The paradigm shift of next-generation stock tokenization from Stove Protocol

The stock tokenization market is entering a new evolutionary stage.

After exploring early trading experiences and product forms, the industry is beginning to show some deeper signals of change—stock tokens are no longer just seen as "assets that can be traded on-chain," but are gradually being understood as foundational asset modules that can be repeatedly invoked, combined, and embedded into higher-level financial structures. This new change is highly similar to the early development path of DeFi, which transitioned from trading to infrastructure.

In fact, the Stove Protocol recently announced by HabitTrade can be seen as a representative example in this direction. Unlike previous solutions that focused on platforms or single products, Stove chooses to provide a set of permissionless protocol interfaces in an open-source, non-profit, zero-protocol-fee manner, to map regulated, real custodial U.S. listed stocks onto the chain in a 1:1 format.

This path does not focus on optimizing a specific trading scenario but attempts to answer a more long-term question: When stocks truly enter the on-chain system, what structure should they exist in to be continuously used by a broader range of financial applications?

To some extent, the emergence of this type of protocol paradigm marks the transition of stock tokenization from past competition centered around "product forms" to an evolutionary path centered around "protocol forms." Under this new structure, stock tokens can be abstracted into verifiable, composable, and scalable foundational asset modules, opening up new spaces for more complex financial applications and cross-protocol collaboration.

Development Path and Trends of Stock Tokenization

Stock tokenization is becoming one of the most significant sub-sectors in the RWA track by 2025. Since the end of 2024, this field has entered a phase of rapid expansion. According to data from rwa.xyz, the scale of related assets has grown from nearly zero to about $780 million, reflecting the accelerating market demand for bringing publicly traded company equity into the on-chain system.

Structurally, the core of stock tokenization lies in the 1:1 mapping of real assets, transforming traditional publicly traded company stocks into digital asset forms that can continuously exist and circulate on-chain, enabling 24/7 operation and global accessibility, introducing a scarce and stable real credit anchor into the crypto ecosystem, and providing a more certain value foundation for DeFi.

Although stock tokenization is not a new concept—after DeFi Summer, projects like Synthetix and Mirror provided stock price exposure on-chain through synthetic asset models, and centralized platforms like FTX explored tokenized U.S. stock trading—these early models essentially remained at the "price exposure" level, neither corresponding to the actual holding and custody of real stocks nor providing legal or economic control over the underlying assets. They exposed systemic risks under oracle failures, collateral volatility, or extreme market conditions, thus limiting their expansion to a broader user and institutional level.

Real Asset Support Becomes the Core of This Round of Growth

The significant growth of stock tokenization in this market cycle fundamentally stems from a paradigm shift: the industry has begun to premise on the holding and custody of real stocks off-chain and issue corresponding tokens on-chain at a 1:1 ratio. Compared to earlier solutions that mainly provided "price exposure," this asset-backed path establishes a clearer, verifiable correspondence between on-chain tokens and real-world assets, achieving substantial improvements in safety, compliance interpretability, and institutional acceptance, thereby laying the foundational conditions for its entry into a broader financial system.

First Generation Paradigm: Exploration Phase

The core significance of the first generation of tokenized stocks lies in the fact that stocks can be tokenized and circulated on-chain. This stage is more reflected as "on-chain stock trading products," opening up imaginative space for the field.

Structurally, the typical form of this stage is the issuance model led by third-party compliance institutions: project parties do not directly assume the role of brokers but collaborate with licensed securities institutions, which complete the purchase and custody of stocks in the traditional market, then issue on-chain tokens at a 1:1 ratio and attempt to support their use across multiple chains or platforms.

Backed Finance's xStocks is a practitioner under this idea. xStocks collaborates with compliant brokers like Alpaca Securities LLC to map corresponding stock rights into on-chain tokens for users to trade or combine. This model is structurally flexible, but its compliance boundaries and expansion capabilities highly depend on the regulatory qualifications of specific jurisdictions and partners.

Second Generation Paradigm: Compliance and Financial Structure Phase

As the market enters a more realistic expansion phase, the narrative focus of tokenized stocks begins to shift: from early emphasis on on-chain trading experience to more closely aligned structural designs with traditional financial operating logic, including clear compliance frameworks, legal relationships, and connectivity with existing securities systems.

In this phase, the first to emerge are closed-loop solutions led by licensed financial institutions. These paths typically cover the stock trading, custody, and related financial product issuance processes by brokers or financial platforms, providing users with trading exposure related to stock prices within a compliance framework. For example, Robinhood's Stock Tokens primarily operate in the European market based on the MiFID II regulatory framework, adopting a structure similar to Contracts for Difference (CFDs), where users participate in the economic outcomes formed by price fluctuations, while the stocks held off-chain by the platform are mainly used for overall risk management and hedging. This type of model has obvious advantages in regulatory communication and compliance interpretation, making it easier to embed into the existing financial system.

Another path comes from structured finance-oriented solutions. For instance, Ondo Finance carries securities-type assets through regulated funds or SPV structures and tokenizes the corresponding rights or shares for on-chain introduction. This design emphasizes the clarity of legal structures, risk isolation, and institutional acceptability, allowing on-chain assets to connect with traditional asset management systems under compliance conditions.

At the same time, the market has also begun to see explorations closer to the on-chain native broker model. Represented by StableStock, it attempts to integrate stock trading, custody, and on-chain asset expression more closely under compliance conditions, relying on HabitTrade's real trading and settlement capabilities, allowing the on-chain system to more directly undertake the execution results of the real securities market.

As the market heat for solutions like StableStock surges, the underlying infrastructure capabilities behind them are also being re-evaluated. Since 2021, HabitTrade has supported U.S. stock trading with stablecoin settlement, long-term building a foundational channel between on-chain funds and traditional capital markets, covering key aspects like trade execution, settlement, and custody. It was only after compliance and structured finance became industry consensus that these underlying, infrastructure-oriented capabilities gradually began to reveal their long-term strategic value, no longer merely seen as components serving a single product or short-term traffic.

Second-generation tokenized stock solutions exhibit a relatively consistent characteristic: while compliance and institutional acceptance have significantly improved, their overall structure still mainly revolves around platforms or specific financial products. Stock tokens are more embedded within established systems, and their usage boundaries, combination methods, and expansion paths are often limited by the design logic of existing financial structures.

The rapid growth of this phase has fully validated the feasibility of real asset mapping at the technical and compliance levels, but from an overall architecture perspective, most solutions remain in a transitional form. The current path primarily addresses "how to achieve tokenized expression and basic trading under compliance conditions," rather than "how to allow stocks to exist on-chain as financial foundational assets in the long term."

In the absence of mature hedging, fund management, and risk transmission mechanisms, the pricing and liquidity of on-chain stocks still struggle to achieve endogenous consistency with the real market, and their price discovery has not truly anchored on the trading and settlement rhythm of the underlying stocks. This naturally imposes structural limits when related assets undertake higher-frequency and more complex financial activities.

Even within the framework emphasizing "1:1 mapping," the correspondence between on-chain tokens and real stocks still primarily reflects connections at the performance and legal levels, rather than a complete integration of financial structures. Assets have been successfully brought on-chain, but the financial structures surrounding those assets have not migrated in sync, which is a key threshold that stock tokenization needs to cross for further evolution.

Third Generation Paradigm: The Turn Towards Protocolization

As analyzed earlier, when stock tokens are still primarily viewed as tradable objects that cannot be repeatedly invoked, collateralized, combined, or used for risk management, their growth potential is inherently limited. To truly bridge the structural gap of "assets are on-chain, but financial structures are not," stock tokenization requires a set of underlying protocol standards that can be reused.

Under these constraints, the third generation of tokenized stocks begins to emerge: the industry's focus gradually shifts from "platform products" to "public protocols," from "transaction-oriented" to "ownership and rights-oriented." In this new structure, Stove itself emphasizes the openness of the ecosystem— the protocol does not concentrate participation qualifications in a few institutions or platforms but retains collaborative space for various types of participants, including compliant executors, developers, and application protocols.

Therefore, the emergence of Stove does not merely add a new implementation method but serves more as a paradigm-level turning signal: stock tokenization begins to be viewed as a financial infrastructure proposition rather than merely a design issue of a single crypto product. This aligns closely with the direction that HabitTrade has been continuously deepening since 2021, focusing on foundational capabilities around compliance execution, settlement, custody, and issuance, rather than relying on product models driven by short-term traffic.

If the core question of the first two generation paradigms is "how to bring stocks on-chain," then the third generation path represented by Stove answers a more fundamental question: when stocks truly exist on-chain, in what manner should they exist.

Stove Protocol: Building Open Standards for Stock Tokenization as a Public Good

As mentioned earlier, the first two generations of stock tokenization solutions were more about exploring "how to make stocks a tradable on-chain product," while Stove Protocol's entry point is clearly more foundational. It attempts to address not just a specific trading experience but also focuses more on two fundamental questions: whether on-chain users can truly access the real stock assets themselves and whether these assets can be continuously used by a broader range of financial applications.

In Stove's design, real stocks are still purchased and held off-chain by compliant brokers, with on-chain tokens existing solely as programmable representations of corresponding rights, always maintaining a 1:1 mapping relationship with real stocks. Unlike previous solutions centered around platforms or products, Stove does not participate in trade matching, does not assume price risk, and does not set protocol fees. Instead, it abstracts key capabilities like minting, redeeming, and settling into a standardized interface, opening it to the entire Web3 ecosystem in an open-source, non-profit manner.

This design means that stock tokens can be repeatedly invoked by different types of on-chain protocols under compliance conditions. For users, this makes on-chain stocks not just simple tradable objects but capable of genuinely carrying economic outcomes such as price changes, dividends, and corporate actions; for developers and protocols, it lowers the participation threshold, allowing them to build financial scenarios like lending, combinations, or fund management around the same type of stock assets without having to repeatedly solve custody, settlement, and consistency issues.

System Structure of Stove Protocol

In terms of outcomes, the core goals of Stove Protocol can be summarized in two points:

• Allow on-chain users to directly trade regulated, real custodial stock assets, ensuring that the economic outcomes remain consistent with off-chain stocks;

• Lower the participation threshold for stock tokenization through an open protocol, enabling more applications, protocols, and developers to build stock-related scenarios on a unified standard.

To achieve this goal, the Stove system does not simply adopt a "custody off-chain + token issuance on-chain" direct connection model but breaks down stock tokenization into several decoupled yet verifiable key links: trading intentions and real market execution occur off-chain, while asset mapping, settlement, and state recording happen on-chain. The protocol itself does not act as a trading counterparty nor participate in traffic competition but focuses on introducing the execution results of the real securities market into the on-chain system in a verifiable manner.

Because it is not bound to specific platforms or applications, Stove is more like providing a set of foundational standards that can be reused long-term for stock tokenization. In this positioning, the protocol modularizes key capabilities such as order settlement, token lifecycle, asset generation, corporate actions, and fund custody, opening them to the outside world through a unified interface, allowing stock tokens to no longer be limited to a specific product form but to have the potential to be continuously invoked by different projects.

RFQ Settlement

RFQ Settlement is the core module in Stove Protocol that connects off-chain compliant execution with on-chain asset settlement, ensuring that real stocks must be traded and held by licensed institutions while achieving verifiable and auditable on-chain settlement.

Since stock trading cannot be directly matched on-chain, Stove does not adopt AMM but introduces an RFQ (Request-for-Quote) model, splitting the trading process into two stages: users generate and sign orders off-chain, expressing verifiable trading intentions; compliant executors complete stock buying and selling in the real market and then submit the results for on-chain settlement.

On-chain contracts are responsible for verifying order signatures, parameters, and execution results, and upon successful verification, trigger the minting or burning of tokens, ensuring that the on-chain asset status always remains consistent with the real stock holdings. Trading execution remains off-chain, while settlement and state changes occur on-chain, thus achieving a balance between compliance, gas costs, and transparency.

RFQ Settlement does not participate in matching or extract protocol fees; all settlement logic is executed based on deterministic rules, existing solely as a bridge layer that reliably receives off-chain execution results into the on-chain system. This is also a key reason why Stove can adapt to the operational logic of the real stock market while maintaining its open protocol attributes.

Token Factory & Manager

StockTokenFactory and StockTokenManager together form the asset layer of Stove Protocol, ensuring that stock tokens maintain consistency with the status of real-world stocks throughout their entire lifecycle from creation to exit.

We see that in the stock tokenization scenario, real assets do not exist statically. Events such as IPOs, stock splits, dividends, code changes, and delistings continuously occur. If these changes cannot be systematically mapped onto the chain, the "1:1 mapping" can only remain in its initial state and is difficult to sustain long-term. To address this, Stove clearly separates the logic of token generation and operational management, incorporating the lifecycle of stock tokens into protocol management through a Factory + Manager combination.

StockTokenFactory is responsible for creating deterministic and predictable token instances for each stock. Based on the CREATE2 mechanism, each stock token address can be uniquely derived from parameters such as stock code and exchange, allowing external protocols to verify whether a token corresponds to a specific stock asset without needing to trust third parties, thus avoiding duplicate issuance or implicit replacement. Each token adopts a zero-decimal structure, semantically corresponding directly to "one share of stock."

StockTokenManager is responsible for maintaining the state consistency of tokens during long-term operation. It uniformly manages the minting and burning of tokens and interfaces with RFQ Settlement, executing mint or burn during each legitimate settlement to ensure that on-chain supply always matches off-chain real holdings. At the same time, the Manager is also responsible for mapping corporate actions such as stock splits, dividends, code changes, and delistings to the chain through standardized processes and constraining key operations through time-lock mechanisms, reducing asymmetric risks from sudden changes.

Under this design, each stock token exists within a clearly defined state machine: from normal circulation to triggering corporate actions, and then to retirement and exit, all key nodes are completed through on-chain calls and leave verifiable records. This provides users with a predictable asset end-of-life path and delineates clear risk boundaries for external protocols.

Through the combination of StockTokenFactory and StockTokenManager, Stove upgrades stock tokenization from a one-time mapping to a long-term operational, auditable, and reusable asset infrastructure. This also constitutes the core difference between Stove Protocol and most "stock token products": the former builds a standardized asset layer rather than just a set of token objects used for trading.

Corporate Actions Module

In the stock tokenization system, what truly determines whether it can be established long-term, be repeatedly used, and enter more complex financial scenarios often comes from a premise that is easily overlooked: when real-world stocks continue to change, can the on-chain tokens still continuously and accurately represent the same asset?

Corporate actions such as stock splits, mergers, dividends, code changes, and delistings are coordinated by exchanges, clearing institutions, and brokers in the traditional financial system, and are themselves prerequisites for stocks to exist as financial assets long-term. If these changes cannot be systematically mapped onto the chain, then the so-called "1:1 mapping" only holds at the time of issuance and will gradually become invalid over time, causing stock tokens to degrade into static certificates rather than sustainable assets.

This is why in many existing or transitional stock tokenization solutions, corporate actions are often treated as marginal issues—relying on manual operations, centralized announcements, or post-fact corrections. This approach may be maintainable when the scale is still small and the usage scenarios are singular, but once tokens are used for lending, combinations, or long-term holding, their uncertainty will be rapidly amplified, evolving into systemic risks.

In this context, Stove Protocol has regarded corporate actions as a core premise that must be addressed head-on in stock tokenization from the outset. The goal of the Corporate Actions module is to ensure that on-chain stocks can maintain consistency with the status of real-world stocks at any point in time, thereby enabling stock tokens to have the potential for long-term existence and repeated use.

Under this module, key corporate actions such as stock splits, mergers, cash dividends, code changes, and delistings are all incorporated into a unified processing flow at the protocol layer, maintaining strict correspondence with the execution and clearing results of brokers in the real market. Whether it is adjustments in the number of shares held or the distribution of economic benefits, their results can be clearly reflected on-chain, rather than relying on manual interpretation or platform credit.

To prioritize state consistency, the Corporate Actions module requires that corporate actions, once triggered, only allow the corresponding tokens to continue circulating after the relevant states have been fully processed and recorded. This design does not pursue operational convenience but rather aims to avoid the continued use of assets in situations of information asymmetry or state misalignment from a systemic perspective.

As a result, the Corporate Actions module addresses whether stock tokens can still be continuously regarded as reliable mappings of real stocks during long-term operation. Only when changes in the real world can be systematically and transparently introduced on-chain can "1:1 correspondence" be a state that can be continuously verified.

Vaults

Stove Protocol introduces an independent vault mechanism (Vault System) at the system level to uniformly carry and manage the real cash flows related to corporate actions. Its core function is to serve as a settlement anchor point between on-chain and the real world, ensuring that the economic outcomes corresponding to stock tokens can genuinely occur, rather than remaining at the level of symbolic or expected mapping.

When publicly traded companies experience events such as dividends, reverse stock splits, or delistings, the corresponding cash distributions or compensation funds will be incorporated into the vault system and managed and distributed according to on-chain rules. Through this mechanism, the on-chain tokens represent not just price changes or rights declarations but can form consistent economic outcomes with corporate actions in the real world.

In Stove's design, all operations involving vault funds are subject to explicit constraints at the protocol layer. Funds are only executed by system modules according to rules within established processes, ensuring that key actions such as dividend distributions and delisting settlements have clear, traceable execution paths. The significance of this structure lies in transforming trust in "people" into trust in "processes" as much as possible.

By unifying corporate action-related funds into a verifiable vault system on-chain, Stove Protocol provides a key guarantee for stock tokenization: on-chain assets not only correspond to real stocks in form but their economic outcomes can also be continuously and transparently fulfilled. This directly relates to users' judgments about the long-term credibility of stock tokens and determines whether they possess the foundational conditions to enter more complex financial scenarios.

Based on the same reasoning, Stove adopts a relatively restrained design approach for key operations and system evolution within its overall architecture. Without disrupting existing asset mapping relationships, the protocol allows for gradual adaptation to regulatory environments and market changes in a controlled manner, avoiding the loss of flexibility in the face of real constraints and preventing key asset logic from going out of control due to frequent adjustments. This "evolvable but not reliant on human discretion" orientation is precisely the important premise that Stove seeks to exist as a long-term infrastructure.

From Token Issuance to Ecological Adoption: Expanding the Application Path for Stock Tokens

Tokenizing stocks is just the first step; whether these tokens can be continuously used and naturally enter broader on-chain financial scenarios determines their long-term value.

We see that Stove Protocol attempts to build an open collaborative structure around tokenized stocks, enabling them to be repeatedly invoked by different applications.

In this structure, the protocol itself, through standardized interfaces and open-source tools, exposes it to a broader range of ecological participants.

Compliant custodians and market takers are responsible for maintaining the authenticity and redeemability of on-chain tokens and real stocks, while developers and DeFi protocols can freely explore different application forms such as lending, yield, derivatives, or combinations based on this foundation.

The introduction of data, oracles, and infrastructure providers further supports price discovery, settlement consistency, and cross-chain circulation.

The core of this design is to leave enough building space for subsequent applications.

Through open SDKs, public interfaces, and cross-protocol compatibility, Stove is expected to further lower the threshold for stock tokens to enter different DeFi scenarios, making them no longer limited to a single trading platform or specific usage scenario, but gradually becoming reusable financial foundational components.

From an industry perspective, this ecological orientation means that Stove establishes the value of the protocol based on the breadth of standard adoption.

When tokenized stocks can flow freely between multiple protocols and continuously participate in real on-chain financial activities, the significance of their existence as real assets on-chain will truly manifest.

The Next Fundamental Piece of the On-Chain Capital Market

As the stablecoin system gradually matures and real assets such as government bonds and money market funds continue to enter the chain, Web3's acceptance of "real assets on-chain" has significantly increased. Against this backdrop, stocks, as the most mature, liquid, and strongly priced asset type in the real financial system, have the potential to become the next class of standardized on-chain assets.

From a longer-term structural perspective, the key to stock tokenization is not in expanding new trading targets but in establishing a sustainable and scalable connection between the real capital market and the on-chain financial system. This logic has been fully validated in the evolution of DeFi: the continuous release of asset value often occurs after its usage radius has been systematically amplified, rather than remaining within a single trading scenario.

Currently, the growth of stock tokenization is still mainly reflected in the issuance and trading scale, while its long-term space depends more on the improvement of capital efficiency and the reshaping of asset usage methods by financial instruments. Therefore, what truly determines its development ceiling is whether on-chain stock assets can be natively called by protocols and integrated into higher-level financial structures such as lending, combinations, and fund management.

It is precisely at this level that the exploration emphasizing protocolization, standardization, and public good attributes begins to show significance—they determine whether stock assets can be reused on-chain, collaborate across protocols, and truly become financial foundational assets.

Thus, stock tokenization is becoming an unavoidable fundamental piece in the process of the on-chain capital market moving towards a complete form. Its maturation rhythm will still be influenced by regulation, but from the perspective of structural evolution, its development direction is already sufficiently clear.