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"The next generation for the markets…will be the tokenization of securities." |
— Larry Fink |
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DAS NYC Preview: Tokenization |
The Dutch East India Company (VOC) issued the world's first stock in 1602, but buyers did not receive physical certificates. |
Instead, their names were written into a ledger (pictured above), changes to which required a visit by both buyer and seller to the company's bookkeeper and with not one, but two company directors in attendance to approve the transfer of ownership. |
Just a few years later, the VOC did away with the ledger and began issuing physical shares, which had the immense benefit of allowing trades to occur without a visit to the company bookkeeper and required zero directors as witness. |
That system of exchanging paper claims of ownership prevailed for about 400 years, only beginning to cause problems when the exchanges occurred over long distances and in high volumes. |
In 1901, for example, London holders of Northern Pacific stock, having telegraphed sell orders to their New York brokers to take advantage of the railroad's soaring share price, were "bought in" at a huge loss when their physical shares, traveling by ship, failed to arrive in time to make delivery. |
Things only really came to a head, however, in the 1960s when a surge in trading activity (12 million shares a day!) caused such a backlog of certificate deliveries that the New York Stock Exchange went to a four-day trading week, closing on Wednesdays to give brokers time to clear it. |
A combination of lost and stolen certificates is estimated to have cost Wall Street brokers as much as $400 million between 1967 and 1970. |
The paperwork crisis led to the "dematerialization" of stock certificates in the 1970s, and in 1973, the establishment of the DTC (predecessor to today's DTCC), which acts as a centralized ledger (like the VOCs!) for US shares. |
The most recent innovation in the movement of ownership rights came in 1993 with the invention of ETFs, which allow bundles of shares to trade as a single security. |
That is where things still stand and it's been hard to imagine any additional improvements — until recently, when the ease of moving crypto tokens around got people thinking that we could move stocks and bonds that way, too. |
Blockchains are ledgers, much like the VOCs, but with the advantage of being distributed — this could, in theory, allow banks, brokers and investors to all use the same ledger, instead of entrusting the world's wealth to a hodgepodge of siloed spreadsheets. |
What that might look like will be a featured theme at the Blockworks' upcoming Digital Asset Summit in NYC, where crypto people will gather to determine how the financial system should be rebooted. |
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It's not just crypto people calling for a reboot, however. |
BlackRock CEO Larry Fink believes that blockchains are the next great innovation in moving investors' claims on assets: "I want the SEC to rapidly approve the tokenization of bonds and stocks," he told CNBC. |
What he mostly seems to have in mind is the capital efficiency that blockchains promise — lowering the cost of owning securities for investors and of processing them for banks and brokers. |
Robinhood may already be realizing some of those efficiencies: In its most recent earnings call, management said they're using stablecoins "to power a lot of our weekend settlements." |
Tokenized dollars are probably the only way to settle anything on a weekend, so that already seems like a significant advance. |
But tokenization could do a lot more. |
Moving tokenized dollars on weekends might be a first step toward an "intermediate stage of tokenization," as Blockworks' Dan Shapiro describes it, "in which each bank creates their own permissioned chain or chains to tokenize their assets." |
Once they do, they might also be inclined to issue new debt and equity directly on their chains — and, for better distribution, maybe even on public chains too. |
(Prometheum, for example, is working on a venue that would allow KYC'd investors to trade securities issued on public blockchains like Ethereum.) |
Larry Fink is also thinking bigger than just cost cutting: "If we can tokenize bonds and stocks…it will democratize investing in ways we can't imagine." |
Personally, I can imagine that tokenization would democratize access to corporate bonds, international stocks, private equity and structured products, all of which are difficult for even accredited investors to access. |
If you held those assets in a KYC'd digital wallet, I could also imagine that you wouldn't have to open multiple accounts with the varying brokers and asset managers that offer them — the brokers would simply come to you. |
If so, those hard-to-access products might also become more liquid by trading on automated market makers (AMMs), which have proven so effective for illiquid crypto tokens. |
But this is probably still not imaginative enough, so I'll be asking around at DAS NYC for more creative ideas — like putting uranium onchain. |
Because, even more than VOC shares, uranium is something you won't want to transfer in person. |
— Byron Gilliam |
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The Libra Impact on Solana |
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Blockworks Research's Dan Smith joins the show for another roundup. Tune in for a deep dive into the LIBRA token launch and its impact on Solana. |
Listen to Lightspeed on Spotify, Apple Podcasts or YouTube. |
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Hashrate Hackers, powered by Blockware, one of North America's leading Bitcoin Mining companies, announces the launch of a groundbreaking initiative aimed at blending the vibrant Ordinals community with the robust world of Bitcoin mining. |
The vision: harness the network of an Ordinals community to install a $10m+ mining operation behind it and allow its Holders to compete for BTC rewards monthly. |
Hashrate Hackers is where a store of culture creates a store of value. It turns collectors into contributors, and holders into participants of mining rewards. |
The mission to redistribute wealth is realized through themed "Hacks" that allow holders to build their rigs and participate in races against the clock and leaderboards for BTC. |
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Follow our Twitter and join our Telegram group for the upcoming details. |
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 | Kristin Smith @KMSmithDC |  |
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Complete and total victory today in our case against the SEC over the dealer rule. Following the SEC's voluntary dismissal of its own appeal, the crypto industry can breathe a sigh of relief. The future is bright for our industry. Let's keep building. |  Blockchain Association @BlockchainAssn
1/ Today marks a complete victory for us – and the broader industry – in our lawsuit against the SEC over the dealer rule. The SEC voluntarily dismissed its appeal of the lawsuit over the dealer rule brought by us and @CryptoFreedomTX. theblockchainassociation.org/blockchainasso… |
| | | 8:08 PM • Feb 19, 2025 | | | | | | 115 Likes 25 Retweets | 13 Replies |
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 | ⟠Palis⟠🐍 @palis | |
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Don't think people realize how much capital has been sidelined on the gambling meta. It feels like all the money is gone but there's a huge percent of crypto participants who do not gamble on daily runners 99% of all institutional capital, most of the big crypto whales, a fair… x.com/i/web/status/1… | | | 7:56 PM • Feb 19, 2025 | | | | | | 235 Likes 22 Retweets | 20 Replies |
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