What Is the Underlying Logic of Stock Tokens? In One Article, Understand How Tokenized Stocks Work

Tokenized stocks are becoming an important bridge connecting traditional capital markets with blockchain finance. As of early 2026, the cumulative trading volume in Gate’s tokenized stock section has surpassed $140 billion, and the single-month market share is as high as 89.1%. In early June 2026, Gate’s daily stock trading volume surged to nearly $30 million, reaching the highest active level in the past few months.

Behind this number is a rapidly taking shape new asset class. But for most investors, the underlying logic of tokenized stocks remains unclear—are they truly stocks, or derivatives? Does holding a token mean owning equity in the company? How does the token price stay in sync with real stocks?

Underlying Logic: Two Main Models Explained

At present, there are mainly two models in the market. They differ fundamentally in how the assets are supported, their legal structure, and the user rights they confer.

Custody-Backed Digital Twin

This is currently the most widely recognized model and a typical example of the “1:1 asset backing” principle.

The operation works as follows: a regulated entity (usually a broker, custodian, or special purpose vehicle) opens a traditional brokerage account and purchases real shares of listed companies. These shares are held in custody under that entity’s name, isolated from the platform’s own assets. After the custody is completed, the platform issues tokens on the blockchain corresponding to the number of shares held—how many shares are held off-chain, how many tokens are minted on-chain.

Under this model, every circulating token must be backed by one real share of stock held in custody by a regulated financial institution. The issuer has a legal obligation to hold and custody one real share for each token on a 1:1 basis. When users buy such tokens, they essentially receive a “digital claim certificate,” which can be verified at any time to confirm whether the underlying assets exist.

What does the user actually own? Buying this type of token does not mean the user is added to the company’s shareholder register. What the user gets is a token representing a claim on the issuer, while the issuer owns the underlying shares. Economically, the user holds the price exposure of that stock; legally, the user has a legal relationship with the issuer rather than a direct legal relationship with the listed company.

How are corporate actions handled? Since the custodian is the legal shareholder, the company pays dividends to the custodian. The platform then distributes these dividends to token holders, typically paid in the form of stablecoins. Stock splits and reverse splits are handled by adjusting the token supply, ensuring the on-chain representation remains matched to the underlying shares.

Synthetic Assets and Derivatives Wrapping

This is a completely different logic. The token purchased by the user actually represents a contract with the platform—the platform promises to pay the token holder an amount equal to the corresponding stock price’s range of fluctuation.

To fulfill its payment obligations, the platform usually buys real stocks as a hedge, but this is not a legal requirement. The platform also has no obligation to disclose its specific stock holdings to token holders.

The core difference lies in what trust is founded on. In the digital twin model, users trust the verifiable fact of “1:1 asset custody.” In the synthetic asset model, users trust the platform company’s ability to perform and the regulatory framework behind it.

The two models each have their own applicable scenarios, but investors need to clearly understand whether they are buying a “verifiable asset certificate” or a “derivative contract based on platform credit.”

Technical Architecture: How Blockchain Supports Tokenized Stocks

Regardless of the model, tokenized stock operations rely on a unified set of technical infrastructure.

Blockchain networks provide the underlying ledger support for tokenized stocks. Whether using a public chain or a Layer 2 scaling network, their core role is to ensure that transaction data is publicly transparent and difficult to tamper with.

Smart contracts are the core component of the tokenized stock system. Smart contracts handle asset issuance, transfer records, permission control, and automatic execution of certain compliance rules. With smart contracts, compliance logic can be programmatically embedded into the asset itself, automatically performing checks such as KYC and AML, effectively reducing cross-border investment costs.

Stablecoins typically act as the medium for transaction settlement. By pairing stablecoins with tokenized stocks, users can complete buy and sell operations on the blockchain network without going through the multiple layers of clearing processes in traditional banking systems.

Atomic settlement is the key breakthrough enabled by the technical architecture. Traditional securities trading usually requires a settlement cycle of T+1 or T+2 from order placement to fund arrival. Tokenized stock settlement has the potential to achieve “atomic settlement”—payment and delivery are completed almost instantly, with an integrated exchange of assets and funds taking place simultaneously. This not only significantly shortens the settlement cycle, but also releases funds that were previously locked in the settlement process, effectively reducing counterparty risk.

Core Value of Tokenized Stocks

Once you understand the underlying logic, the value proposition of tokenized stocks becomes clear.

Around-the-clock trading is the most intuitive advantage. Traditional stock markets have fixed trading hours (usually 9:30 to 16:00 on weekdays), and they are closed on weekends and holidays. Tokenized stocks operate on blockchain networks, allowing investors to trade anytime, anywhere.

Fractionalized ownership breaks the barrier of traditional “whole-share” trading. With blockchain technology, one stock can be split into very small units of tokens. On the Gate platform, users can start with as low as 0.01 shares. Even for technology stocks with higher prices, users can participate with a minimum threshold of $1.

Near-instant on-chain settlement is the third core advantage. Traditional stock trading requires a settlement cycle of T+1 or T+2, while tokenized stocks can have asset transfers almost instantly confirmed via blockchain networks.

Programmability and composability are unique on-chain attributes of tokenized stocks. Investors can deposit stock tokens into DeFi protocols as collateral, participate in liquidity mining or lending, and implement automated investment strategies through smart contracts.

Structural Limitations That Cannot Be Ignored

The other side of the advantages is limitations. While tokenized stocks offer convenience, they also expose structural shortcomings in several key dimensions.

A substantive lack of shareholder rights is the most controversial issue. Tokenized stock investors do not become registered shareholders of the target company. The World Federation of Exchanges has explicitly warned regulators such as the SEC and the European Securities and Markets Authority, stating that although these products mimic stocks, they do not provide equivalent shareholder rights, and they lack the transparency and regulatory protection of traditional stock exchanges. What investors gain is more a “price-tracking” function rather than true equity-related economic rights.

Regulatory risk continues to intensify is another constraint. The SEC’s stance on tokenized securities has long been trending toward tightening. Even under the “innovation exemption” framework advanced by the SEC in 2026, tokenized securities must still provide investors with core shareholder rights (such as dividend rights or voting rights), or they will lose listing eligibility. This means the regulatory compliance threshold for tokenized stocks is continuously rising, not falling.

Differences in the scale of market depth are also not to be ignored. As of May 2026, the on-chain market capitalization of tokenized public stocks was approximately $1.5 billion. Although this figure has grown by more than 5 times since early 2025, compared with the global stock market’s scale of roughly $150 trillion, the gap remains huge.

Liquidity limitations stem from challenges faced by market makers. In multiple respects, the tokenized stock market presents unfavorable conditions that affect market makers’ ability to allocate capital effectively and provide liquidity. In addition, around-the-clock trading without circuit breakers can also become a double-edged sword—when markets are extremely volatile, assets may fall sharply in a short period and trading may not be paused.

Summary

The underlying logic of tokenized stocks can be summarized as a single core thread: mapping the economic value of traditional stocks into on-chain digital assets through blockchain technology to achieve higher trading efficiency, lower participation barriers, and broader global accessibility.

The validity of this logic depends on support at two levels. On the technical side, blockchain acts as “clearing and settlement + asset verification” infrastructure, providing transparent, tamper-proof ledgers and near real-time settlement capabilities. On the financial side, regulated custodians hold real stocks as underlying assets, ensuring that the token value corresponds to the real stock.

However, investors must remain clear-eyed: while tokenized stocks offer convenience, they also come with structural limitations such as the lack of shareholder rights, regulatory uncertainty, and insufficient market depth. The value of tokenized stocks lies in “price exposure” and “trading efficiency,” not in “shareholder identity” and “corporate governance rights.”

Understanding this underlying logic is the starting point for rational participation in the tokenized stock market.

Frequently Asked Questions (FAQ)

Q1: What is the difference between tokenized stocks and real stocks?

Tokenized stocks reflect the price and economic exposure of real stocks, but holders are usually not registered shareholders of the listed company and do not have shareholder rights such as voting rights. Real stocks are held via brokerage accounts and rely on stock exchanges and central clearing systems; tokenized stocks are held via crypto wallets and operate on blockchain networks.

Q2: How does the price of a tokenized stock stay synchronized with the real stock?

In the custody-backed model, tokens correspond 1:1 with the real stock, so the price naturally moves in tandem. If a price spread occurs, authorized participants and market makers can use arbitrage mechanisms to bring prices back into alignment. In the synthetic asset model, price pegging is driven by smart contracts and oracles.

Q3: Can I receive dividends by holding tokenized stocks?

In the custody-backed model, after the custodian, as the legal shareholder, receives dividends, the platform will distribute the dividends to token holders, typically paid in the form of stablecoins. However, this is not a standard feature of all models; the specific situation depends on the product structure.

Q4: Where can tokenized stocks be traded?

Tokenized stocks can be traded on crypto trading platforms that support the asset. Gate offers a range of tokenized stock trading pairs, and users can view real-time quotes and place buy and sell orders through the platform.

Q5: What are the main risks of investing in tokenized stocks?

The main risks include: lack of shareholder rights (no voting rights), regulatory policy changes (different countries have different determinations of tokenized securities), insufficient market depth (liquidity may be lower than that of traditional stocks), and platform credit risk (especially prominent in the synthetic asset model).