Tokenized stocks bridge the blockchain trade divide
Video game retailer GameStop’s dramatic inventory reduction in January was the moment r / WallStreetBets finally went from a humble Reddit forum to a financial force that can no longer be ignored. But lost among memes, trading app dramas, and criticism of the sanctity of the stock market has been a surprising result: GameStop’s share price hasn’t just gone up – the company has actually listened. its many new retail investors and has aggressively stepped up its strategy. focus on e-commerce. Rather than just a one-time market issue, the investments made by users of r / WallStreetBets resulted in the real transformation of a business that many on Wall Street had predicted would end.
Related: GameStop inadvertently paves the way for decentralized finance
You’d think the guys on Wall Street and their fan club in Congress would hail this as a rare triumph of market evangelism. But the bad people made money from this event, so in their eyes the GameStop episode was a dangerous fluke.
The stock market remains in the hands of corrupt and trading institutions. But just because the traditional market is rigged with rules that evolve with the moods of the elite doesn’t mean everyday retail investors should cede all control to shareholders and give up trading in stocks altogether. Instead, a hybrid model incorporating cryptocurrency and bringing tokenized shares of companies on a blockchain ledger for people to buy, sell and trade, can help build a better and more transparent stock market accessible to people. all.
Since I founded the r / WallStreetBets subreddit in 2012, the community has grown tremendously and has undergone a number of changes. Until recently, discussion of crypto tokens was considered off-limits by r / WallStreetBets users. But the popularity of innovative trading apps has helped close the gap between stocks and digital assets. R / WallStreetBets’ latest initiative aims to create exchange traded products, or ETPs, that work like traditional ETFs but instead allow community members to buy indexed cryptocurrency stocks as well as stocks from companies like Tesla or Facebook.
If, as expected in the future, more companies start tokenizing their shares on the blockchain, not only will they help create a more democratic market, but they will also benefit from a number of technological efficiencies and have access to a powerful army of retailers. investors.
Related: Understanding the systemic shift from digitalization to tokenization of financial services
Tokenization of financial services
As user-friendly as the market may be for large institutional players, the old ways of raising capital still present a number of challenges and outdated protocols for most businesses. Strict stock market rules help some more than others, as does the willingness of banks and financial institutions to issue credit and deal with the general difficulties of business owners in convincing private investors to get involved. With shares tokenized on a blockchain, issuing shares comes with lower costs and greater flexibility in fundraising. In this way, ordinary investors have a greater say and the value of companies is more closely tied to market forces than to an elite group of wealthy investors.
Rather than forcing people to guess what decisions are made in smoky back rooms, token stocks traded on a blockchain movement for all to see, with greater transparency for regulators and shareholders. Regulators have the ability to monitor capitalization charts and instantly share activity, as well as view on-chain corporate governance votes. Shareholders, whether they are studying algorithms or YOLO stimulus dollars on stocks even, are able to see any activity on the chain regarding the sale of shares, as well as the votes of other shareholders regarding the shares. business decisions. Such a system is much fairer than the current status quo for everyone involved.
Our outdated system restricts shares by jurisdiction, which means that a Portuguese citizen is prohibited from investing in companies that may even operate in their own country. If you ask me, anyone who has ever sold their Wii for $ 3 or 550 yen should be eligible to throw money at GameStop. But a blockchain-based system makes equity tokenization universal and accessible 24/7, 365 days a year. In addition to offering greater access, this change eliminates after-hours trading and the dark pool that allows institutional investors to trade without exposure and without publicly showing their intentions when seeking a buyer or trading. seller. The ETP r / WallStreetBets initiative overcomes these inherent biases and eliminates the advantage that large institutions abuse to conduct covert transactions that lead to inequalities.
To borrow an online term, the summary of the TLDR (Too Long Unread) is that blockchain enables the creation of community governance that is fundamentally incompatible with traditional finance. Democratic features like community surveys allow each participant to shape how allocations and investment decisions are made, and the results are clear. Numerous academic studies have compared the accuracy of financial markets between professional individual traders and decisions made by collective intelligence, showing time and time again that even a group of outsiders can outperform the best indices.
Related: Social governance of crypto will lead to online freedom
To use a slang term from the r / WallStreetBets subreddit about the power to invest as a community, research argues that “the monkeys together” are indeed strong and, in one way or another, as than collective, make better decisions than the pros. If Wall Street calls it market manipulation when a group of normal people come together to pursue their economic interests, maybe it is time for a new market.
The views, thoughts and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Jaime Rogozinski is one of the founders of WallStreetBets, the internet movement that sparked the memes stock phenomenon that challenged Wall Street. He has appeared in the Wall Street Journal, CNBC and a variety of other media. Currently, he is working with the founding members of the WallStreetBets movement to create a decentralized autonomous organization in which tokenized stocks and crypto assets are accessible to all in the form of ETPs, which are like index funds but digitized, accessible to all and much, much more difficult to handle.