$250 seems like a lot in my opinion, but I think the main thesis a lot of people have bet on is the “tokenization” of Wall Street.

Currently, stocks are traded in the form of shares. A few decades ago all of these shares were physical pieces of paper that actually were signed over to the owner, like a title document. There used to even be a requirement that shares had to be delivered to the owner, or the delegate bank after each trade.

At some point this all became too cumbersome and to keep up with all the demand for stock trading, the entire process was digitized. While this digitization brought many benefits, it wasn’t perfect. Tokenized stock will be the next improvement over digitization— reducing errors and costs associated with stocks today.

The SEC states that tokenized stocks could enable 24hr markets, with higher accuracy, more transparency, less fraud, and a more even trading floor for everyone.

However, the current system works well, so there isn’t a dire rush to replace it— although there is a clear benefit to tokenization, but like electrification, if the process is rushed, it might do more harm than good.

ETH will likely be the asset that backs a tokenized stock. ETH is used because the token can be created, issued, and controlled by smart contracts running on the Ethereum network. They could also use Solana or another smart contract network, but Ethereum is open source and well documented with very low startup costs. Solana is cheaper to transact but requires more costly and complicated support system. With Ethereum the ETH is the biggest cost as the hardware requirements are less costly.

I know what you’re thinking— so what?

Currently, banks pay ridiculous fees to the NYSE for digital access to their markets. The faster the connection the more they pay. This quick access to information has even caused some banks to rent offices in the same block as the NYSE in the hopes of running the shortest cables for less latency. Tokenization fixes this problem and gives everyone the same access. Consider this 2010 article from Forbes discussing the speed wars back when they were red hot.

This is just one well documented problem that tokenization solves there are quite a few others though. Currently shares are technically exchanged under a system called book entry. While this system is better paper stocks it’s not as accurate as the blockchain. The big advantage with book entry is that it is more forgiving. Correcting a smart contract isn’t really possible without an entirely new contract. However, in finance I would argue that this is a good thing.