The Full Package: Tokenizing Securities on the Stellar Network

Not surprisingly, the largest asset class on the Stellar network, by volume, is tokenized securities. Many major financial institutions trust the network’s robust asset control features and efficiency to issue securities of their own including money market funds and bonds such as those issued by Franklin Templeton: BENJI, WisdomTree: WisdomTree Prime, ABN Amro: digital bond and the Bank of International Settlement: Asian Green Bond Fund. New and existing asset issuers building on the Stellar blockchain can enjoy the following key advantages by relying on the network for asset issuance:

For many issuers, asset tokenization on the Stellar network may provide significant operational efficiencies by allowing asset issuers to reduce the number of internal sources for record keeping. The Stellar blockchain maintains a real-time ledger that tracks the state of the network at all times, enabling asset issuers to use the blockchain to maintain a single source of truth² for fund transactions and information processed on the network. This single source of truth is stored on a public infrastructure allowing institutions to, ideally, save on redundant servers. Further, the 24/7 liveness helps reduce the risk and cost of transaction queues and delayed reconciliations.

The nature of an open-source, public permissioned blockchain like the Stellar network means institutions and individuals can find real-time transaction specific data about assets on the network through a block explorer like Stellar Expert and/or the public, open source Hubble database. For asset issuers, this transparency offers the ability to monitor non PII data such as flow of funds, transactions and share ownership in real-time.

Sustainability and efficiency are integral to the Stellar network by design. The Stellar Consensus Protocol (SCP) is a low-energy consensus mechanism achieved through Proof-of-Agreement (PoA). On an annual basis, the estimated electricity generated by the SCP is equivalent to the greenhouse gas emitted by 33.7 homes in one year.⁴ This sustainable design, is part of why energy conscious issuers like the Bank of International Settlement select the Stellar network⁵ to tokenize their securities⁶.

The Stellar network also opens up new distribution channels for digital assets tokenized on the network. Institutions from fintech firms, building innovative decentralized applications to traditional financial institutions providing on and off-ramps to the network, can integrate tokenized assets enabling their customers to transact and store value in the digital economy while maintaining the controls set up by the issuer.

This expansive ecosystem means asset issuers can grow their addressable markets by making assets available to a variety of companies building on the Stellar network. Better yet, these ecosystem companies are accessible to asset issuers through the network’s interoperable standards for on and off-ramping, KYC and AML.

Smart contracts can unleash a range of new financial services on the Stellar network by allowing for better automation and processes. With the upcoming launch of Soroban mainnet, the smart contract protocol built on top of the Stellar network, developers can build specific protocols for a variety of use cases. Such use cases might eventually include activities like savings, lending, automatic yield calculations, delivery vs. programmable payment (DVPP) settlement without any intermediary⁷ and other financial transactions.