Decentralized Stock-backed Tokens
The modern financial system is antiquated: 6.5 hours of trading per weekday, and no trading on weekends or holidays. Companies don’t arbitrarily pause, and neither should the shares representing them. Synthetics are an interesting concept; however, they do not participate in the actual market. A directly backed asset is necessary. Tokens backed directly by securities offer all of the benefits of a traditional stock without the limits of the outdated financial system.
The current stock market system is incredibly limited and limiting.
Participating in the US stock market requires American Dollars in an American stock brokerage.
Participating in the UK stock market requires British Pounds.
You can opt to buy into managed international funds, but most people do not have easy access to global markets.
If you’re participating in the largest stock market on the planet — the US Stock Market — you’re limited to 6.5 hours of trading a day from 9:30 EST — 4:00 EST. While this may be reasonable if you live in New York, it’s a burden to any other timezone.
Recently, brokerages have arbitrarily limited trading accessibility of certain stocks. This move has not only disenfranchised retail investors, it has also directly impacted their financial wellbeing. We believe people deserve easy, instant access to their investments; without limits.
Ethereum is an excellent framework for a global financial system. Ethereum is censorship-resistant, controlled by none, and accessible to anyone with an internet connection. DeFi has grown dramatically and has none of the limitations of our current stock market. By building on Ethereum, wrapped stocks are open to the globe as a truly international system. Anyone from anywhere in the world has the potential to buy any wrapped stock from any market. This expansion of the market represents a futuristic opportunity which could see supported stocks rise in value significantly.
Once wStocks are minted, they transcend the bounds of the traditional stock market: they’re backed by real securities, and they can be traded and exchanged outside of the trading hours of each independent market.
It’s impossible to escape the limits of the stock market completely. Any securely backed asset needs a centralized system to store assets. Unfortunately, stocks still need to be purchased during market hours, but once tokens have been minted, they’re fully in the owners control. Any token can be traded to anybody, lent out, borrowed, and used on any Ethereum platform that chooses to support them.
Adding a decentralized layer to the current stock market system fixes the outdated areas of the financial system:
- Unlimited trading hours
- Significantly faster trades (no several-day-long trade settling)
- Built in fractional shares
- Free participation in international markets from anywhere in the world
- The ability to send wStock directly to other people
While maintaining the benefits that it provides access to:
- Direct participation in the markets (wStock trades affect the stock price)
- Efficient risk/return on investments
- Potential for future features like dividends and stock voting rights
The stock market is very centralized. To interact with the stock market, some level of centralization is unavoidable. But to truly convince the market to transition to DeFi, we must demonstrate a dramatic improvement in the trading of market valued assets. This is the first step toward a truly decentralized stock market.
StockSwap starts as a venture toward this higher goal; we intend to be fully compliant with all applicable rules and regulations. A governance token will be used to make project decisions, and a DAO will potentially be used for further decentralization.
At its core, we believe the following:
- Custody of the stocks should be distributed, multiple trusted vendors and custodians should hold backing assets.
- Multiple purchasing options should safeguard against our service being controlled by a single broker.
- As many stocks and securities as possible should be supported.
- Users should know exactly how their assets are being secured and supported.
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