We recently learned about DX.Exchange, which has offices in Estonia and Israel, and how they’ll offer digital tokens based on shares of 10 Nasdaq-listed companies.
Let’s make that clear: This will enable investors to trade in companies including Apple Inc., Facebook Inc. and Tesla Inc. outside of the U.S. even when the stock markets are closed.
How is this possible?
Well, DX will offer digital stocks, or tokens, based on actual shares. The tokens are based on Ethereum, and will correspond to the demand on DX.
Now, what’s interesting to me is the larger implications here.
If the SEC can’t stop them from tokenizing US shares internationally, the world stock exchange is about to be reshaped drastically.
Furthermore, even if this is not the ideal end-state, it will show the world the power and efficiency of tokenizing real world securities of public blockchains. If you’ve wondered why I haven’t stopped talking about security tokens, this is why.
Let’s talk about this another way if it’s making your brain hurt. Similarly, we use email because email’s faster, cheaper, and easier than physical letters by orders of magnitude. Furthermore, we use email for things that we never used a letter before.
Sure, they’re both written communications, but email has been transformative.
Unless you’re sending a letter by folding it into a paper plane, no one ever sends a physical letter to someone down the hall asking, “What are your lunch plans?”, but yet that’s exactly what happens every day with email.
Under the same context, we take millions of disposable photos of things we never did before because our phones are good at it and it doesn’t cost anything. I sincerely doubt anyone has taken 300 selfies in a row with a polaroid.
Bringing this back to the topic at hand, when you digitize private securities with security tokens (which is different from the public securities trading on the stock exchange), you’ve made the process easier, cheaper, and faster. Not only that, but you’ve also made it easier, cheaper, and faster to bundle and unbundle and trade private securities in ways we’ve never seen before.
Just like email and digital photos, digital securities are transformative.
So let’s play out a scenario.
Let’s say you’re a property developer and you have a bunch of buildings.
And let’s say you decide to tokenize them. Now, not only can you make a bet on your individual assets, but you can use technologies to very quickly create micro-ETFs. Set Protocol is one such technology that would enable you to do that.
Using Set, you could bundle together ERC20 tokens and create a token to represent that bundle. That bundle token is essentially an ETF.
Now, you could have entire neighborhoods represented by ETFs. Using dYdX, you could quickly set up synthetic derivatives on top of your ETFs, allowing you to go long or short based on your preferences.
Now, what’s cool is that Set is already functioning, and there are sites like https://www.tokensets.com/set/ethx which will bundle together small sets of similar tokens.
For example, you can spread out your risk by investing in the ETHX set, which is a set of the top 10 ERC20 tokens. Or you could invest in the DEXSet, which invests in the major decentralized exchange protocol tokens. Or how about the StableSet, which helps cover your risk when parking your capital in case a stablecoin becomes insolvent.