arrive today
Asset tokenisation opens up doors for individual traders and the companies they're investing in.
The DX.Exchange cryptocurrency exchange is launching today, and it comes with a pronounced twist that sets it apart from most others.
That twist is that people can trade shares on the platform as well as cryptocurrencies. Specifically, from launch, users can trade Alphabet (Google), Netflix, Facebook, Tesla, Amazon, Microsoft, Baidu, Intel and other stock, it says.
Even more specifically, users will be trading crypto-fied shares as security tokens, transferring and managing them over the Ethereum blockchain.
How it works
DX.Exchange – or more specifically MPS Marketplace Securities – will be purchasing these shares. It will then create cryptocurrency representations of these shares as digital tokens on the Ethereum blockchain. These tokens can then be traded and managed as easily as any other Ethereum-based cryptocurrency.
MPS is appropriately registered and licensed to provide asset custody and brokerage services, while the shares themselves will be held separate from company and customer funds and will always be there to fully back all the tokenised shares in circulation 1:1.
It might sound like a slightly convoluted arrangement, but functionally it's just like buying shares through any other broker. The main difference is that in this case the broker isn't someone you call on the phone while shouting "buy, buy, buy!" like in the movies, but is instead a website. This is naturally a much more practical and efficient way of serving customers, bringing benefits like lower costs, 24/7 access to global markets, the ability to serve a more global customer base and so on.
In this respect, it's quite similar to many of the other online share trading platforms out there.
Its use of blockchain and cryptocurrency technology then introduces new benefits and takes things a step further.
By converting the shares to cryptocurrency, users can actually get complete control over their own assets. For example, rather than just being able to buy, hold and sell shares through a platform, you might be able to actually transfer ownership of those shares, or fractions of a share, anywhere in the world quickly and easily.
It can be especially beneficial for people in emerging markets since the reduced costs and lower barrier for entry of crypto-fied shares is potentially one of the only viable ways for an everyday person to even buy into those sorts of investment opportunities, while also bringing the costs of selling or trading shares down to a more reasonable level.
The lowered costs and improved accessibility can translate into significant market benefits for the companies whose shares are being tokenised explains Ned Myers, SVP and head of product at AlphaPoint, a white label blockchain company focused on tokenising assets in a similar way.
"Fractionalising equity interest in a corporation, project finance project, or real estate investment trust, are all examples of the same trend – creating a digital security that leverages the advantages of blockchain," he said. "Transferring a store of value from a physical asset to a digital one provides easier access to the hundreds of billions of dollars circulating throughout capital markets, sidestepping the fees associated with converting crypto assets to a fiat currency.
"DX.Exchange's trading of securities is indicative of a trend AlphaPoint is seeing from several of its customers and is likely to dominate both the blockchain and high-worth asset sectors in 2019."
Beyond the shares being managed there, DX.Exchange is also bringing some of the benefits of crypto-fication to its own platform. For example, with a fee schedule that encourages people to use the DX cryptocurrency (DXCash) for buying, selling and paying fees on the platform. The usual US$20 (or equivalent) per month account fee is reduced to $10 equivalent when paid with DXCash, and the trading fees (which only kick in at $50,000 per month) are similarly reduced by 0.5% when paid in DXCash.
This might once again be good news for everyone since it weans users away from the expenses associated with fiat currency and keeps the costs of actually using the platform as close to a flat $10 as possible.
People will still need to make an initial deposit though. The fiat deposit options of wire transfer or credit card might both be pricier than is ideal, especially for the geographically disadvantaged, but cryptocurrency deposits are also available which might bring the transfer costs down to almost nothing.
It's fortunate that money itself was the first thing to get crypto-fied.
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