What you need to know
- A new report has revealed that millions of dollars worth of fake Apple stocks are being traded over blockchain.
- Bloomberg says around $34 million in "synthetic" Apple stocks that track the real-world price of AAPL exist.
- Users can trade tokens on decentralized markets.
A new report from Bloomberg has revealed that around $34 million in "fake" Apple stocks are being traded over blockchain.
The new report states:
Fake versions of Tesla Inc., Apple Inc., Amazon.com Inc. and other big stocks, as well as a few popular exchange-traded funds, have been created by the projects Mirror Protocol and Synthetix over the past year. The tokens, and the programming that allows them to trade, are engineered to reflect the prices of the securities they track without any actual purchases or sales of the real stocks and ETFs involved. So far, volumes are just a tiny fraction of those on regulated exchanges. But for crypto enthusiasts, the potential upside is huge.
The report says that these new tokens occupy the same grey area of DeFi (decentralized finance) as NFTs and the like. The report explains:
But to oversimplify, under the Mirror Protocol, the idea is to keep prices of the synthetic -- or "mirrored" -- equities in the ballpark of the real thing by offering incentives for traders to arbitrage price discrepancies and manage the actual supply of tokens. Users can create, or "mint," new tokens when prices are too high by posting collateral, and destroy, or "burn," tokens when prices are too low, driving the price up or down.
According to the report these tokens are traded on decentralized and automated markets, rather than crypto exchanges like Coinbase. The report says that the volumes aren't anything to wake up Wall Street at the moment, given that $34 million of mirrored Apple tokens are currently in circulation, 1/1000th of Apple's full market cap.
An expert in the report stated that because the synthetic stocks aren't regulated or traded on the national securities exchange the SEC "would take issue with them", and that regulators may look to stop the practice, but that doing so would require them "to shut down the underlying open-source software code that makes up the blockchain and is used by a global user base that includes many anonymous players."
You can read the full report here.