What are tokenized shares? Tokenized shares are tokenized derivatives that represent traditional securities, specifically shares of public limited companies listed on regulated exchanges. Key benefits of tokenized stocks include fractional ownership of traditional stocks, 24/7 market access, and increased liquidity, to name a few. These digital assets are collateralized 1:1 to traditional shares, giving holders the right to many of the same financial benefits of owning the underlying shares.
Tokenized shares are a tokenization of a digital total return swap ("TRS") contract (similar to contracts for differences). The value of tokenized shares is based on and guaranteed by the underlying asset, a traditional security (typically a publicly traded stock), and the value of the digital asset is determined by the value of the traditional security. For example, they are backed by a notional equivalent of the traditional security (ie, $100 of the debt derivative would be backed by $100 of the traditional security). This allows tokenized shares to mirror the economic performance of the applicable traditional benchmark shares. Bittrex Global itself lists tokens that represent derivative contracts collateralized by the underlying traditional stocks. These tokens are backed by shares of stock provided by DigitalAssets.AG. Bittrex Global cannot withdraw or redeem them for the underlying shares. In the future, there may be ways to withdraw tokens from Bittrex Global or redeem tokens for underlying shares.
For now, there are only spot markets for tokenized securities listed on Bittrex Global. Switzerland-based DigitalAssets.AG facilitates the tokenization of traditional financial assets. The firm brought stock trading to another major cryptocurrency exchange in partnership with Germany-based CM-Equity AG in December 2020 alone.