Author: Lao Bai

Editor's Note: In the current financial environment, the evolution of digital assets has sparked widespread discussion. @coolish (Paul Wei) pointed out that the rights and interests behind shares of listed companies are entirely subject to a single government and centralized power. This structure calls into question the necessity of converting shares into tokens, because those whose interests are harmed are often the very rule-makers of the game, and arbitrage that affects scale may be vetoed by centralization. In contrast, Crypto's survival depends on a decentralized distribution of nodes, a criterion met even by DeAI, which is currently still in an unstable state. However, the rights and interests of stocks are fundamentally determined by a single government power, a critical flaw that makes tokenization insufficiently necessary.

Building on this, Lao Bai further explores topics related to synthetic assets and tokenized stocks. He mentions that synthetic assets offer a price exposure similar to stock spot, and in past market votes, users have shown a preference for real assets over synthetic ones. Additionally, he notes that attempts at tokenizing stocks are not new, and the evolving regulatory environment has brought renewed attention to this area. Lao Bai emphasizes that although the rights behind stocks are subject to government control, tokenized stocks could still become part of the global expansion of dollar-denominated assets. Below is the original text of Lao Bai's reply:

1. Synthetic Assets

At the time, many friends said that if all you want is a price exposure similar to stock spot, aiming for long-term holding and avoiding the Funding Rate erosion seen with Perps, synthetic assets are the best approach.

Personally, having followed this space from the SNX era through to Mirror in the Luna era, and even if you consider GMX's GLP as a "variant synthetic asset," many of the designs within are very fancy. I still vaguely remember the sense of amazement when first seeing SNX's synthetic assets and GLP's design during the DeFi Summer era (GLP didn't have stocks; later, GNS, inspired by GLP, created a synthetic asset pool that could trade everything, including stocks).

However, the market has already voted with real money once, and what users ultimately chose was real assets (or credibly mapped assets) > synthetic assets.

It has nothing to do with decentralization, technology, or mechanism—it's simply about assets that are more credible and backed by real assets.

Interestingly, the synthetic assets that didn't reach the top but ultimately survived, like DAI (USDS) and USDE, are both semi-centralized solutions.

2. Tokenized Stocks - Over a year ago, I had the fortune to discuss a topic with Yi Jie. At the time, she asked me what I thought was the biggest problem in the crypto space. My answer was, "We have over-financialized too many things," speaking more from a VC perspective on directions like Meme, Gamefi, and AI Crypto, which I felt were solutions looking for a problem.

Yi Jie's answer to me was that she believed we lack good assets. Essentially, we were both saying the same thing. I also asked her then if Binance had considered launching stock trading. She indicated that Binance had tried in 2021, but the regulatory pressure was too great at the time, and the product was taken down after just a few months.

So, tokenized stocks in our circle are actually a second attempt. The first trial by Binance and FTX in '21 was struck down by regulators—but now, established CEXs like Binance and Bitget, along with platforms like BIT, StableStock, and MSX, are revisiting this, indicating that both the regulatory environment and product structures have evolved over these years. It's not simply repeating past mistakes.

3. Soul Blood in the Hands of a Generational Foe

Here, I agree with Wei Shen's view that "the rights behind stocks are fundamentally a product of a single government's power" and that "those whose interests are harmed are themselves the rule-makers of the game." However, we can look at it from another perspective—if you view Alpaca as Tether, does the entire logic fall into place?

Stablecoins are one of the most widely used and successful products in Crypto. No one says—because the dollar is controlled by the Federal Reserve, stablecoins have a critical flaw.

In other words, "centralization of the underlying asset" ≠ "the act of tokenization has no value."

Of course, Alpaca doesn't yet have Tether's scale and reputation, but when USDT first started, Tether was similarly accompanied by various doubts, whether about asset reserves, fears of being strangled by the Fed, or USDT being used for regulatory arbitrage, gray market activities, or even terrorist activities... But over the years, it has reached a scale of hundreds of billions.

Stablecoins are now seen as one of the means for the dollar's global hegemonic expansion. Why can't tokenized stocks be seen as one of the means for the global expansion of dollar-denominated assets?

If we say "those whose interests are harmed are the rule-makers, and if the impact becomes significant, it will be vetoed"—if in the coming years the impact grows large enough to be vetoed, that precisely proves one point: reaching that scale of impact itself already demonstrates its value and vitality. How similar this is to the growth path of stablecoins back in the day. As for how the regulatory framework ultimately evolves, that is actually a separate question.

Over the past decade and more, Crypto has been continuously creating new ways to trade, but rarely creating new high-quality assets. When a market lacks asset supply, it will constantly financialize existing assets. Memes, Perps, and various high-leverage products are essentially the result of this.

From this perspective, tokenized stocks may not necessarily be creating new financial instruments, but rather introducing new asset supply to Crypto. A certain type of arbitrage is just a current Feature, not the entire purpose. On one side, there is a genuine thirst for quality assets among major CEXs and users; on the other, against the macro backdrop of deglobalization, there is the global expansion of the dollar and dollar-denominated assets. Supply and demand perfectly match, which is why I am firmly bullish on the future of tokenized stocks :)