Concept

An equity-backed token is a type of asset-backed token (ABT)/ asset-referenced token (ART) in which the underlying ownership is a certain equity holding or equity instrument. These tokens represent ownership in equity instruments/ interests such as stocks and shares in funds (and any form of equity share in a business, venture, etc.) These tokens allow fractional or partial ownership of ventures or net assets, providing access to equity markets through blockchain. As an asset-backed token/ asset-referenced token, this category of tokens is often offered by means of a security token offering (STO) and reflect an actual value due to correlation with an external, real-world asset’s value. Hence, the tokens allow secure, fast and cost-effective trading of equities (as traditional assets) via blockchain technology, adding to liquidity of such traditional assets.

Broader category

An asset-referenced token (ART) is a cryptographic asset (cryptoasset)- and a specific type of security token– that is referenced to another underlying asset (as a reserve) to maintain its value over time. Asset-referenced tokens derive their value from physical assets or other digital assets that have a sort of stable value, whereby supporting such the stability of such a token. The underlying assets may widely vary depending on the scope of tokenization, including equities, real estate properties, precious metals like gold or silver, commodities, or artworks, and collective interests (fanship). However, the token, though a type of stablecoin, cannot be pegged to fiat money.

An asset-referenced token is created and issued converting ownership of real-world assets (RWAs) like equity holdings, real estate, properties, gold, and the like into digital tokens. The linkage helps reduces the volatility of a token thanks to the direct relation between the value of the cryptocurrency and tangible assets. This instills the aspects of confidence and stability in the tokens as investment compared to highly speculative cryptocurrencies. Furthermore, asset-referenced tokens allow investors to have fractional ownership of valuable assets- that is, a portion of the asset without having to purchase the whole of it.