Tokenized Stock Representing Amazon on DeFiChain Splits on a 20-for-1 Basis

What is Happening?

The DeFi version of tokenized stocks which reflect AMZN stock on the crypto market, has long been influenced by the stock market, but Amazon’s move of splitting the stock directly affects these DeFi tokenized stocks. Each existing share of AMZN stock is divided into 20 separate units as part of the 20 for one stock split which became effective on June 6. This provides new investors with additional investment options because, before the split, most small buyers couldn’t afford to buy Amazon stock.

The dAMZN, the tokenized version of the DeFi stock, split similarly to the AMZN stock mirroring its market movement and change in fundamentals. The dAMZN tokens are minted and traded on DeFiChain, which tracks the price of Amazon shares but does not have ownership of the underlying stocks. With the use of oracle feeds and other DeFiChain features, the dAMZN attempts to imitate the price movements of real-world stocks by mirroring the market movement through the feeding of live data. Due to this, buyers will have the identical amount of dAMZN they had before the split since DeFiChain will refresh the price from the oracles based on the input received ~ talk about the future of finance!

What is DeFi Chain?

DeFiChain is a decentralized blockchain-based platform dedicated to enabling decentralized financial services that are efficient, efficient, and transparent by building technologically, providing unparalleled high transaction throughput and reduced risk of errors. The ultimate purpose of this project is to provide the infrastructure based on the Bitcoin network with complete DeFi capabilities with a focus on scaling.

Every few blocks, the network anchors to the Bitcoin blockchain (through Merkle root) and uses a hybrid Proof of Stake/Proof of Work consensus process. According to Messari, there are reduced smart contract flaws on DeFiChain since it is non-Turing complete, allowing transactions to move swiftly at minimal gas costs and reducing the chance of smart contract failures.

Why are Tokenized Stocks Important for the Future of Finance?

Tokenized stocks or equities are the same as a share of equity in a publicly listed corporation, like equities on the Nasdaq or S&P 500, depending upon their underlying legal structure. Tokenized stocks are represented by digital tokens that reflect or mirror the price movement of the traditional stock in the market.

Investors normally get their shares in their account through a brokerage after purchasing a standard stock on an exchange or in an initial public offering (IPO). It’s the same approach for tokenized stocks, where the tokenized stocks can be exchanged on a cryptocurrency market as they are issued and traded on the blockchain. The process of generating a tokenized stock generally involves a custodian and an investment or brokerage institution. The custodian receives the underlying stock, which the institution purchases and deposits. Tokens are created on a blockchain, based on the custodian’s reserves based on the amount of the shares held by the custodian.

Tokenized stocks can then be listed on a cryptocurrency exchange, where they can be purchased and sold just like any other kind of cryptocurrency. It is almost like owning the underlying stock, with dividends being paid out in some cases depending upon the type of tokenized stocks. Tokenized stocks are revolutionary in nature as the token transactions can be settled in a couple of minutes, whereas the settlement of regular stock is based on T+2 settlement. Further, tokenized stocks provide exposure to US financial markets to crypto and international investors who may not have any exposure to US securities due to regulations or jurisdictional constraints.

Understanding Why Crypto Investors Should Care About DeFi-based Tokenized Stocks

One of the reasons why dAMZN and other DeFiChain-based tokenized stocks are seeing adoption is because the typical investing method does not provide exposure to the stock market to crypto investors if the investor does not liquidate their position to buy that particular stock. Further, tokenized stocks have lesser compliance hassle in contrast to traditional securities, with a long processing time and compliances, making the process slow and cumbersome.

Furthermore, many investors cannot invest in their favourite US equities due to regional limitations, trading restraints and local regulations. These traders and investors now have global price exposure to these assets via DeFiChain’s dTokens (tokenized stocks). For example, the tokenized stock of Twitter, the social media firm, a mirror of TWTR, over the previous three months, the token’s price has fluctuated between $41.23 and $67.77, in line with the market trends in the traditional financial markets giving exposure to crypto investors on the Elon musk bid to buy Twitter.

Final Thoughts on Splitting of Tokenized Amazon Stock

Tokenized stocks are novel instruments which, in my opinion, serve a larger purpose of providing exposure to US-based stocks to international investors because, in various jurisdictions, it is difficult to buy and hold US-based technology stocks directly. Gaining exposure to US tech companies via tokenized stocks is an excellent tool for investors who can invest and trade such instruments without liquidating their crypto assets portfolio to fiat.

Don’t forget to like and share the story!

Image credits: Christian Wiediger, Meriç Dağlı, Aditya Vyas and ANIRUDH.