Stock tokenization is gaining ground in the Web3 era. Many people refer to xStocks as “blockchain versions of stocks,” but in practice, not all xStocks have the same form and function.

In this case, the types can vary, depending on the underlying asset and the tokenization model used. Therefore, understanding xStocks classifications is not enough to simply look at the company name they represent.

This is because we also need to understand how the tokens are issued, collateralized, and executed on the blockchain network.

Types of xStocks Based on Their Underlying Assets

Simply put, xStocks are stock tokens on the blockchain, some of which are backed 1:1 by real shares held by a regulated custodian. Based on the asset represented, the types are as follows:

1. Individual Stock-Based xStocks (Single-Stock Tokenized)

This type represents a single share of a specific public company. Tokens can represent stocks in technology, consumer, and other sectors, with prices generally pegged 1:1 to the original stock.

Their structure focuses on a single issuer, making them suitable for those seeking exposure to a specific company, rather than multiple stocks.

2. ETF-Based xStocks

This model represents an ETF, a product that contains a collection of stocks within a single index or sector. Because it contains more than one stock, the exposure is more diversified than a single stock.

The token price follows the movement of the underlying ETF, not a single company.

3. Index-Based or Asset Basket-Based xStocks

This type represents a collection of specific stocks packaged into a single asset basket. The contents can be structured based on a specific theme, sector, or strategy (thematic basket).

The goal is to provide exposure to a single group of stocks within a single token. However, it’s important to note that backing structures can vary depending on the issuer.

Types of xStocks Based on On-Chain Tokenization Models

While previously we distinguished them by their underlying assets, this time we’ll look at the technical structure of the blockchain. This is where the differences in tokenization models truly determine how the tokens are secured, monitored, and held at risk.

1. Fully Collateralized (Backed 1:1 by Real Stock)

In this model, each token is fully backed by real stock held by a third-party custodian. This usually involves a regulated entity, with reports or proof of asset storage for transparency.

The primary risk lies with the custodian and issuer. If there are issues at the institutional level, the tokens are also affected.

2. Synthetic Tokenized Stocks

This type doesn’t always have physical shares as direct collateral. Its price is set to mirror that of a specific stock through a derivative mechanism or crypto asset collateral.

Price movements rely on oracles. The risk increases due to the potential for automatic liquidation and fluctuations in the value of the crypto collateral.

3. Custodial vs. Non-Custodial Structure

In a custodial structure, the issuer holds the original shares, and users only hold the tokens.

While tokens can be stored non-custodially in the user’s wallet, the underlying original shares remain in the custody of a legally regulated entity.

Types of xStocks Based on the Blockchain Used

xStocks can be issued on multiple blockchain networks. These chain differences affect fees, transaction speed, and the ecosystem they can access. Below are the types based on the blockchain used.

1. xStocks on Ethereum (ERC-20)

On the Ethereum network, xStocks uses the ERC-20 standard. This means these tokens are directly compatible with various DeFi applications on Ethereum, such as DEXs and lending platforms.

However, transaction fees depend on network conditions. When user activity is high, gas fees can increase.

2. xStocks on Solana (SPL Token)

On Solana, xStocks are available in the form of SPL Tokens. Its advantages lie in lower fees and fast transaction processing.

This model is suitable for 24/7 trading and easily connects to various dApps within the Solana ecosystem.

3. Multi-Chain xStocks

xStocks can also be present on more than one network, including the BNB Chain. This provides flexibility because users can choose the chain that best suits their needs.

However, transferring assets between chains requires a bridge. This poses additional risks, such as potential issues or security vulnerabilities in the bridge system.

Why Is Understanding xStocks Types Important?

Understanding xStocks types is important because not all of them work the same way. While they all represent shares, their risk structures can differ depending on how the product is issued and secured.

The collateral model impacts transparency. You need to know whether the underlying asset actually exists, who holds it, and how the redemption mechanism works. This determines how clear and secure the structure is.

The blockchain used also impacts transaction costs and ease of access. Some networks are cheap and fast, while others are more expensive and congested.

Therefore, before using xStocks, it’s important to understand the differences. Don’t just look at the stock name; understand how it works to avoid misuse.

Differences in Classification of xStocks and Conventional Stocks

The difference between xStocks and conventional stocks lies in their structure. Conventional stocks essentially lack a variety of tokenization models.

The mechanism is relatively uniform because shares are issued directly by the company and traded on an official exchange. Ownership is then recorded in the investor’s name through a capital market custodian system.

Meanwhile, xStocks have an additional layer. In addition to representing shares, xStocks run on blockchain infrastructure as its transaction network.

It also includes a custodian that stores the underlying assets and a smart contract that regulates their issuance and circulation. Each of these layers carries its own rules and risks.

Therefore, xStocks are more complex than conventional stocks. This applies not only to price and company performance, but also to how the tokens are issued, secured, and technically managed.

Conclusion

So, that was an interesting discussion about the types of xStocks based on assets and tokenization models that you need to know. You can read more about them in the INDODAX Academy’s Crypto Academy.

In conclusion, xStocks are not simply “stocks moved to the blockchain.” It combines capital market assets, custodial structures, smart contracts, and blockchain networks, each of which carries different logic and risks.

A single token may appear simple on the screen, but its architecture can be far more complex than conventional stocks.

Understanding xStocks Types helps you see where your true exposure lies: whether in the stock itself, the custodian, the derivative mechanism, or the chain infrastructure used.

The differences between collateral models, custodial and non-custodial structures, and the choice of blockchain are not merely technical details, but rather factors that influence transparency, costs, and the potential for operational disruption.

Tokenization does open up more flexible and time-sensitive access. However, that flexibility comes with an additional layer of technology.

Therefore, before using it, it’s important to view xStocks as a hybrid product between capital markets and Web3, rather than simply equating it with regular stocks.

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FAQ

1. What are the most common types of xStocks?
   They can be distinguished by underlying assets, such as individual stocks and ETFs, and by tokenization models, such as fully collateralized or synthetic.
2. Are all xStocks backed by real stocks?
   Not always. Some fully collateralized models are backed 1:1 by physical stocks, while synthetic models use derivative mechanisms or crypto collateral.
3. Are xStocks limited to one blockchain?
   No. xStocks can be issued on multiple blockchains, such as Ethereum or Solana, depending on the issuer.
4. Does the tokenization structure affect risk?
   Yes. The custodian model, collateral type, and blockchain used can affect transparency and operational risk.
5. Are xStocks the same as buying shares directly?
   Not entirely. xStocks represent stock price exposure through blockchain tokens, not necessarily direct share ownership.

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Author:  Boy