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Premise: I’m still learning here so I apologize if my question is too basic.

Let's suppose that someone is developing a digital market for equity shares using blockchain (because it could save huge costs to the whole banking industry by removing the need for big Back-office departments).

Question #1: The equity shares would (probably) be represented by ERC-20 token contracts on the Ethereum blockchain, right?

Question #1.1: ERC-721 (Non-Fungible Tokens) cannot be used because one equity token is fungible with another equity token issued by the same company, right?

Question #2: Using ERC-20, would the tokens issued by each different company have a different name and symbol? For instance, Apple tokens would be "AAPL", Google tokens would be "GOOGL", Coca-Cola tokens would be "KO" and so on... Right?

Question #3: If indeed each company has a different token, how does a user on a block explorer or other trading platform know that AAPL, GOOGL, KO all represent equity shares in some company and not some cryptocurrency or some utility token? In other terms, how do I know that AAPL, GOOGL and KO belong to the same asset class?

Question #4: If I'm correct (that it's not possible to distinguish different types of tokens on a same block explorer), then does it mean that a separate platform needs to be created for the exclusive trade of AAPL, GOOGL, KO and other equity tokens?

  • Have you researched on Decentralized Token Exchange subject? It has a trading exchange already implemented. – Nulik Aug 8 '18 at 23:32
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Answer 1: Yes, you would issue a token for each company, one token for AAPL, another for GOOG, etc... If traded shares group into classes, you would have to issue tokens per class, like GOOG-A, GOOG-B, etc... However this tokens would not prove any ownership of a share, unless the Exchange (like NASDAQ, etc) accepts that, and country's laws have to be modified to trade shares on the blockchain.

Answwer 1.1: No, NFT can not be used in your case since shares are fungible, they all cost the same, and they have the same properties.

Answer 2: One share class -> 1 Token contract (i.e. one token symbol, one token name)

Answer 3: You would have to create another ERC standard, to classify contracts. Each contract would have a method returning the class of contract it really is. Right now an ERC20 token can be anything. It can be a movie ticket, or it can be a share. It is the issuer the one who knows what his token really means.

Answer 4: No, ERC20 is has just 4 variables, symbol,decimals, name, balances of accounts. 3 methods and 2 events. What you are asking is much more complex.

  • Thanks @nulik in Answer 4 are you saying that another (more complex) ERC standard alone would solve the issue? I'll also research into Decentralized Token Exchange as you suggested :) – moumous87 Aug 9 '18 at 3:05
  • tokens are continuously evolving, the ERC20 is now obsolete, there are new standards available – Nulik Aug 9 '18 at 13:22

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