Two Paradigms of Stock Tokenization: Open DeFi and Compliance Walls

Stock tokenization has become an important trend in blockchain finance, driving the deep integration of traditional financial assets with the crypto world. Currently, two main models have emerged in the market: the open DeFi path represented by xStocks and the compliance walled garden path represented by Robinhood. These two models exhibit significant differences in their underlying logic, technical architecture, and business models.

1. The Underlying Logic of the Two Major Models

xStocks: Embracing the Open Road of Decentralized Finance

xStocks adopts a 1:1 asset-backed security token model. Its core features include:

• The tokens held by users legally represent ownership or rights to real stocks.
• Issued by Swiss company Backed Finance, compliant with the Swiss DLT law
• By establishing a special purpose vehicle (SPV) in Liechtenstein to hold real stocks, risk isolation is achieved.
• A 1:1 pegging mechanism is adopted, with each Token strictly corresponding to one share of real stock.
• Integrated with Chainlink to provide transparent proof of reserves
• Dual-track liquidity strategy: liquidity is provided by market makers in CEX, while users can provide liquidity themselves in DeFi protocols.

Robinhood: Compliance-first "walled garden"

Robinhood adopts a derivatives contract-based token model. Its core features include:

• The tokens purchased by users are essentially financial derivative contracts that track the prices of specific stocks.
• Issued by Robinhood Europe UAB, regulated by the Central Bank of Lithuania
• The product complies with the EU MiFID II framework and is classified as a derivative.
• Quickly and cost-effectively deployed 213 stock tokens on the Arbitrum chain
• Attempt tokenization of stocks from non-public companies, such as OpenAI and SpaceX.
• Adopting a "walled garden" model, only EU users who have undergone KYC can hold and trade.
• Plan to develop its own Layer 2 network Robinhood Chain

2. Differences in Technical Architecture

Choosing a Layer 1 Blockchain

• xStocks chooses Solana: pursuing extreme performance, but there are stability risks.
• Robinhood chooses Arbitrum: inheriting Ethereum's security and preparing for future self-built Layer 2.

core technology components

• Smart Contract: xStocks uses open SPL Token, Robinhood uses permission-controlled Token
• Oracles: Price information and reserve proof rely on oracles like Chainlink.
• Cross-chain interoperability: xStocks plans to use Chainlink CCIP to achieve cross-chain.

Asset On-Chain and SPV Operation

The SPV operation process of xStocks includes: asset isolation, tokenization, token minting, token distribution, lifecycle management, redemption and destruction, ensuring a 1:1 correspondence between on-chain tokens and off-chain assets.

3. Business Model and Risk Assessment

business model

• Robinhood: Mainly charges foreign exchange conversion fees, and may introduce payment for order flow models in the future.
• xStocks: Transaction fees, minting/redemption fees, B2B asset tokenization services

Risk Assessment

Both modes face risks from various aspects such as regulation, technology, market, and law, but their focus is different:

• The open model of xStocks faces more regulatory uncertainty.
• Robinhood's closed model has centralized risks.

IV. Market Landscape and Future Outlook

Major Player Matrix

Market participants can be divided into three major camps:

1. Open DeFi pathways: xStocks, Synthetix, etc.
2. Compliance moat path: Robinhood, Hashnote, etc.
3. Infrastructure providers: Chainlink, Securitize, etc.

Market Trends

• From isolation to deep integration with TradFi and DeFi
• Clarification of regulations promotes compliance innovation
• The entry of institutions brings more liquidity and trust
• Private equity tokenization has become a new blue ocean.

In the future, open and closed models may coexist for a long time, serving different user groups. The game between technological innovation and regulatory adaptation will determine the speed of industry development. Stock tokenization is reshaping the global financial market, and all participants need to actively and prudently embrace this financial revolution.