As the tokenization of physical assets, digital assets, and rights accelerates around the world, more people are becoming interested in financial products offered through tokens, such as stocks. But is this operation better than the Stock Exchange?
This is a common and natural question, as equity tokens are a new product on the market. However, the numerous advantages of tokenizing assets are attracting more companies.
On the other hand, the stock market, besides being a traditional path for decades, is part of a solid financial ecosystem, with high market and government regulation and a high level of security.
So why can buying shares in tokens be more advantageous than investing through a stock broker?
There are several aspects to consider when comparing stocks on the stock market with stocks on the blockchain.
In this article, BLOCKBR talks about the two processes and how you can choose the best one for your capital to yield better returns!
HOW DO STOCKS WORK ON THE STOCK EXCHANGE?
Shares are small fractions of the market value of a company. When you purchase a share, you become the owner of the company in the percentage that the share represents, but without the right to participate in the decisions.
The stock offering is the beginning of a cycle that benefits businesses and investors (shareholders) by raising funds to promote the company’s growth, boosting its market value and, consequently, the value of the shares.
The stock offer is made at the Stock Exchange, where individuals and groups of investors can always acquire the shares through a broker accredited at CVM, the body that regulates the capital market in Brazil.
WHAT ARE THE TYPES OF SHARES TRADED?
The shares available for purchase, as well as the sub-classifications used, are the same both when buying shares on the exchange and when buying equity tokens.
- Preferred stock: Shareholders have preference in the distribution of dividends, at the end of the year, but do not have the right to vote in the company’s decisions;
- Common stock: Shareholders are entitled to participate in corporate decisions.
HOW CAN WE PROFIT FROM STOCKS?
There are three ways to earn passive income by investing in stocks.
- Selling the shares: consists in selling the shares at times of appreciation and earning a profit in relation to what was paid;
- Dividends: is the percentage on the company’s profit, at a defined periodicity and proportional to the number of shares;
- Interest on equity capital: is an amount paid to all shareholders, regardless of whether there is a profit or not. It is an expense that the company takes on to make its stock offering more attractive.
6 FACTORS TO DECIDE BETWEEN STOCK MARKET SHARES OR TOKENS
As we have seen so far, each investment model has its own characteristics and deciding whether it is better to invest in stocks on the stock exchange or in tokenization requires knowing some factors that are the most present in the concerns of stock investors.
1 – ACCESS TO SMALL INVESTORS
The initial limit for buying stock on the stock market is high for the vast majority of people. Thus, they end up wasting a great chance to diversify their investments, and scale gains.
Equity tokens, on the other hand, use a well-known differential in cryptocurrencies, the fractionation of a stock into a large number of shares for individual sale. You can buy only 1/1000 of an action if you want.
This allows access for smaller investors, increases the visibility and attractiveness of stock tokenization to an ever-widening audience, and increases investor confidence in the choice.
In addition, it increases liquidity for the tokenized share offeror with the agility in transactions and helps improve prices with fracking.
2 – STRUCTURE OF OPERATION
Decentralization is one of the main characteristics of cryptoassets – coins, NFTs, tokens – and for shares in tokens it is another important competitive difference.
To invest in stocks on the Exchange, you must register with a brokerage house that is accredited at the CVM and your balances will always be in the systems of the brokerage houses, which intermediate the transactions.
The tokenized shares are traded on a blockchain, where all that is needed is a registration and a digital wallet to start investing. You are not dependent on third parties to buy stock tokens.
For the tokenized stock investor, it is freedom of decision.
3 – AVAILABILITY
The speed of doing business and making investments these days does not match up with opening hours. If we can buy a car online at dawn, why does investing need to be nine-to-five?
On tokenized stock platforms, one can buy and sell 24 hours a day, seven days a week, because one will find the quotes always in real time. With this, the investor in tokenized stocks takes better advantage of the opportunities.
For the tokenized stock offeror, it is another factor in accelerating liquidity.
4 – SECURITY
The level of security used by traditional brokerage houses is undeniable, always with the concern of preventing cyber-attacks that cause billions in losses. But investing in security has a cost that is passed on to the fees.
Blockchains operate with modern data security protocols, high-level encryption, and the consensus validation system, which requires all computers in the network to approve the transaction electronically, without human interference.
Moreover, the networks that operate with tokenization are the same ones that have invested in cryptocurrency security for years – and there is no record of hacking and data theft.
5 – SPEED
The technological agility of stock token platforms is the result of the investment that blockchains have already made so that time is not an obstacle in transactions with cryptocurrencies and NFTs.
In addition to making investment more attractive, public offerings of tokens, the crypto counterparts to public offerings of stock, become more agile.
6 – BURROCRACY
In traditional stock offerings, there is a complex path that ends up discouraging – and generating mistrust – even in people with a lot of capital to invest.
In stock tokens, the blockchain uses the smart contract – a digital, encrypted file created specifically for the offering of a particular stock and containing the conditions for buying the stock.
It is the digital version of the stock contract in the physical world, with one advantage: the operation is 100% electronic. With this, offerors and investors can be sure that the network’s computers will perform what has been contracted for, without depending on employees and without risk of errors.
All computers in the network have the most current version of the smart contract to ensure that each transaction is validated by all of them. Everything is recorded in an electronic ledger, ensuring transparency to buy tokenized shares!
HOW TO RAISE FUNDS WITH STOCK TOKENS?
The process of offering stock tokens is simple. The first step is to look for an asset and rights tokenizing company, such as BLOCKBR, and present the capitalization project – number of shares, types of shares, expected capital, term of the offering, and other data.
The tokenizing company will perform all the feasibility analyses of the tokenization and, together with the client, will define the fractioning of the tokens and other details.
The shares will be tokenized and hosted in a blockchain, where transactions will be made, both the receipt of amounts and the payment of dividends and interest on capital, electronically and with the governance of the smart contract created.
BLOCKBR Digital Assets is a fintech that combines technological innovation and digital knowledge to transform physical assets into digital ones, in the asset tokenization process.
The offer of tokenized physical and financial assets, both current and new, is democratic and decentralized, which makes investing safer, simpler and more efficient.
We enable, structure, issue and offer tokens on our platform and beyond. Be aware that tokens depend on feasibility and regulatory factors.
Do you want to tokenize your business or part of it? Do you have a business solution and does it make sense to issue your own token ?
